Published in Roll Call
In recent years, the dialogue on Capitol Hill has been dominated by a debate about the economic well being of the middle class. Years of sluggish growth, widening inequality and a deep sense that the nation’s global economic leadership is slipping have rightfully focused the public, policymakers’ and media attention on middle-class economic concerns.
From infrastructure and the minimum wage, to trade pacts, tax reform and domestic energy production, both parties have wrangled over competing visions of how to spur growth and restore economic mobility. These are all critically important policy debates that deserve bipartisan leadership. However, if the nation really wants to boost middle-class economic security, expanding homeownership needs to return to the top of the public policy agenda.
For decades, the purchase of a first home was the hallmark of middle class arrival and the foundation of financial security for aspiring families. Steadily growing homeownership rates were seen as a proxy for the nation’s progress in making the American Dream a reality for as many Americans as possible. Moreover, broad-based home ownership exemplified the uniquely American sentiment that ordinary people could control their own destinies and move ahead through hard work and responsibility.
Today, many middle-class Americans, especially recent college graduates, wonder if the dream of homeownership is just that—a dream.
Young professionals and working families face a number of challenges that previous generations did not, including a stubbornly sluggish job market, rising student loan obligations, and living expenses in most large metropolitan areas that far outpace starting salaries. In particular, the traditional path that college graduates follow from graduation to shared apartments to saving money for their first home is becoming harder and harder to traverse.
The homeownership rate continues to drop and currently stands at 64.8 percent, the lowest rate in nearly two decades. Fast-forward a generation or two and imagine an American in which a minority of people are homeowners. While still unlikely, this once-unthinkable notion cannot be dismissed out of hand if current trends continue.
The economic implications of a potentially sustained decline in homeownership are profoundly troubling. Homeownership strengthens families, communities, and the overall economy like virtually nothing else can. Homeownership is not just an indicator of economic growth; it’s a cause. Declining home ownership is an indicator of, well, decline.
That is why expanding home ownership has long been a bipartisan aim and must be again. What would an agenda in support of that goal include?
First, preserve what works. The mortgage interest deduction has been a remarkably effective mechanism to help make homeownership a reality for scores of millions of Americans. It is inextricably embedded into American homeowners’ financial planning. It is no exaggeration to say that slashing this powerful incentive could destabilize housing markets. Members of Congress should send homeowners a clear message that they can count on this time-tested and overwhelmingly popular provision to stay intact.
Second, take prudent, incremental steps to improve the availability of credit for qualified applicants, as the Federal Housing Finance Agency has recently done. To be sure, we are still recovering from a financial crisis brought about in part by lax lending standards and financial institutions’ risky investments in extremely complex and unregulated mortgage-backed securities. But nearly six years after the crash, overly stringent lending standards continue to limit the availability of responsible, affordable mortgage financing even for credit worthy consumers.
We should not let the sins of Wall Street’s past punish Main Street in perpetuity. While the crash is fresh in our minds, we should also remember that decades’ of pro-homeownership policies helped build the American middle class and power our postwar rise to global economic leadership. While recent steps from the administration are welcome, the country needs a strong message from both ends of Pennsylvania Avenue that we are at long last moving forward to restore the responsible flow of housing credit would have a powerful psychological effect on lenders, borrowers, investors, developers and realtors alike.
Third, address the student loan debt crisis. Congress should discuss potential ideas to reduce this growing burden on the middle class. In 2013, student loans accounted for nine percent of total household debt at $1.027 trillion, tripling from three percent of household debt in 2003. Student loans have helped generations of families finance education, but as the cost of education rises to a greater level of household debt, we are limiting the ability of a generation of college graduates to spend their resources on saving for down payments, buying consumer goods, saving for their future and preparing for retirement—all things that must happen to grow the middle class.
Finally, and most importantly, we simply need national leadership on this issue from both parties. Given the centrality of homeownership to economic recovery, no platform to boost the fortunes of the middle class should be considered complete without a homeownership agenda.
Everyone understands we are living in a politically polarized era, but a robust pro-homeownership plan is the kind of unifying issue that could win support from a wide swath of voters across the spectrum. Regardless of political party, most Americans want the American Dream to remain a reality.