I am glad to see Elizabeth Warren come out, sort of, in a way, against the fixation on home ownership. When I give talks about the economic crisis to community organizations, I get, at best, a blank stare when I launch into my diatribe on why most working class people should not be buying their own homes. Warren is worried about the asset market implications, but I am moved, at least initially, by Finance for Dummies. Rule number one: diversify. Don’t put all your savings in one basket. Especially not your home, since if something terrible happens to it, it will also likely put a dent in your living expenses. Buy index funds or dairy futures in Switzerland or anything, but don’t put it all into your home.
Nocera’s commentary is about how the government can reconfigure its interest subsidies, but just as important, if not more so, is strengthening the tenure rights of renters. In areas of Europe where renting is more popular and enjoys higher social status, it is also more protected than it is here. The rules governing rental agreements are local, and we are not likely to federalize them very soon, but imagine a scenario like this: Washington announces that it plans to withdraw subsidies for homeownership, but in doing so it wants to provide a better rental alternative. So, in coordination with academic specialists and various stakeholders, the feds hammer out a new model for local ordinances, perhaps even new language for rental agreements. The withdrawal of subsidies is tied to the uptake of the new rights for renters.
A side benefit is that mortgage balances level off and the nation’s finances become less ragged.
Worried that average folks won’t save enough if they don’t have that monthly mortgage payment demanding their attention? Other countries have used postal savings accounts for this purpose. Postal is too 20th century. How about getting families to play a multi-player internet game, something medieval with armor and magic potions, where you buy kingdoms with game points that you earn by depositing some money in a savings account? As long as our virtual warriors are not borrowing from the moneylenders (with players’ real money), we’re OK.