There is a debate in the United States as to where home ownership rates are heading, and whether Millennials — people who came of age around 2000 — will get into the housing market the way generations before them did.
The percentage of people younger than age 35 who are homeowners went from 42 percent a decade ago to just a little more than a third now. People are staying in education longer, taking bigger loans, delaying marriage, added to which mortgages are harder to get. Meanwhile, rents are rising significantly amd developers, for a number of reasons, are building fewer starter homes.
Is home ownership on a permanent decline because of high costs, changing demographics or new attitudes about home ownership? Or is it just being delayed for the younger generation by the effects of the recession eight years ago? Is there really a shift in attitudes? 90 percent of those younger than age 30 do say they expect to eventually own. Some observers think it is just taking them longer to save for a down-payment.
However, Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute, thinks the younger generation is simply less interested in home ownership. A 2014 study by Fannie Mae of “prime” home buyers found that among young, college educated, upper-income, white families, home ownership fell 6 percent from 2000. Why? Because maybe they are tired of constant debt, including the idea of mortgage debt? Everyone agrees that eventually most will buy. After all, at 82 million the millenials are a bigger generation than the Baby Boomers. (based on an NPR article, 2016)
Thatcher and Reagan agreed that home ownership was a key to creating a more conservative electorate. It certainly seems to have worked in Britain, but only as long as house prices go up and not down, which on a small island attracting immigrants they have a tendency to do. From an Epicurean point of view, if owning your own house fosters peace of mind and security, then it is a good thing. Being over-sold a mortgage when you are poor and the mortgage interest rate can rise substantially, is not. Repossession owing to failure to pay your mortgage is not condusive to voting for the status quo. in short, there is nothing magical about owning a house; historically it is a modern idea.
Many people on the Left have suggested using government-backed loans and grants to help people buy their first home. Even the Conservative Party has a ‘help to buy’ scheme designed to help people onto the housing ladder. I’m very sceptical of such schemes. George Bush wanted to help people onto the housing market, but the Fed’s low interest rates which he said he approved of, the profligate lending of Fannie May and Freddie Mac, and the deregulation of the lending sector- all contributed to the sub prime mortgage crisis and subsequent financial crisis in 2008. Instead, I think we should subsidise and regulate rents. For me, home ownership is a luxury, not a necessity. If you can afford it, great. But we should focus our attention on the bottom end of society: those who will never be able to afford their own home. It would also be dangerous to encourage large mortgages in this era of unusually low interest rates; when they eventually rise (and they probably should soon), then a lot of people will find themselves having to make unsustainably large mortgage repayments.
You may be being a bit hard on Fannie May and Freddie Mac. They were not the primary lenders – the banks were. The banks were free to lend recklessly because they knew , for instance, that Fannie May was there to buy the loans from them. Who then packaged the mortgages in such a away that no one knew what was in any package is another matter, and I’m not sure who was responsible. But if you can, as a bank, lend endlessly without worrying about the capital you have on hand, you end up being reckless. You know you will be reimbursed by Fannie May. Yes, the latter has part of the responsibility, but it was specifically there to help poorer people buy their own houses. It got totally out of hand, and Fannie May should have known it was and should have demanded a halt. But it was the banks who gave mortgage brokers incentives to lend at any cost without checking credit-worthiness, and it is they who deserve most of the blame.