Remember that discussion we had in November about the government’s role in encouraging homeownership? I just wanted to share something from this fascinating New Yorker profile on Barney Frank, D-Mass., chairman of the Committee on Financial Services, that includes some of Frank’s thoughts on that topic. From the story:
“There are three lies politicians tell,” he told the real-estate group. “The first is ‘We ran against each other but are still good friends.’ That’s never true. The second is ‘I like campaigning.’ Anyone who tells you they like campaigning is either a liar or a sociopath. Then, there’s ‘I hate to say I told you so.’ “He went on, “Everybody likes to say ‘I told you so.’ …
Frank told the group at Boston College that he predicted, and might have prevented, the real-estate crisis that has engulfed the economy. By this time, many aspects of the crisis were well known. The end of the housing bubble had caused home values to plummet and mortgage defaults to rise, particularly among subprime borrowers. Many financial-services firms had assembled mortgages and bought and sold them as securities, and the value of those assets had also declined sharply — a development that devastated the firms. …
According to Frank, at the root of the real-estate crisis was a misguided notion that homeownership should be available to all people — what President Bush has called “the ownership society.” “The ‘I told you so’ here is that homeownership is a nice thing but it is not suitable for everybody,” Frank said at Boston College. “There are people in this society who don’t have enough money to be homeowners, and there are people whose lives are not sufficiently integrated for them to take on the responsibility to be a homeowner. And we did too much pushing of people into inappropriate mortgages and into homeownership.” He said that many people would always be renters, and that there was nothing wrong with this. “We need to get back in the business of building rental housing and preserving the housing we have,” he said.
In our conversation last fall, Mark Riedy from USD’s real estate school chimed in with a similar sentiment, that maybe the country had pushed homeownership too far:
Riedy said he thinks homeownership will always be an ideal. But he said that historically, the national homeownership rate was around 66.5 percent. Because of the combination of loosened restrictions for mortgages, new ways of financing loans and a governmental encouragement of the increased homeownership, the rate rose to about 69 percent this decade, he said.
“That 2.5 percent probably never should’ve been homeowners,” he said. “We screwed around with the natural state of what it ought to be. There’s a reason why they don’t own.”