Wednesday, September 2, 2009

Home Ownership: Re-Visioning an American Dream

Tom Sugrue wrote an interesting piece in the WSJ published Saturday, August 15, called “The New American Dream: Renting.” His article is not a prescription but a suggestion that Americans need to return to the notion that there is no disgrace in renting your home. He points out that prior to the Depression Era, few Americans actually owned their own homes, title – wise. It was the explosive growth in the last 50 years of the 20th Century that led to the possibility that any working American could own his own piece of paradise. Sugrue quotes President George W. Bush calling for “an ownership society” of citizens possessing single family bliss. Sugrue’s piece ends with this reflection: “If there's one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic. James Truslow Adams, the historian who coined the phrase "the American dream," one that he defined as "a better, richer, and happier life for all our citizens of every rank" also offered a prescient commentary in the midst of the Great Depression. "That dream," he wrote in 1933, "has always meant more than the accumulation of material goods." Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold.”

Well, let’s not, in this space, rag on speculators who saw serial, highly leveraged, residential acquisition as the way to sudden and abundant wealth. They have more worries than what a blogger considers their just desserts. Instead, let’s ponder what will become of a 21st Century batch of Americans whose credit ratings are abysmal but who still want to own their own patch of land. Unless the Obama Administration declares a moratorium on bad credit, there’s a gaggle of folks who won’t be financeable for some time except perhaps by rapacious credit card purveyors. And that means there will be a flabby inventory of homes on the market in many SMSAs for a good while. This in turn means that while more homes may be “affordable” in the near future, the universe of potential buyers will take a while to ramp-up, especially if lenders do their “opposing side of the pendulum” over-correction, imposing more stringent underwriting of home loans for some short period of time – well, at least until the temporary insanity cycle resumes in the mortgage-lending community.

Perhaps Americans should contemplate a new housing paradigm, where ownership of a structure they call “home” is divorced from ownership of the land, or a fractional interest in land, upon which the foundation of their residence rests. Land (and infrastructure like curb, gutter, hydrants, sidewalk) cost is a significant component of the total cost of home ownership. If it were possible to have the right to occupy a tract of land with your residence without owning the land itself, in what respects would that be unattractive? Judging by the reluctance of my neighbors in the last couple of weeks to mow their front lawns, I’d guess it’s a phenomenon many could accustom themselves to.

Say you’re wondering, “how would that work?” Or perhaps you’re thinking, “so is he advocating that we all live in mobile home parks?” Nope, I’m not advocating a new era of mobile home fiefdoms. I’m saying that you don’t have to own land in order to use land residentially. There’s no zoning restriction that I know of in the big majority of American communities that requires fee title ownership of an occupied, legally-created and entitled lot. If the opposite were true, there would be no condominium projects, because the owners there own “air space” between the painted, interior surfaces of their walls. The land on which the buildings sit, and the buildings themselves, most times, are common elements that are owned by the condominium owners’ association. This is a very common form of co-housing. Our society needs to take a much closer look at all forms of co-housing, I think, and to develop projects that experiment in new directions with co-housing forms.

An investor will find new incentives to develop co-housing projects of different varieties if it discovers that it can retain title to the land and still generate income from the dwellers on a parcel – without necessarily “renting” anything to those dwellers. Particularly if the dwelling unit is detachable from the moorings of the unit upon the property and transportable elsewhere, retaining the dweller’s continued exclusive ownership (or not, if the dweller decides to sell), a purchaser of a housing unit can still have a long term, perhaps even appreciating, asset without incurring the expense and other burdens of land ownership. (Like mowing your doggone front lawn, for Pete’s sake!) Since lenders already know how to finance the modest acquisition costs of mobile homes or manufactured housing units, this proposal for co-housing featuring the potential for portable dwellings is not impossibly novel or threatening.

I’m going to post in the next few months about alternative forms of co-housing that turn away from fee title ownership divided among the dwellers on a parcel. Some may involve renting land, but others will entail just paying a “parking fee,” with no land ownership incidents or burdens other than those a person voluntarily undertakes. Of course, a paradigm shift will require one to cease thinking of home ownership as a lucrative, or at least steadily appreciating, investment vehicle. This transformation can be achieved, as Sugrue implies:

“Some countries—such as Spain and Italy—have higher rates of home ownership than the U.S., but there, homes are often purchased with the support of extended families and are places to settle for the long term, not to flip to eager buyers or trade up for a McMansion. In France, Germany, and Switzerland, renting is more common than purchasing. There, most people invest their earnings in the stock market or squirrel it away in savings accounts. In those countries, whether you are a renter or an owner, houses have use value, not exchange value.”

Hmmm. Use value - what a concept. France, Germany and Switzerland have fairly high living standards (and by law, grant their workers longer annual leaves than workers in the U.S.); these are not third world countries in their industrial capacities. So perhaps Americans might consider as a society new forms of owning a “piece of the rock” without citizens having their credit standings stoned to pieces. Stay tuned, readers.


No comments:

Post a Comment