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 65 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.