Drumbeat intensifies against home subsidies

Finance Professor Viral V. Acharya of NYU's Stern School of Business

An op-ed piece in the New York Times this week drew a tweet from a broker friend of mine saying that the authors’ points were “inane.”

Even as a dedicated social and economic liberal, never mind real estate broker, I have to disagree with him.  In earlier posts, I have confessed to finding myself in the uncomfortable position of questioning why the American Dream has to consist of homeownership.

A roof over heads is a roof, whether owned or rented.  Shelter is shelter.

Since the contention that home ownership stabilizes neighborhoods has yet to be proved, what are the other justifications for homeownership?

Try to enumerate the advantages of homeownership, and I’ll bet your list stops at four.  The first three will be the tax benefits.  The fourth probably would be the opportunity to make improvements that don’t also add value for some landlord.

You might once have suggested that appreciation makes homeownership a solid investment.  So much for that notion: Can you say “underwater,” “foreclosure” or “distressed properties” without grimacing?

Moreoever, whatever happens on Wall Street, a select number of unusually perspicacious investors always manage to make money in bull, bear and volatile markets.

At least they have liquidity, unlike the homeowners who have been unable to cut their losses by unloading properties they not longer want, no longer can afford and no longer can sell at a prices that make sense to them.  Their situation will change, of course, though not any time soon.

In their op-ed piece, NYU professors Acharya, Richardson, Nieuwerburgh and White draw assumptions perhaps open to challenge — e.g. data from the American Enterprise Institute that “suggest” housing tax breaks don’t cause the market to flourish — but some of their analysis makes sense even to this liberal.

The authors cite research that I’ve mentioned in previous posts showing how the government’s subsidies benefit the rich far more than those who are less well-off.  They also make the proposal that any changes be undertaken gradually, a truly sensible approach.

Weening Americans off the tax benefits that homebuyers, not renters, can enjoy would save more than $100 billion a year, the professors note.  That ending them will cost homeowners (like me) money when they eventually sell is a result they avoid mentioning.

Still, I believe the long-term goal of redefining the American Dream is worth pursuing.  At the same time, I think there’s no danger of that happening for years to come, if ever.

Would I rather own where I live than rent?  Sure.

I’d also like to invest in a hedge fund as part of my dream, but I’ll never have enough money to do so.  I can live with that too.

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Malcolm Carter
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Charles Rutenberg Realty
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3 thoughts on “Drumbeat intensifies against home subsidies

  1. We got off track when we started viewing homes as investments first and foremost. Homes, like insurance, behave like investments, but ought not be viewed as investments only for obvious reasons. I could opine more and spend time looking stuff up to prove how incredibly right I am, but it is Saturday, I am a broker, and I have a mortgage to pay.


  2. Shelter isn’t shelter. At the end of 30 years and you have rented, you have nothing. At the end of 30 years and you bought, you own the asset outright. This is to say nothing of the domino effect that ownership has on the economy. Renters and landlords don’t put in new kitchens, buy lawnmowers and other things the way owners do. Landlords buy used appliances and fix dryers with paper clips and duct tape before they would ever buy new.

    Subsidize renters and all you do is subsidize landlords. We already have that in Section 8 and DSS. Not my idea of a model to follow for the rest of us.

    None of these arguments have a lick to do with taxes. The powers that be recognized this long ago and put the incentives in place to ensure that the economy overall would benefit.

    Other than that, you remain a gentleman and a scholar.


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