August 16, 2009

The “Rentership” Society

The (often overlooked) Weekend Journal has an essay this week that to me seems absolutely indispensable for anyone who cares about how we move out of the financial shit storm in which we are currently ensconced. It briefly documents the centuries old American obsession with home ownership, and all the US government has done since the Depression, both covertly and overtly, to make the dream of ownership a reality for tens of millions. Of course, we all know where all that assistance led us decades later: the debacle that is GSEs like the infamous Fannie and Freddie, now on taxpayer-funded life support and operating in a zombie-like state.

Finally, it seems, serious people are willing to engage the fundamental fallacy that created these worst-of-all-worlds hybrid monstrosities: home ownership as the end-goal for all people, no matter how little they make or much they can afford. This is a welcome change in my book. I may be sounding like a broken record of unsympathetic callousness at this point, but economic realities are rarely warm and fuzzy either. With our catastrophic flirtation with financial meltdown perhaps—hopefully—drawing to a close (LIBOR is down to 0.5 percent!), we are now seeing calls for the so-called rentership society.

How exactly that is accomplished, however, is a different question. No doubt some who are either too dimwitted or too corrupt to learn any lessons (maybe both) will fight the whole concept tooth and nail, calling for the government to once again prop up those of both the lying and languishing ilk. But those sorts of people can no longer be taken seriously. And news that the Administration is altering its focus to renting rather than ownership as far as federal subsidies are concerned is only a part of the story.

If we want to get serious about de-emphasizing home ownership, screwing around with HUD subsidies is a sideshow. Likely the biggest federal incentive for home ownership is the mortgage interest tax deduction. Take that away, and all of a sudden the owning versus renting decision changes entirely. Easy enough, right?

Of course not. The problem is that a lot of people who do (miraculously still) own their homes benefit greatly from this handout. They are, moreover, mostly of the older and wealthier sort, and thus, as far as politics go, much more significant than the young, poor, or some awful combination thereof. The chances, therefore, of the blowhard jerk-offs in Congress actually altering the tax code to strip out the mortgage interest deduction is about as likely as Fannie and Freddie actually reporting a quarterly profit ever again.

Which is really too bad. There is nothing more disappointing then a recognition of what is wrong and how to fix it followed by complete inaction. Well, actually, that's not true. Corn subsidies are worse.