For over a century, policymakers have argued that homeowners take better care of their neighborhood and are just generally more desirable in other ways. As early as 1917, the federal Labor Department created a propaganda campaign to encourage home ownership. And in 1925, Commerce Secretary Herbert Hoover wrote
Maintaining a high percentage of individual home owners is one of the searching tests that now challenge the people of the United States…The present large proportion of families that own their own homes is both the foundation of a sound economic and social system and a guarantee that our society will continue to develop rationally as changing conditions demand.
In many ways, Hoover was successful. In 1920, about 45 percent of households lived in owner-occupied housing; today, about 64 percent do.
Mass homeownership might have had no negative side effects in a society in which most people live in the same house until they are dead, and as a result are not overly concerned with the house’s resale value.
But in modern America, people often hop from one house to the other, selling houses when they move, retire, or just add another child or two to their families. And when people expect to sell their homes in a few years, they naturally want those homes to get more expensive (or to use a common euphemism, to “appreciate in value” so homeowners can “accumulate wealth”).
To help achieve this goal, homeowners have a strong incentive to lobby government to use zoning codes and other regulations to limit housing supply, in order to help homes get more expensive (or in zoning-talk, “increase property values”).
And because government has been quite successful in doing exactly that, housing costs have exploded in many metro areas, which in turn means that more and more people cannot afford homes any more (at least not without considerable dislocation of some sort, such as moving to someplace with minimal economic opportunity).
So perhaps we’d all be better off if government stopped encouraging home ownership, right? Well, maybe not. After the 2008 recession, homeownership rates declined from a postwar peak of 69 percent to its current level, which in turn meant that the number of non-homeowners in search of rental options increased. And when the demand for rental housing increased, the cost of renting of course increased as well. So declines in homeownership are bad too.
The only real solution is to this dilemma is to create institutional firewalls to protect landowners’ right to build, such as statewide laws that limit the discretion of local governments.