Renting and owning both bring joys and sorrows. Renting allows flexibility and doesn’t require accumulated wealth. When your life changes, you can move closer to a new job or move to a larger or smaller space when the household size changes. But renting also makes someone else rich and leaves renters with no wealth-building power, for this generation or for the next.
Owning discourages flexibility. If your job is suddenly two hours away, you have a choice—move or commute. If the neighborhood declines, the home value also declines, a higher risk for those with less income security. Owning property is a proven way for the wealthy to increase wealth and the primary way of building wealth by those with almost none. But that hump of even a few thousand dollars in the bank for a down-payment is a huge one for those who haven’t already inherited wealth.
Renters are also in danger of the owner selling the land. When a resort or gaming venue is built it brings revenue to the area but destroys homes and communities.
A Third Option: Public Ownership?
Urban planner and policy expert Shane Phillips manages the Randall Lewis Housing Initiative for the UCLA Lewis Center for Regional Policy Studies and is the author of The Affordable City: Strategies for Putting Housing Within Reach (And Keeping It There). In an article in the current Atlantic Monthly in “Renting Is Terrible. Owning Is Worse,” he proposes a strategy for renting without making someone else rich.
His model is built on public housing developed and managed by a non-profit organization rather than a public agency as is usually the case in the United States. The arguments he makes are useful in understanding how a cooperatively owned cohousing community might be financed with the help of public funds.
Financing Cooperatively Owned Housing
Homeownership was revolutionized in 1934 when the Federal Housing Administration (FHA) began insuring 15-20 year mortgages and later the 30-year-mortgage. Many more people were able to afford to purchase land and a house. With capitalism, however, the profits go to the top and housing became larger more elaborate, and expensive. The simple basic home that many families could own before the Second World War was no longer available. Large expensive homes were promoted by city governments and developers alike to raise profits and taxes.
One strategy to reverse this trend is economies of size and materials, as in the Tiny House movement and 3D printing. Another is to use public funds to finance housing that is affordable for those with incomes 50% lower than the median income. But to do it in a way that gives the residents the long-lasting and increasing benefits of owning property.
However, a third-party owner inevitably has conflicting interests. And commitments change when the political wind blows the other way. In Europe, there is a long tradition of government-built housing that provides permanent homes for a significant number of residents. In the United States, the failure of the massive housing projects of the 1960s is a more familiar example. Even New York City, which has large, decades-old middle-class projects with the feel of private condominiums, is selling them off to developers to manage. Or convert them to condominiums. Some residents are able to purchase their homes but residents without tens of thousands of dollars sitting unused in the bank are being displaced.
The purpose of Affordable Cohousing is to explore ways to build a safe and secure home for everyone. The public commitment, however, is in supporting housing for those able to purchase middle-class housing. The kind that developers and city councils like to build because the profits are higher. MacMansions.
America treats renting as it has treated the minimum wage for the past several decades: unworthy of serious concern, just a phase in young people’s lives, and a long-term outcome only for those unwilling to pull themselves up by their bootstraps. This perspective is a big part of why renters enjoy so few protections, and why the U.S. showers roughly $150 billion on homeowners each year but only a fraction of that on renters, despite renters having about half the median household income of owners.
To repeat: Homeowners are subsidized with $150 billion each year. This is how the middle class can afford to own their homes. The public subsidies for ownership, however, stay with the homeowner. The public doesn’t take the money back when the house is sold. The homeowner puts it in their own bank account or invests in more property. The next generation inherits and can purchase more property with more public subsidies.
Public, Non-Profit, or Homeowners Association?
Phillips’ proposal for a solution combines the advantages of owning and renting controlled by a partnership of non-profits and public government agencies. In addition to the flexibility of renting, it is flexible enough to build in benefits for the residents similar to those of homeowners. One possible option, for example, is allowing residents to build a form of equity with rent reductions, or even no rent after 30 years. This encourages stability, committed residents, and building community.
Better would be for the third-party organization to disappear, gradually putting itself out of business.
Even with homeowners subsidized with $150 billion each year the United States is very low on the list of countries with the highest percentage of ownership. Romania has a homeownership rate of 95.8%. Hungary, Slovakia, Singapore, and Cuba have rates of 90% or more. The United States is significantly far down the list with 65% ownership. Below Mexico (80%), Greece (75%), and Brazil (74.4%).
Categories: Zoning & Codes