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Opinion: The hidden menace of homeownership.
Unemployed homeowners are less free to take jobs elsewhere because they are tied down to one of the biggest investments of their lives. Owning a home, especially one whose value has plummeted, creates a doom loop. Wealth is tied up in property that can't be easily sold, and owners feel unable to seek new and better opportunities elsewhere.
One of the grand ideas behind the European Union was to allow members with EU passports to work in member countries. The EU wanted to create a more fluid workforce, like the U.S. had, to help foster the creation of amazing centers of productivity such as the Sun Belt, Silicon Valley, the entertainment industry in Los Angeles, and the media and financial sectors in New York.
Italians went to England, Germans moved to France — but Europeans' mobility did not increase as much as leaders had hoped. Workers were partly limited by language barriers — there are 23 official languages in the 27 countries that make up the European Union. They were also constrained by the ball and chain of property ownership.
A similar burden could now hamper America’s economic recovery. The urban theorist Richard Florida, author of “Who’s Your City?,” has predicted that more productivity centers will spring up across America in the future. But Americans will need to be able to flock to these places in order to find other like-minded individuals and begin building oases of economic activity without being confined by the shackles of property.
Compared to some of the gluttonous Europeans, Americans’ hunger for property seems practically anorexic, even at its peak of 69.2 percent in 2004. But now is an opportunity to take some cues from countries that do not share the obsession to own and where property has not undergone radical price convulsions.
With its pro-rental laws, Germany’s homeownership lingers at 48 percent, and its house prices have risen 2.8 percent in the past year. In Switzerland, where foreigners have not been allowed to buy property, only 39 percent of the population own their home. House prices there have remained stable.
The best level of homeownership for America might be 64 to 65 percent, the level it was until the mid-1990s, before the spike in buying occurred, according to the U.S. Census Bureau. After the trauma of this recession, which was triggered by the glut of poorly financed mortgages, it’s time to think of ways to stop steering people toward homeownership by making renting just as attractive as buying.
Incentives throughout the U.S. tax code encourage individuals to buy property and deduct mortgage interest and property taxes, but there’s no uniform encouragement for renters. If any breaks are given to renters, they are distributed on an uneven, state-by-state basis.
If rental incentives were offered nationally, citizens could decide for themselves the best path for their financial future instead of being lured toward homeownership with its irresistible promise and its deep limitations.
Susan E. Reed has covered business and international affairs in 34 countries for CBS News, The New York Times, The New Republic and other news organizations.
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