Homeownership has long been part of the American dream, but that dream has been deferred.
Households in their 30s have an ownership rate of just 42% — more than 20 points lower than the national average.
The median age of all home buyers is a record-breaking 59, and the age of a first-time buyer is 40 — up from 29 in 1981.
As a solution, the Trump administration is floating a 50-year mortgage.
Though I disagree with that specific idea, I am heartened that they are brainstorming ways to tackle the problem.
We need a Marshall Plan for housing, a collection of broad initiatives to make homes more affordable and put the dream back on track.
The federal government can use its bully pulpit to get changes to red tape and regulations that are holding back building, and encourage policies that would increase housing and decrease costs.
To start, the White House and Fannie Mae should instead promote shorter, 20-year mortgages.
As Ed Pinto of the American Enterprise Institute has argued, a 20-year loan can be paid off ‘when the 30-year-term loan leaves most homeowners saddled with another decade or more of mortgage payments, the cash flow freed up from a paid-off shorter-term loan is available to fund a child’s post-secondary-education needs and later turbocharge one’s own retirement.’
The 20-year loan could be incentivized with a first-time buyer tax credit.
The decline in homeownership is a problem that must be addressed federally and locally.
This would be especially important today when the vast majority of taxpayers no longer itemize their tax returns — which means they cannot avail themselves of the deduction for mortgage interest.
That deduction always favored wealthy buyers of high-end homes anyway — so a targeted tax credit would help those who actually need it far more.
It’s time, as well, for the Trump White House to roll back one of the key initiatives of Elizabeth Warren’s pet project, the Consumer Protection Financial Agency.
The CPFC has pressured banks to limit mortgages to ‘plain vanilla’ mortgages, premised on its rules or what consumers can afford.
Adjustable rate loans and other ‘mortgage products’ can be right for some buyers — who should have a choice of how much risk they want to take in exchange for getting into the home market.
Even a low down payment might be hard to come up with, however, for those who can’t take advantage of generous in-laws.
Those without rich parents might turn to a ‘housing saving account’ — akin to the popular health savings accounts initiated by George W. Bush and which hold some $59 billion and are sheltered from taxation.
The new housing accounts should be tailored only for down payments, however — not long-term maintenance and other homeowner needs.
Buyers also are allowed today to take out $10,000 from their 401(k) penalty-free to go to a downpayment on a home.
Perhaps it’s time to raise that ceiling.
Of course, it goes almost without saying that even the most creative financing and incentives will fall short of addressing our housing needs without the most important problem: Supply.
There are many reasons why there aren’t enough starter homes.
