Friday, April 25, 2014

A Weekend Palate Cleanser: The Assault On Home Ownership Begins

Just when one thinks that the left might want to keep certain policies to themselves, we have to thank Ryan Cooper writing in The Week for beginning the assault on home ownership.
Yes, Mr. Cooper thinks that the American Dream of striving for home ownership is pretty bad. The really bad thing about home ownership is that it separates the haves from the have nots. No really, it does.
If you want Karl Marx 101, it is right here in this one sentence:

Homeownership has long been the way American society has divided itself into a responsible, stable bourgeoisie (owners) and an undisciplined rabble (renters). The divide used to be along stark, overtly racial lines, enforced by white supremacist terrorism, but nowadays the distinction is a bit more subtle.

Yes, you who are fortunate to be home owners and myself are bourgeoisie. And dammit, we maintain our bourgeois lifestyle by overt racism and even terrorism. I'm sorry, that was before. No, no, no. It's no longer so overt.
You must read all at the link to get the flavor of Mr. Cooper and ho at a level he does not really understand why home ownership is why America is the way she is.
First, some personal background.
As I am pushing 50 years old, Mrs. RVFTLC and I are pretty new homeowners. This May 15 will be our three-year anniversary as home owners. Before that we were renters. Yes, in many ways, renting is easy. All we have to do us write a check to our landlord once a month and that is it. Maybe included in the rent are utilities. Maybe not. And when one rents, if something goes wrong, like plumbing, or any other thing that is wrong, call the landlord. When the landlord feels like it, they will call someone to go over and take a look at the problem. And that person will notify the landlord. They determine if a total repair is going to be made or not. And renting one can choose an apartment, a condominium, a town home or even a home. Why if it is a home, don't worry about how the front yard looks. The landlord will send a gardener maybe every week or more likely twice a month. But you can't do anything YOU want to the front yard. Nor the back yard. Nor inside the domicile. You can't paint any wall willy nilly. And maybe you have to use approved nails by the landlord to hang your wall coverings, pictures, photos and the like. You can't choose carpet or hardwood floors. It's up to the landlord.
See, renting is great if you don't mind having most of your freedoms at the cost of the whim of a landlord. Or if you don't mind getting things done on a landlord's schedule and not your own.
But what is the wonder of home ownership?
Well, even though you are paying a mortgage for up to 30 years, it is yours. And the most obvious is that the mortgage payment never changes. The only way it does if one chooses to refinance the loan at a lower interest rate. Which lowers one's payment. Get it. It never goes up and can go down.
Now when Mrs. RVFTLC and I bought our current abode nearly three years ago, we decided that we did not want the work of owning a single-family dwelling. So we saw our dream, a town home. It is a compromise because of the way that it is layed out. It is in eight sections of about six to eight units each. And they have a detached garage, a little back yard, the unit and a little front yard. Perfect for our needs. As I alluded to, we belong to an HOA or Home Owner's Association. So it is our monthly mortgage and HOA payment. In three years no payment hike. Our HOA has only gone up $20 or an average of about $6.75c a year. The year before we moved, our rent went up $50. And was more than our two payments here combined.
And one thing that our current federal tax system does is give tax incentive to home ownership. Whether or not that is a good thing or not is for another time and another post.
By allotting a mortgage deduction for home ownership and improvements, I can assure you we have already recouped our investment by breaking even, federal tax wise. Even Mr. Cooper acknowledges that but in a snarky, disingenuous way. From Mr. Cooper:

The most prevalent is the mortgage interest deduction, which racked up a bill of $100 billion in 2009.

Don't you like how Mr. Cooper implies a cost? There is not a cost but $100,000,000,000 that does not go into the politician's pockets in Washington. It ends up staying in the local economies and taxes end up being collected locally rather than in Washington. So there is not a cost but not a redistribution of wealth either.
Speaking of taxes, being a home owner means that one has to pay property taxes.
And in California, for a roughly $300,000 home (yeah, there are some, but this is just a figure to use) the annual property tax is roughly $3,700. And in Los Angeles county there are special districts that the property tax goes to such as flood control, county parks, our local library. There are 11 extra assessments which adds roughly about $500 more to our property tax bill. So yes, being a home owner has the perk of paying for many services that renters do not directly pay for.
Something to think about, eh Mr. Cooper?
Without homeowners, who would pay for schools? Flood control districts? Storm drain channels? Community colleges? Shall I go on?
Here is something to think about.
In the United States, as of 2009, the home ownership rate was 67%. a majority of Americans. And yes, it is true as Mr. Cooper points out, many homeowners are underwater because of the housing bubble bursting in 2007. But unlike the gloom and doom of the millions that he mentions (and I have to doubt that broad number), one of the aspects of the investment into a home is for the long run. In other words, one can buy a home at $300,000 and stay in it 20 years. And maybe in that time, the value will go down. but at 20 years, if you sell it you will more than likely sell it at a profit. Yes if one buys a home just as an investment, it does take a lot of work into researching all case scenarios.
And while Mr. Cooper bashes some of the subsidies and or federal tax breaks as for the rich, again the fact is that the Home Mortgage Deduction is why at this point many, many American families have not been victims of the housing bubble.
What Mr. Cooper fails to point out is why the last bubble occurred.
It is due to the fact that pressure was put on lenders by the federal government to provide loans to people that were not prepared for home ownership. Down payments were a bare minimum. The lenders made all kind of exceptions and were encouraged to do so. Regrettably, this was to try to get more minority families into home ownership. No, not regretting that it was aimed at minorities. The regret is that is why many of the lenders were called predatory. It would have been beneficial to have the potential home buyers have more of a down payment. It would have been a good thing for the lender to have poor credit risks clean up their credit problems before they proceeded with their loans. In many cases, they did not.
Before we continue, home ownership is NOT for everybody for a lot of reasons. One is mobility and especially among younger, generally college graduates. For many of those will have to for job prospects. Another is that for some people, home ownership is not their American dream. Many of those are single people. And they are probably more interested in long-term travelling. They do not want to be tied down with having to deal with what home ownership brings. And most of all, there are those that can not afford it and all of the above is OK.
What Mr. Cooper does not explain in his piece is who should be homeowners, What kind of society will it be if most of the homes were owned by a few and the majority were forced to be renters? Is he comfortable with maybe five people owning 95% of homes in any given substantial city?
He does not say.
What Mr. Cooper does suggest is that there really should be no difference between a home owner and the renter:

Most of all, though, there is simply no reason for home ownership to occupy the cultural perch that it does. Renting is just as legitimate a form of paying for shelter as buying.

No, a home that is bought is not just for shelter. If you put it to that level, what you end up with is something along these lines.

This is what housing looked like in the old Soviet Union. Many cities and towns have rows, rows and endless rows of this kind of simple housing. Because since it was owned by the state and it really is for shelter after all, it does not have to look like anything, oh I don't know, unique. Individual.
And the dirty secret that Mr. Cooper will not tell you is that is what his idea on home ownership lead to. The abolition of private property and that includes and is eventually home ownership.
If Mr. Cooper went that far in this piece, he would be called a socialist nut-job. What he is doing is setting up the idea that home ownership is something of a bygone era. That renting is OK. Who cares? It's just shelter after all. What is the big deal?
The big deal is that private property and home ownership are the bulwarks of the American experience.
And people like Ryan Cooper see that as an affront. And he has begun the conversation that is the assault on home ownership.

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