Real Estate

Oh, just give me a home. Or not.

One of the few initiatives of President George W. Bush’s administration that tried to honestly help people who were not already well off was its push to increase homeownership for people at all levels of income. It worked hard to make this an “ownership society,” in which not just the rich but poorer people, too, could grow in wealth through the long-term increase in their home’s value.

The main way the administration sought to make this happen was to push for higher affordable housing finance goals for the two government-sponsored mortgage entities, Fannie Mae and Freddie Mac. Those two organizations help facilitate a secondary market for mortgages, buying up vast quantities of mortgages from the originating lenders, freeing up those lenders to then dole out new mortgages. It helps everybody.

It’s a great concept, but it ran seriously off the rails at these two GSEs and elsewhere in the global finance markets. And the economy went ka-blooey. The problem, as you’ve heard hundreds of times before, was that regulation was lax when not altogether absent or corrupt, and a multitrillion dollar mortgage market nearly shattered the world economy. It ended up hurting everybody: the investors, the general taxpayers who had to bail out Fannie and Freddie and other financial giants, renters who had never owned a home in their lives but who now faced upward pressure on their rents because of a sudden increase of former homeowners flooding into the rental markets, and those former homeowners who lost everything — their homes, their credit ratings, their hopes for joining the ownership society.

That is a problem Rep. Barney Frank worked to resolve after the 2008 economic debacle; we’ll leave to other writers an expert evaluation of whether the new regulations and the new system — which include President Obama’s recent plan to wind down Fannie and Freddie completely and remove them from the marketplace — clean up and stabilize the system. But we can look at the aspect of the problem that was driven by a desire to push people into homeownership beyond their natural inclinations and, in many cases, beyond their ability to afford.

Barney Frank is retired now. The longtime Democratic U.S. representative from Massachusetts is still around, however, offering his trademark blunt assessments of things. (He once told Ralph Nader, “You are luxuriating in the purity of your irrelevance.”) He left behind a track record in Congress as a — perhaps the — leading Democrat on financial regulatory issues, and he was intimately involved in crafting a post-meltdown response to the Great Recession.

A related area of expertise is housing. In May, he told a San Francisco audience that his longtime involvement with the House Committee on Financial Services began “in 1981 because I care a lot about affordable housing — rental housing. I’ve always felt that we make a mistake by insisting that the only good form of housing for low-income people is ownership; decent rental housing is the most appropriate form for many people, if we do it right.”

You can expand that from “low-income people” to “everyone.” We didn’t do it right before, and it is a good example of the argument that government should not try to push people to make economic decisions they aren’t prepared to make naturally. People make their own decisions, and they might not always be what the occupant of the Oval Office wants, but he’s just renting the White House, anyway.

A friend — I’ll call her Dawn — is homeless. Rich, but homeless. It’s by choice. Dawn sold her San Francisco condo for nearly $1.5 million and a tidy profit last year. But rather than put that money directly into the purchase of a new home, she is sitting on the cash and living with friends and family. A little bit of time with Relative A, a little time with Friend B.

Dawn could end her homelessness any time she wanted; all she would have to do is buy another house or condominium. She would even be able to pay cash, earning the enmity of all competing noncash bidders on the property. But she is determined to wait out the current spike in home prices.

Then there’s another friend I’ll call Darren. He’s a lifelong renter who plans to change that when he retires in a few years. Until then, he is houseless but not homeless; he’s quite comfortable renting the apartment he’s inhabited for the past two decades.

The right time for Darren to finally buy a home will be determined not by price booms and busts — he’s got no shortage of money after a career in the booming biotech industry — but by the dramatic life change he plans for retirement, a change that will probably take him to another city altogether where he will devote himself to nonprofit volunteering.

And yet another real-life example is Liz, who bought a home in Colorado with her partner 10 years ago when it looked like they would be there longterm. But when their jobs dried up and they moved to the West Coast, they had to sell their home through a tortuous process that left a bad taste in their mouths and a big dent in their bank accounts. They have been renting a condo for more than six years, and they have no immediate plans to move back into homeownership.

Each of these people will sort out their next foray into home ownership. Let’s hope government doesn’t try to make their decisions for them.

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John Zipperer is the former senior editor for Apartment Finance Today and Affordable Housing Finance magazines. E-mail: [email protected]