Rent or own? Increasingly Americans opt for rental homes.

Homeownership – a central part of the American dream – is on the decline.

The bursting of the housing bubble is pushing current owners out of homes. Potential home buyers are putting off a purchase, evidence suggests, and renters are choosing to rent for longer periods of time. After reaching a high in 2004, the share of Americans who own their home has fallen to the lowest level in 13 years – and it's likely to slide more.

"Renting used to be the thing you did until you could afford to buy a house, but this has definitely changed," writes Peggy Alford, president of Internet rental-listing site Rent.com, in an e-mail. "While home-ownership will always be part of some people's American Dream, it's no longer taboo to rent."

This shift toward rentership is certainly a reversal of the "ownership society" articulated by President Bush in 2003, where a rising tide of citizens with homes, stocks, and other assets were supposed to lead to a more responsible society. For decades, homeownership especially was touted as leading to everything from more stable neighborhoods to better-educated children. So is the shift bad for America?

The rent or own debate is not so clear-cut, many experts agree. The tilt toward renting signals instead a return to more normal levels of homeownership. New research suggests that it isn't quite the driver of social good that it was once thought to be.

For starters, the ability of regular folks to buy a home is a relatively new phenomenon in the timeline of American history. "As recently as the 1930s, fewer than 40 percent of adults in American households owned their homes," says Robert Hockett, a law professor at Cornell University in Ithaca, N.Y., who studies organizational and financial law and economics. Only after the Hoover and Roosevelt administration made regulatory changes in the home mortgage industry did the homeownership rate go up.

The housing bubble also exaggerated the rate. From a high of 69.2 percent in 2004, the share of Americans who own their home has fallen to 66.4 percent, which is still a percentage point or two above the rates that predominated from the mid-1960s through the mid-'90s. Renting, meanwhile, appears to be on the rise. With some 39 million rental households already, the United States is poised to add another 3.6 million households by 2020, according to a recent study by the Joint Center for Housing Studies at Harvard University in Cambridge, Mass.

The debate over which is better for community well-being – renting or owning – comes down to stability. The long-held notion is that owners have a stake in the community and therefore contribute to making it a safe, clean, and pleasant place to live. According to Mr. Hockett, this theory is overblown.

"Lots of people rent because they can't afford to buy, but that doesn't mean that they aren't responsible members of their community," he says. "What really matters is whether they think of themselves as stakeholders. What determines whether you think of yourself as a stakeholder is how long you plan on staying. If you are there for the long haul, you're a stakeholder. If you're transient, you're less so."

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