Own your own home?
From the first days of the colonial settlers, through the 19th century and into the space age, the United States has been essentially a nation of homeowners. At first it was the small farm. By the time of Abraham Lincoln, the federal government was eagerly providing 160 acres (and often a mule) through the Homestead Act. During the New Deal 1930s a succession of federal programs dramatically hastened homeownership, followed by the GI bill of the mid-1940s which provided generous federal assistance for millions of returning war veterans and helped spur the growth of the suburbs.
Now many analysts believe that the "golden age" of American homeownership may be over. They suggest that in the future new housing supply will be at lower than needed levels, prices will soar to the point where only the most affluent families will be able to purchase homes, and federal assistance programs -- because of budget pressures -- will be sharply curtailed. "The 1980s will clearly mark the end of a fifty-year housing cycle, one in which America's shelter provisions became the envy of the world," two housing experts noted in a Rutgers symposium recently.
The task for everyone involved with housing -- from the federal government, the savings associations, and mortgage industry to the builders and numerous construction unions -- is clear-cut. The United States must take steps to ensure that American families have access to decent and affordable housing, and that the consistent goal of America as a nation of homeowners remains intact. That the US has escaped much of the class antagonism found in some other industrial nations is due in large measure to the existence of a large, homeowning middle class.
Yet it will be a challenge to maintain this standard in the period ahead:
* Although some 18 million new homes were built during the 1970s, an additional 21 million units will have to be built during the 1980s to house 97 million households that are expected to exist by the end of the decade. That means well over 2 million new units will have to be built a year. Yet housing starts last year plummeted to 1.3 million units and are now running at around 1. 5 million units, sharply below the 1968 peak.
* Alongside continuing conversions of apartments to condominiums (although at a slower level than in the late 1970s), there is a paucity of construction of new rental complexes. It is therefore a question whether enough rental housing will be available by the late 1980s.
* The average price of a new home in the US is now over $80,000. Not surprisingly, the number of first-time homeowners fell roughly 50 percent between 1977 and 1980, and those first-timers now make up only around 20 percent of all purchasers.
What must be done?
The answers, of course, given all the diverse elements involved in rising home costs, are varied. But at the outset it is important that lawmakers, who in most cases are themselves homeowners, remain dedicated to the goal of America as a homeowning nation. That does not necessarily mean a continuation of particular programs, nor even necessarily the heavy federal financial subsidy of past housing programs. But it does mean that lawmakers and the new administration must be zealous in their commitment to ensuring an adequate housing stock.
To that end, the Reagan administration is correct in seeking to lower inflation and interest rates. But it should also reexamine its proposed cutback of new FHA authority (as proposed by the Carter administration).A strong case can be made that the additional FHA commitments are "investment" dollars.
The administration would also be well-served by seeking as swiftly as possible to fulfill the 1980 GOP platform, which called for a "young family housing initiative." That would mean, for example, establishing savings programs such as found in European nations which allow young families to set up interest-free passbook savings accounts ear-marked for a new home. The administration might also want to consider voucher systems as a possible way of aiding lower- or moderate-income families. The idea was first broached by the Nixon administration and was supported in concept by some members of the Reagan preinaugural urban task force. Under the concept, qualifying families would be given a direct grant to help them either buy or rent housing. The approach would thus shift federal funds now going to the private housing industry itself to families and would allow greater freedom of choice in housing decisions.
The administration shows signs of wanting to take steps to aid the troubled savings industry, including facilitating bank mergers where appropriate. Development of new nonfixed or "fluctuating-rate" mortgages where interest payments rise or fall depending on overall interest fluctuations is a welcome sign of ingenuity. The administration might also want to consider granting the savings industry new types of savings instruments, such as instruments that would have tax-free status and would be linked to Treasury bill rates.
There are countless other steps that could be taken. Cities need to be more careful about approving destruction of older housing stocks, particularly in areas that can be converted to industrial parks. Pressure must be kept up on banks and S&Ls to desist from "redlining" -- refusing to write housing loans in inner city areas where older housing is common. Cities must be more zealous in preventing arson. Construction unions need to show more restraint in wage demands, which invariably push prices upward.
We do not suggest that these proposals are definitive. Congress and the administration must weigh each proposal carefully. But the important thing is that they not let the dream of homeownership disappear and fail to k eep faith with new generations of Americans.