Needed: a US housing policy

THE United States needs to develop a comprehensive national housing policy. The early 1980s witnessed a decline in the ratio of homeowners to renters. That represents a reversal of a 30-year trend toward home ownership by Americans.

Throughout its history, the US has been a nation that has encouraged home ownership. In the early years of the republic, that often meant a small farm. Today, the choices are diverse, from a single-family house to a condominium to a cooperative. But for millions of Americans, particularly for young families with children, there is a major hitch: prices. The average price of a new house went up $2,100 in February to $94,500.

The US housing industry itself is currently doing well after a downturn during the recession. Although interest rates remain at historically high levels , housing sales are up, in part because in many families both husband and wife are working and thus able to afford big monthly mortgage payments. According to government figures released yesterday, sales of new houses climbed 7.8 percent in February from January.

What needs to be kept in clear focus, however, are the long-range factors that affect housing:

* Interest rates. Although interest rates declined slightly Wednesday, the outlook is upward.

* Mortgage money. Currently, financial institutions have ample capital to finance home purchases. But according to a task force of the US League of Savings Associations, the housing industry is expected to face a capital shortfall of about $288 billion over the remainder of this decade to finance new housing.

Why? Because of large federal budget deficits. Uncle Sam is now consuming roughly 26 percent of all funds raised in private credit markets. The task force reckons that unless firm action is taken to reduce deficits, the amount could jump to 30 percent in the years ahead.

Three steps are essential to ensure that enough housing is available for Americans in the years ahead:

1. Congress and the White House need to reduce federal deficits. That means slowing the rate of increase in defense spending, curbing the growth in entitlement programs, and providing for modest tax hikes.

2. Tax incentives for personal savings should be granted to prospective first-time homeowners. Such incentives are common in Europe.

3. Government, at both the federal and local levels, needs to eliminate impediments to construction of new housing, such as out-of-date zoning restrictions. Rental complexes should be precluded from denying apartments to families with children (as is increasingly common), unless there are unusual circumstances.

Finally, lending institutions would seem wise in providing more detailed and easy-to-understand information about different kinds of mortgages, such as adjustable rate mortgages. These mortgages often start out at rates as low as 8 to 9 percent, but quickly jump upward to reflect overall hikes in interest rates. Some families find they cannot meet the higher monthly payments.

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