Time to Delink Homeownership from Asset Building

Using homeownership as an asset-building mechanism and retirement plan might not be a great thing for our society.

home with for sale sign in foreground
Photo by freeimage4life, via flickr, CC0 1.0.

Robert Wassmer and Imaez Wahid set off a bit of a firestorm several months ago with an ill-considered article in Housing Policy Debate that asked whether NIMBYism might actually be “rational” in a world where “likely residents of affordable housing” might actually lower property values. In other words, if the world discriminates, it becomes rational for supposedly non-biased homeowners to do so as well, since other people’s beliefs will affect their property values.

I’m not going to get into a thorough debunking of their argument and policy proposal, because three published responses do the job quite thoroughly: “Comment on ‘Does the Likely Demographics of Affordable Housing Justify NIMBYism?’” by J. Rosie Tighe and Edward G. Goetz; “Affordable Housing and Its Residents Are Not Pollutants,” by Mai Thi Nguyen and Corianne Payton Scally; and, for the scholars, “A Methodological Critique of Wassmer and Wahid,” by Philip M. E. Garboden and Prentiss A. Dantzler. They are currently free to download, but that might be temporary.

The extremely short version is:

(You can also see Wassmer’s response to the feedback here.)

One thing that struck me about this whole kerfuffle, though, is that it’s a good example of why using homeownership as an asset-building mechanism and retirement plan might not be a great thing for our society.

Almighty Property Values

Despite their strong critiques, the commenters readily agree that even non-drastic changes in property values are a legitimate concern for homeowners.

“Because the home is the primary source of wealth for most middle-income families, owners are understandably concerned about their property values,” acknowledge Tighe and Goetz.

“One point on which we agree with Wassmer and Wahid is that it is understandable for homeowners to be risk averse to nearby land uses that they perceive will drive down the value of their asset,” say Nguyen and Scally.

Anti-Social Homeownership

Perhaps we shouldn’t accept this point quite so calmly, though. The value of one’s home is frequently touted as not only an asset, but the asset, the retirement fund, the nest egg, the best way to build assets and achieve economic stability. And it’s not only the value of the home, but the expected appreciation of that home.

However, since that value is primarily based on the value of the land it sits on, it’s out of the homeowner’s control. It is, in essence, speculation. People do try to control their property value by intervening out of (perceived) self-interest in zoning and development decisions. All. The. Time. Very often they are flat out wrong about the threats to their property values—but along the way they manage to have very real negative effects on integration, mobility, sustainable density, fair share housing construction, and the like in the process.

[RELATED ARTICLE: What Is NIMBYism and How Do Affordable Housing Developers Respond to It?]

And even in the cases where they are right—say, the location of a dump—it is detrimental to trying to achieve an equitable society when one group of people feel that their quality of life and entire financial stability is threatened when they are asked to accept some shared responsibility for undesirable land uses.

To be clear—I’m not concerned for wealthy individuals sitting on tons of equity who lose their minds at the prospect that that equity might shrink a little. And I absolutely agree that in a whole lot of cases (probably the vast majority) fears about home values are either driven by unacknowledged prejudice or are masks for quite conscious prejudice.

Questioning the Nest Egg

Nonetheless, legitimizing the use of speculation on residential land values as a retirement plan makes it much harder to address NIMBYism, biased or not, because we’re forced to cede that trying to maximize home value is on some level “rational,” and exactly what society expects homeowners to do.

“This sort of wealth building is predicated on a never-ending stream of new people who are willing and able to pay current homeowners increasingly absurd amounts of money for their homes,” writes Joe Cortright at City Observatory. “It is, in other words, a massive up-front transfer of wealth from younger people to older people, on the implicit promise that when those young people become old, there will be new young people willing to give them even more money.” Homeownership as a wealth-building tool is not only detrimental to fair housing, it’s detrimental to affordable housing.

“We realized that there was a common interest that joined elected officials, developers, and homeowners into a formidable political bloc: rising property values,” wrote Peter Sabonis in Shelterforce, describing the challenges of gathering support for a community land trust in Baltimore. “Property appreciation meant equity to homeowners, profit opportunities for developers, and revenue for a city government reliant on property taxes.”

It doesn’t help that many people—including in the community development world—spent a lot of time valorizing homeownership as morally superior in part because of the “stake” in the neighborhood that it gives someone. This has done narrative damage to the development of sufficient rental housing, has lent too much legitimacy to the fears of homeowners, and makes it harder to win the narrative battle against NIMBYism.

Homeownership can offer a lot of things to households and neighborhoods—stability and control, rootedness and continuity. In some cases it can be a better deal than renting, and it can be a financial benefit just for the forced savings of paying off a mortgage. It’s not a bad thing at all, and we should keep working to make sure everyone who wants it has equal access to it. But that doesn’t mean it has to be seen as an appreciation machine.

Daniel Wu, in one of his Welcome Labs newsletters on the future of inclusive housing, quotes a friend asserting that “housing is so tense because NIMBYs are worried about threats to their ‘nest egg.’” Wu suggests that “delinking housing from wealth creation, then, might mean more rational ways forward.”

I agree. It’s time to stop treating speculation on home value for a nest egg as socially desirable, especially if there are other options.

However, we do have to acknowledge that for many people, speculating on land values is appealing for the same reason gambling is—in a society that does not offer universal health care, retirement security (and even the little we have is constantly under assault), reasonable wages, steady employment, or a decent safety net, we’re looking for something to stabilize us. So: next stop—building a society where non-affluent people do have other prospects for economic stability and a comfortable retirement, so we’re not searching for a silver bullet that is destructive to our neighborhoods.

Miriam Axel-Lute is CEO/editor-in-chief of Shelterforce. She lives in Albany, New York, and is a proud small-city aficionado.


  1. Miriam
    I believe this article is reckless from an advocate WITHOUT proposing alternative methods of asset building and wealth accumulation for African Americans most of whom have what tiny modicum of wealth has been through homeownership. African Americans have put their children through college with their home equity, when the financial crisis occurred African American institutions of higher learning suffered an amazing drop enrollment and many suffered a financial crisis of their own as a result in the precipitous loss of black wealth accumulation resulting from the crisis. What are your proposals for wealth accumulation? If you have none your article is just as dangerous as the one you cited.

    • I’m not sure why you see it as dangerous? Did you take it to mean I was advocating for reducing efforts to support reducing the racial homeownership gap? Because I absolutely don’t mean that. There are many reasons to keep supporting homeownership for those who want it–including but not limited to the home equity that comes from forced savings and modest appreciation.

      But the way we rely so heavily on massive housing appreciation based on land value rise *hurts* African Americans overall, even if some have managed to benefit from it. Look at how much wealth was lost in the foreclosure crisis, and who lost it. Combined with racial prejudice it drives discriminatory and segregational behavior, as well as resistance to things that would improve life for everyone, which was the main point of this article.

      The original article that was under critique proposed a specific policy of “cap and trade,” which implied that affordable housing residents were pollutants and we should legitimize fear-driven stereotypes about them. I was more proposing a shift of attention than one narrow, specific policy. The list of what we need instead is simple, but a very big political lift, I’m aware of that. We need reparations, shared-equity homeownership, wider availability of non-speculative housing in general, a stronger safety net including beefed up social security, a stronger labor movement and a return of pensions, and support for asset-building in financial vehicles that are not attached to property values and therefore land use decisions and racial fears–child savings accounts, retirement accounts, etc.

  2. I am intrigued by the connection between offering a safety net of basic coverage (healthcare, childcare, elderly care, and living wages) and the possibility of reduced pressure on housing as a nest egg. Even personally, I would be much less inclined to think about housing as a financial investment if I had some assurances that my most basic needs would be met through the use of my tax dollars. I would still love to see a comparison of the U.S. housing market to that of other OECD nations, but one that accounts for the differences in policies. For instance, I saw a chart the other day (from peoplespolicyproject.org) that compares the percent of our income paid in taxes including employer-based healthcare premiums to the share of taxes paid in other countries. While most of us would believe, based on rhetoric, that the average American pays less in taxes than those living in many European countries, the reality is quite different when we also include our healthcare premiums. Only the Netherlands pays more than we do!

  3. The article is interesting and makes many good points. However, I also understand how it led to Stella Adams’ response.

    Homeownership is hardly the only asset builder in trouble. The article did not cover enough the breakdown of other asset building tools in our society. Wage stagnation, Higher Ed debt, predatory lending and the overall/debt culture have robbed us of the other pillars of middle class wealth building: Living wages, college education, access to credit and the ability to save. This general erosion weakens the homeownership asset building tool. The notion of moving away from homeownership for building assets might have resonated more if this larger picture had been painted more fully.

    The idea might also have been more easily understood if there were a stronger case made for alternatives. It was also unclear what people should do instead. Given the lack of affordable rental housing stock, not sure how renting is a much better path to saving money, let alone creating the potential equity homeownership provides, albeit minimal.

    Seems to me it is time to “delink” speculation and predatory lending from housing. I know! How do we do that? But I am not sure how we do what the article suggests either.

    • We should definitely delink speculation and predatory lending from housing–and really my point was about the part of “asset building” in housing that is essentially speculation on land values. And my point wasn’t that it doesn’t have benefits for some people or that renting is better, but that leaning on homeownership as retirement fund–including, and perhaps especially for white middle-class people–causes anti-social behavior that reinforces racially injustice outcomes and exclusionary and sprawling land use patterns. I don’t want to stop encouraging homeownership for those who have been excluded from it. I want to stop legitimizing better-off households’ obsession with their property values.

      I think shared-equity homeownership models would provide the good parts without the bad. So would putting fewer big costs on the shoulders of individuals (so–free college, better Social Security). Also more investment in asset-building models like worker cooperatives that have positive side benefits instead of negative ones. But I’m well aware that there isn’t an easy answer.

  4. It is indeed useful to be reminded that homeowners build wealth in more than one way. There is the appreciation of home values, with all the drawbacks that have been noted in the article. But even in the absence of substantial appreciation, there is still significant wealth accumulation over time as the principal balance of the mortgage is paid down. Ideally, the mortgage balance gets paid off by the time people are ready to retire – thereby greatly reducing monthly living expenses post-retirement while preserving an asset that can be passed on through inter-generational wealth transfer.

  5. I want to put in a word for Limited Equity Housing Co-ops. Co-ops take housing out of the speculative market permanently! It is a path to housing stability for those who can never afford to purchase a home. I helped form the co-op where I live over 30 years ago. My monthly payments are about 20% of what market rents are today, which allows me to put funds into savings every year without it being linked to “property values”. I do earn limited equity equal to the CPI, or about what a CD would pay on my initial co-op share purchase. We are homeowners but not part of the speculative market. We are also part of the Bay Area Community Land Trust, which creates and supports housing co-ops.

  6. Thanks for the plug for Limited Equity Housing Co-ops, Rick. LEHCs are a great option for providing affordable home owners that becomes more affordable over time. Many California cities and counties require that affordable units be created as part of new development projects. Unfortunately, these deed restricted homes can be lost far too easily. During the Great Recession, many units were lost through foreclosure. Afterwards, many were lost because their resale formulas bore no resemblance to the market. In earlier days, units were lost when interest rates increased. Owner were either forced to sell at a loss, additional public subsidies were required to maintain the units’ affordability or the units were lost from the affordable stock.

    It’s time for people to reconsider the LEHC model for affordable ownership housing.


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