Community Development Field

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.

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