The Great Recession plunged untold numbers of former homeowners back into the ranks of those who rent. And as housing prices skyrocket, wages remain largely stagnant, and "lost" good jobs continue to be replaced with jobs that just barely let a person scrape by, the seemingly basic goal of home ownership--and the stability and confidence that come with it--appear increasingly out of reach. The recession has created a generational wealth gap that many economists say will never heal for millennials. Home ownership among those under 40 is at a historic low, and even households with two steady incomes don't see any viable path to affording a house in many parts of the country. For example, one recent report found that there was not a single home for sale in the city of San Francisco that the average San Francisco teacher could afford.
Since 2013, there have been frequent reports of how the housing market is "recovering." But far too many of these sales are to investors and "flippers"--those looking to buy up hot property so they can turn around and sell it to deep-pocketed investors at an even higher price. This creates false scarcity, and drives the price of home ownership out of reach for the average family. Homes are rapidly becoming something that only the well-heeled can afford, a luxury for the upper class and a commodity to be rented out to the rest for massive profit. Like money, homes are being hoarded by the wealthy.
Much has been written about the emerging housing divide. Many potential reasons have been explored, and most such pieces conclude by stating that, due to the numerous factors in play, finding a way to course-correct is tricky if not impossible.
But what if it isn't?
The problem is that housing is being treated as a high-value financial investment, rather than a basic necessity. Even comfortably middle-class homeowners are taught to treat their homes as investments; we leverage debt against them, we factor them into calculations of our "value," and they often play a substantial role in our retirement plans.
But a house isn't an investment; it's a basic, essential resource. Everyone needs somewhere to live--shelter is second only to food and water on the list of basic survival needs. And by most standards, ownership is far preferable to rental: it's more stable both economically and socially, it creates more stable neighborhoods and your money is gaining you a permanent shelter rather than a rented service (your money is no longer being thrown down a "black hole," so to speak). There are plenty of cases where rental makes sense, and some people would rather forego the hassle of home ownership. But given a choice, most people would rather own; they just can't afford to, despite the number of homes in the United States. Why?
The price is driven up by the number of homes for sale in relation to the number of people who would want to buy. Homes for sale are more scarce because of how many are bought as investment properties. The price is further driven up by the deep pockets of these investors, who frequently outbid families looking for a home, thus establishing a higher average market value.
So how do we make home ownership more affordable?
Destroy the value of homes.
More specifically: impose a national cap on home ownership. If a single person (or couple, or business interest) is restricted from owning more than, say, three residential properties, speculators and investors will be forced to sell en masse. Three homes is still enough for someone to have a primary residence, a secondary home, and even a so-called "investment" or rental property. It's even enough for a small, local business to operate two or three properties. But it would make large-scale residential property investment impossible. Big investors would have to liquidate their holdings to comply with the new law, freeing a wealth of supply onto the market. And, since deep-pocketed investors can't buy up properties in bulk, sellers will be forced to lower prices until they find buyers who CAN afford them.
As with any such drastic change, pitfalls are plentiful. Anyone who has already made a significant investment in property stands to lose a lot of equity, and that includes plenty of regular folks who will wake up to find that their homes are worth a fraction of what they paid. A home still has a baseline intrinsic value, based on the cost of materials and labor that went into its construction, as well as the value of the land itself... but this figure is far, far lower than what most houses sell for in today's market. And because so much wealth is being destroyed, the law would likely have to be phased in over a period of years, with restrictions increasing each year and a detailed set of guidelines for how to handle the sale and transfer of property during the implementation period.
And in order to be effective, such a law would need to be constructed very carefully. Set to lose a great deal, real estate investors would look for any possible loophole to exploit. Means of sidestepping the cap (split ownership, holding companies, etc.) would have to be taken into account and blocked, efforts to reclassify residential property to prevent it from "counting" would also have to be addressed, and a series of court challenges would be all but inevitable. And the penalties for noncompliance would have to be stiff and severe, so that it doesn't become just another "cost of doing business," allowing large firms to keep operating while only driving out the smaller businesses that can't afford the fines. On the other hand, incentives and subsidies for sale may be helpful to keep current homeowners from being left completely empty-handed.
Of course, anything like this would be a prickly pear to set up on the first place. Anything that smacks of the government telling people how to handle their own property would be very unpopular in the public eye, at least until the benefits begin to manifest. Undoubtedly, the first battle cry against such a change would be "The government's after our land!"
Well, no, actually. The whole idea is to make the land MORE accessible to MORE people, to help more folks become homeowners in a real, lasting way, not through the predatory financial tricks that defined the home ownership drive of the George W. Bush years.
The beginnings of a draft proposal appear below the fold.
DISCLAIMER: I am no attorney. I know this thing is full of holes, and there are likely numerous legitimate needs and concerns
I am overlooking that would have to be taken into account. But this is a starting point, and I'd love to get reader feedback.
0. Definitions
0a. Owner: a person, business, or other legal entity recognized as holding legal possession of a piece of real property.
0b. Residence: for the purpose of this law, a residence shall be defined as any piece of real property whose primary function is long-term human habitation (90 days or more of ongoing habitation by the owner or a given tenant). Any property on which more than 50% of the habitable structure is residential in nature shall be considered a residence, regardless of state or local zoning.
0c. Full Penalty Rate: for the purpose of this law, the full penalty rate shall be defined as the sum total of the fair market values of all real property currently held, in part or in full, by a given owner, as determined by a court-appointed independent assessor.
1. Restriction of Residence Ownership
1a. No owner shall possess, or maintain partial possession, of more than three (3) residences simultaneously.
1b. No owner shall, through use of subsidiaries, holdings, or any other means, maintain full or partial direct or indirect possession or control of more than three (3) residences simultaneously.
1c. If an owner has full or partial possession of three residences, and seeks to acquire one or more additional residences, the owner shall not be recognized as obtaining possession of any additional residences until possession of one or more of the other three residences has been completely and legally relinquished as necessary to maintain compliance with 1a and 1b.
1d. Only the United States government, state governments, and recognized nonprofit educational and religious institutes shall be exempt from the restriction of residence ownership. The restrictions of residence ownership cannot be waived under any circumstances.
2. Reducing Ownership
2a. All owners shall have a period of five (5) years from passage of this law to comply with Section 1. This period shall be known as the implementation period.
2b. Any owner found to be in possession of more than three residences after the implementation period has ended shall be compelled, within a reasonable period of not more than two (2) years, to sell as much real property as necessary to comply with Section 1. The owner shall decide which properties to sell, and shall be responsible for executing the sale of the properties.
2c. If an owner has been compelled to sell property in accordance with 2b and has not sold the property within a reasonable period, the property shall immediately be subject to siezure by [appropriate agency] and subject to public auction. The owner shall receive 50% of the net income from the sale.
2d. During the implementation period, no owner shall acquire any new residences unless such acquisition is in compliance with
Section 1.
3. Enforcement and Penalties
3a. After the implementation period has ended, any owner found to be in deliberate defiance of Section 1, or who willfully attempts to circumvent any part of this law, shall be fined no less than half and no more than double the full penalty rate. All real property involved shall immediately be subject to siezure by the court and subject to public auction. The owner shall receive 50% of the net income from the sale. The owner's share of the sale shall be applied toward payment of the fine.
3b. After the implementation period has ended, any owner who has been found to be in deliberate defiance of Section 1 on multiple occasions, or who willfully attempts to circumvent any part of this law on multiple occasions, may be restricted to owning no more than one (1) residence at any given time. This restriction may be temporary or ongoing, and once issued, cannot be lifted except by court order.