Institutional Myopia and Policy Distortions: The Promotion of Homeownership for the Poor

Article excerpt

Housing is acknowledged to be a national problem in the United States. The precise nature of that problem, however, is largely unspecified--and certainly not an element of policy consensus. Most policies are directed at relatively short-term fixes, ranging from providing more shelter space to offering homeownership status to low- and moderate-income households. The myopic perspective of policymakers was well visible in the 1960s provision of loan subsidies to developers in return for inclusion of low- and moderate-income rental housing in their projects. That housing supply evaporated as the loans were paid off and the requirements lifted; this pattern is one source of the current crisis. The emphasis on homeownership evident in the federal policies that emerged in the 1980s similarly takes a short-term view [Stegman 1991].

An infusion of cash may be able to solve immediate acquisition problems and permit lower income households to attain ownership. The rhetorical rationale for the promotion of ownership is that it will improve the stability of housing tenure and increase residents' commitments to their dwelling places and communities [Silver 1990]. However, minimal institutional attention has been given to preservation of tenure over time. This short-term focus is inappropriate for policies directed at long investment decisions and is inconsistent with the avowed intent to stabilize tenure. Unfortunately, such a myopic perspective that defines the problem as one of attaining, not sustaining, ownership is consistent with, and inherent to, conformance to short-term private market pressures [National Association of Homebuilders 1986].

A core belief in "privatization" and the superior allocative and productive capacities of the private marketplace characterized the Reagan--Bush years. These perspectives led to the redirection of federal housing policies away from assuring a supply of low-cost housing to focus on efforts to promote homeownership for lower income households. Observers of these policies have commented on declines in the affordable housing supply and the growth in homelessness that accompanied them [van Vliet and van Weesep 1990].

This paper argues that the institutional assumptions that attainment of ownership status is tantamount to increased stability of tenure and maintenance of that status are false. The pervasive myopia is such that even federal non-housing policies (such as the eligibility criteria associated with federal income maintenance and medical assistance programs as currently administered) may act to inhibit low- and moderate-income homeownership. We begin our argument with a review of the patterns of income instability of low- and moderate-income households. Next, we examine the ability of low- and moderate-income households to predict their own housing mobility. Finally, we return to the institutional factors shaping a myopic view of the housing problem that ignores these issues and conclude with some suggestions for policy responses.

The Income Instability Facing Low- and Moderate-Income Households

Low- to moderate-income would-be homeowners confront several barriers to acquiring and maintaining their own homes. These include: (1) the down payment and closing costs, which require some asset base or assistance from other sources; (2) the monthly carrying costs (including mortgage, utility, insurance, and tax payments), which they have to cover out of their current income; and (3) unanticipated maintenance and repair costs, which they may not be prepared to address. Reflecting the pervasive institutional myopia, public and private efforts to assist low- and moderate-income households to enter into homeownership tend to focus on the first two cost elements and ignore the third.

This inadequate support system can place an inordinate burden on a homeowner over time. For example, if a water heater breaks down, the plumbing starts leaking, or a tree branch crashes through a roof, homeowners would be faced with emergency repairs. …