1 American Dream or American Obsession ? The Economic Benefits and Costs of Homeownership

Homeownership, like baseball and hotdogs, is an integral part of the American culture. Over the past 70 years, the U.S. government has devoted significant public resources to encouraging and promoting homeownership. (See Housing Policies That Promote Homeownership for a summary of the various programs.) The percentage of households that live in housing units they own has risen from around 40 percent before World War II to close to 70 percent today. The financial crisis that started in 2008 has prompted the government to spend even more on preserving homeownership, despite the fact that the financial crisis itself was led by the meltdown of the U.S. housing market. In light of these developments, an increasing number of academicians and media reporters are now questioning the previously unquestionable: Has the American dream turned into an American obsession? In this article, we analyze the economic benefits and costs associated with owning one’s residence. We re-examine a variety of rationales that have been put forward in support of homeownership, namely, housing as a means of saving and a means of investment. We argue that both rationales are no longer valid. We also examine the evidence for an economic cost associated with homeownership, that is, the reduced mobility rate. In a nutshell, while owning one’s own residence carries economic benefits for many households, it is not for everyone, at least not on economic grounds. As the