Tougher home ownership credentials: better for cities?

 Over the past few years, home ownership became easier than it had been in decades in the United States and in many countries around the world.  40 year mortgages and buying with little or no downpayment made purchasing easier.  A US practice of loaning 103% of the value of a house made it seem like a no-brainer to buy a house.

But should everyone own their home?  Is this really the path to prosperity and/or happiness?  Perhaps the tightening lending rules in the US and Canada and elsewhere in the world will be better for individuals, families and the urban economy.

When is home ownership not necessarily a good idea?

If you are young (or not) and “trying on” jobs and careers, changing employers every year or two, home ownership restricts your options and may hold back economic development in a city.

  • it limits your ability to relocate for a great opportunity.  Trying on cities — as Richard Florida suggests in his recent book — might be as important to one’s long term happiness as trying out jobs.   Also, in this era of high gas prices, owning in an eastern suburb could limit one’s ability to accept a job in a western suburb.
  • it could prevent you from taking a lower paying position that might be particularly interesting or a wonderful learning opportunity.
  • it could prevent you from returning to school, such as for an MBA, or a trade certificate or another diploma.  Without ownership, you could move to a cheaper home.
  • renting offers more cost certainty (in most cases).  Costly repairs are the owner’s responsibility.

That’s for individuals.  For cities, young people owning homes potentially creates labor imbalances.  In a national or even global economy, ideally, you want people to be able to move from places where jobs are scarce to places with workers shortages.

Cities also need new people and new ideas, as well as for previous residents to return with new ideas from their time elsewhere.

It may be that city economies need a certain number of workers, particularly younger ones, able to change jobs easily.  It’s possible that in order to best hone their talents, and excel in their careers the average person may need to change jobs a certain number of times.  If people are not free to find out what they enjoy and are best at, might that not bring down both the economy as well as the general happiness and human energy in a city?  

Cities are, of course, more than sites of transient workers.  They do need long term “community anchors” who own homes and contribute to neighborhoods and urban life.

Some people should own homes.  But, historically, home ownership happened once people had settled into a career with one employer and had settled down with their life partner.  Perhaps that should be the same way now.

If ownership typically required saving for a down payment and a solid recent employment history — as it historically has done — that might be best for cities and for the average person.

9 comments

  1. [...] a good thing, quoting James Surowieki, Richard Florida and Matt Yglesias. Wendy Waters of All About Cities notes that with the disappearance of 40 year, 100% mortgages, it will not be so easy to buy a [...]

  2. [...] a good thing, quoting James Surowieki, Richard Florida and Matt Yglesias. Wendy Waters of All About Cities notes that with the disappearance of 40 year, 100% mortgages, it will not be so easy to buy a [...]

  3. [...] a good thing, quoting James Surowieki, Richard Florida and Matt Yglesias. Wendy Waters of All About Cities notes that with the disappearance of 40 year, 100% mortgages, it will not be so easy to buy a [...]

  4. Gwen says:

    One interesting development to consider is the growth of telecommuters. I have telecommuted to my job for the last eight years. During that time I have lived in California, Vancouver and now Summerland. Now my husband also telecommutes. We can work anywhere as long as there is wireless.

  5. mortgages are 30 year term. There may be some 40 year term mortgages in the subprime market. DK for sure.

  6. KenF says:

    40 year mortgages, yep, just like 6 year car loans.

  7. Wendy Waters says:

    In Canada, 25 year mortgages were the standard until about 2 years ago when the government-owned CMHC which insures high LTV mortgages agreed to insure 40 year options, and some with zero down. Both of those options are being removed effective later this year. The banks are following the lead and removing 40 year options. Many are speculating on a buying burst in the next couple months and then a halt as some potential-first-time buyers scramble to get into the market.

    I recall reading that 40 year mortgages along with interest-only loans were available in the sub prime market in the US. I’m sure you’re correct that 30 year options remained the standard in the “prime” market.

  8. Gwen says:

    An interesting alternate angle to consider is the growth of telecommuters. My husband and I both telecommute to our jobs, so we can essentially live anywhere. I have moved four times while holding down the same job (California, Vancouver and the Okanagan). We “tried on” cities and have finally settled down in the southern Okanagan.

  9. [...] – bookmarked by 3 members originally found by mustangsflame2 on 2008-07-24 Tougher home ownership credentials: better for cities? http://allaboutcities.ca/tougher-home-ownership-credentials-better-for-cities/ – bookmarked by 2 [...]