Should We Encourage Low-Income Homeownership?

Sociologist Dalton Conley argues yes, and now especially, given the affordability of a bottomed out market:

"the solution to our troubles is not to restrict homeownership, but to expand it...owning a home can be one of the best ways for a poor family to save and accumulate assets: recent history aside, the value of a house does typically rise, and its owner avoids paying rent and gets a tax break."

I've gotta be honest with you, I'm extremely wary of this argument.  At a most base level, and this shows you how far I've moved back to the left since entering MIT in 2004, when I would have supported Conley's argument 100%, there's an argument to be made for providing more affordable, safe, rental housing as a basic good in society, not just as a sorry, second-class substitute for homeownership. And it's the argument for rental housing that seems especially timely to me.  Secondly, homeownership has a lot of additional costs beyond renting, that without a better all round safety net to gird low-income homeowners, I fear would undermine the assumed economic security and gain homeownership offers.

Right now, I am both a renter and a homeowner.  The rental property I live in is pretty great, though definitely not in as good condition as the unit I bought 4 years ago (a unit that is worth depressingly less than what I paid for it - Hello, my name is Leigh & I'm an underwater homeowner.  Hi Leigh).  But there are so many fewer costs - no property taxes, no condo (or homeowner association) fee, no payments for repairs.  Relief from property taxes alone saves me $2000+ per year - or almost an extra $200 per month.  Sure, I'm not building equity, but I'm also paying about $300 less per month for my rental property than I am for my condo unit.  So now we're looking at roughly $500 / month that I'm "saving" by renting.  That's a substantial difference in liquidity, so crucial to a household budget.

Coming back to the equity issue, Conley's startling exception  to his rule - "recent history aside" - points to the precariousness of this singular social benefit to homeownership.  Boom and bust cycles in the housing market, though perhaps less pronounced than this one, are not uncommon.  Property values rise and fall, and the overall property values in neighborhoods where low-income buyers can afford to purchase might not be all that impressive to begin with, until a wave of gentrification rolls in, which then forces increases in property taxes, which can severely challenge inflexible, low-income budgets.

It's really risky to argue for more homeownership without also arguing for at least improved wages, greater job security, universal healthcare, and improved energy efficiency.  For all I know, Conley supports all these social improvements.  But the narrow argument for homeownership alone as an economic stepping stone for low-income homeowners is one we tried valiantly in the late 1990s and throughout the Bush Administration.  Because we didn't put the proper regulatory controls and social supports around it, we ended up screwing a whole slew of moderate-income and lower-income homeowners in our abusive securitization of the mortgage industry.  To his credit, Conley is arguing for a modest, service-heavy path to homeownership run by knowledgable non-profit and community development organizations.  It's expensive but paying off, according to his example.

But honestly, and I can't believe I'm saying this out loud...$2B for 27k homeowners?  Do you know what we could do for $2B?  How much green rehab we could provide to existing rental properties?  The possible transportation improvements we might make in low-income communities? The incentives we could provide to bring groceries into neighborhoods?  The educational subsidies we could provide?

After 5 1/2 years studying housing and urban policy, I've gotten pretty wary of these "more privatization!" arguments as anti-poverty strategies.  But you already knew that, didn't you.  What do you think of his proposal?

(Photo from Oakland (CA) ACORN action to stop a foreclosure auction, by Jacob Ruff)