Home Accounts: Unlocking the American Dream of Homeownership for All
The expansion of homeownership in the 20th century is one of America’s greatest achievements. One-hundred and twenty years ago, only 10 percent of Americans owned their own homes. Today, nearly two-thirds of Americans are homeowners. This was made possible by government policy—the Homestead Acts, the G.I. Bill and the creation of the 30-year fixed-rate mortgage and mortgage insurance.
Homeownership is at the heart of the American Dream, and for good reason. Homes are not only structures, but the fundamental, secure incubators where families, dreams, talents, wealth and character grow. No wonder 89 percent of Americans want to own homes. America, as the urbanist Bruce Katz notes, “is essentially a nation of homeowners and people who aspire to be.”
But lately, the dream of homeownership seems to be dying. Fifteen million families lost their homes in the wake of the great recession of 2008, largely because of bad underwriting, predatory lending with variable rate mortgages and discrimination. Overall homeownership rates have declined, exposing the racially unjust structure of homeownership in this country—the result of a century or more of discriminatory policies and practices. While almost three-quarters of White families own homes, fewer than half of African Americans, Latino families and Native Americans are homeowners.
We can restore the opportunity to own a home to all by introducing savings accounts for homeownership—which I call “Home Accounts”—funded out of existing housing tax subsidies. Home Accounts are a pillar of the Prosperity Bill that I propose in my new book, A Few Thousand Dollars.
The book features stories that demonstrate the success of savings programs for putting homeownership within everybody’s reach. Take low-income home buyers like David and Helen Greer, who bought homes in the San Francisco Bay Area—a seemingly impossible feat—with the help of a matched savings Individual Development Account. In fact, David, a veteran and college dropout, went from being homeless to owning not one but two homes in San Francisco, one for his growing family and the other to earn income.
Or take Mariana, an Argentinian immigrant who never had a stable home until she was eight years old, who combined $6000 in matched savings through the EARN program with back child support and income from a yearlong job with the U.S. Census to buy a home in Alameda County for her daughter and herself. She stressed how the home provide them a new sense of security—but that security was only 20 percent of its value. Its greatest benefit was to provide a base to leave a bad job and wait until she could gain good employment.
A Few Thousand Dollars showcases several other successful homeownership programs, such as the Community Advantage Program of the Center for Self Help, where 52,000 families with average incomes of $30,792 bought and kept homes. Two-thirds of those new homeowners never missed a payment, and the foreclosure rate was less than that of higher-income homebuyers. Even though the homes were purchased before the 2008 collapse, by 2012, homeowners had built an average of $22,000 in wealth.
A Few Thousand Dollars suggests Home Accounts could enable every American to assemble the critical downpayment that is the chief (though not the only) barrier to homeownership. Home Accounts would match the first $1000 in annual savings on a sliding scale. The poorest fifth of Americans would have their savings matched $3 to $1, to amass $4,000 a year. Even the wealthiest fifth of Americans would receive a 33 percent incentive to save for their homes.
Home Accounts would be financed by reforming our existing $251 billion in annual tax incentives for homeownership—which provide an average of $11,890 to the wealthiest .1 percent of Americans while providing just $20 to the poorest fifth—into an investment in the homeownership dreams of all Americans. Yes, I propose modifying the sacred home mortgage interest deduction—but the reformed system will provide increased support for all except the wealthiest 5 percent.
Now is not the time to give up on homeownership. Rather, it is time to open homeownership—the primary route to wealth creation for families and the crucible for the future—to all people.
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