Friday, October 17, 2008

American Dream of Home Ownership Still Vital

One would have thought that with the current chaos in the financial markets emanating from what has been going on in housing that the bottom has fallen out of more than the market and perhaps, that the long-held American Dream of home ownership might be actually at risk; but such is not the case, as this article notes.

It also explores how the over-regulation of the planning process and land use policy has contributed to the ever-growing difficulty of the average consumer to easily buy a home.

An excerpt.

“Even after the burst of the housing bubble, the American Dream of home ownership has remained alive in some places. As it turns out the “bubble” was far from pervasive, and as Nobel Laureate Paul Krugman indicated in The New York Times, the housing price increases were largely limited to the areas of the nation with stronger land use regulation.

“In all, at the peak of the housing bubble, 46 of 129 US markets had house prices at or below the historic ceiling of three times household incomes (see 4th International Demographia Housing Affordability Survey. Before the bubble, nearly all markets were at or below that norm, but many have risen to double, triple or even more than three times the standard.

“The American Dream can be said to have started with William Levitt, who revolutionized home building starting with his huge Levittown, New York development in the late 1940s.

“As Witold Rybczynski wrote in a recent Wilson Quarterly article, new Levittown houses could be purchased for three times the average wage in Levittown. This bought a detached 750 square foot house, without a garage. Interestingly, this was at a time when single-income families were still the norm.

“Levittown is the birthplace of the modern American Dream. It was only after the pioneering model of Levittown that home ownership became the norm by becoming affordable to middle-income and blue collar households in America. At the end of World War II, home ownership in the United States was 40 percent. By 1960, it exceeded 60 percent and since risen to above 65 percent.

“Levittown, and the automobile-oriented urban expansion it foreshadowed, resulted in the greatest democratization of prosperity in history. Wherever mass suburbanization occurred – whether in the United States, its first world cousins Canada and Australia, Western Europe or later even Japan – we have seen the unprecedented rise of a mass property-owning class.

“This economic and social advance was built on liberal land use regulation. It would not have been possible if the policies that have poisoned housing markets from Los Angeles and Portland to Miami and Boston had been in effect at that time.”