Responsible Homeownership

Yesterday’s New York Times ran an op-ed by NYU Sociologist Dalton Conley which focused on ideas to repair the housing market. He argues against the notion put forth by some that it was low-income borrowers that triggered the crisis by getting loans they could not afford. But this claim is both wrong-headed and objectionable, especially considering that the entire economy was over-leveraged and we learn more everyday how these families were steered into inferior and costlier mortgage products. Beyond the pointlessness in assigning blame to the most powerless group, Conley argues that this may be precisely the right time to set lower-income families on the path toward responsible homeownership. Home prices are down which means affordability is up.

It is not surprising that Conley would make this case. In past work he has focused much attention on the paths of mobility and the role that savings and assets play in this process. His recent paper, which we published earlier this year, explored these links explicitly and how they work both within generations and across them. It is an informative framework for thinking about the role of asset-based policy in promoting economic mobility across the life course. You can watch our June 19th event which featured Dalton and others (including myself) discussing his work.

And for many families, the home purchase is a seminal event in this continuum. It is often made at the end of a savings process which provides the downpayment and then becomes a resource both as a source of home equity and as a means to leverage access to additional capital. But is has to be done right or it can trigger significant asset losses as well. That is why we need to focus our efforts on constructing a responsible homeownership policy, one that gets responsible homebuyers into responsible loans that can work for both lenders and borrowers alike.