Is homeownership good for the economy?

Different cultures have very different perspectives on the importance of owning our own home. For some, it makes little sense to move into our own property between living with our family and moving in with a partner. For others, home ownership is seen as an important part of being a productive member of society; governments promote it by offering tax deals or cheap loans to potential buyers and if given the choice, people prefer to own their homes rather than rent.¹ 

One reason why homeownership is promoted is because it creates an asset for individuals to invest and accumulate their wealth. Taking out a mortgage and investing in property is seen as a wise economic decision; instead of paying rent, homeowners can pay off their debts, accumulate wealth and have a home to live in, all at the same time. It seems like some of the most stable investments we can make nowadays are certain property markets in cities where people assume that prices will always remain high.

However, the 2008 financial crisis demonstrated that even mortgage payments can easily be much riskier than they seem – particularly if people are buying their homes with more debt rather than higher incomes. And despite the individual benefits of investing in a house, the marketization of housing can cause real problems for those that haven’t made it onto the housing ladder. Property developers buy houses with no intention to live in them, but simply to rent them out or sell them on at a profit. Housing becomes an asset rather than a place to live, where rising prices are seen as a good thing rather than a barrier for people to live in decent housing.

Homeowners are said to invest more in their local area and engage more in community life, another claimed benefit of homeownership. According to economists this is for two reasons; homeowners have a financial incentive to improve their local area – the better it becomes the higher house prices will rise.² Homeowners are also more likely to stay in the same community for longer periods of time, increasing their engage and participation in the local community, than if they were moving on the next place in no time. Some economists have even found a link between neighborhoods with high numbers of homeowners, and low reports of crime.³ But it’s not always so clear cut that homeownership makes better citizens. Countries that prefer renting, such as Germany, don’t really have worse local citizens than a country which prefers homeownership, like the US.⁴

The main thing to understand with houses is that they play multiple roles in the economy: they are people's homes, land resources and financial assets to be bought and sold. These multiple roles make it hard to decide what the value of a home really is.⁵