It is shocking how many are disillusioned about homeownership these days. Time Magazine's Barbara Kiviat, for instance, says “Homeownership has let us down.” (" The Case Against Homeownership ") Recent years of bubbling home values followed by a grim bust have given us millions of foreclosures and walkaways, abandoned houses, 'easy' credit which turned hard and vicious, and the near-collapse of the home building industry. Too often, homeowners found themselves immobilized, unable to move to a better job because they could not sell their homes. High rates of homeownership also meant high rates of unemployment.
The pundits announced that, regretfully, it may be wiser to rent than to own your home. For many, they say, your investment in your home has turned out to be a bad deal. So, they seem to be saying that homeownership is beyond the reach of us ordinary folk and is naturally preserved for the enjoyment of the very rich.
The problem arose because so many people began to accept the strange idea that “your home is your greatest investment.” People came to expect a return on their investment, comparable to such investments as owning a business, owning shares of stock, or bonds and the like.
Nonsense! A home is where you love your mate, raise your kids, entertain your friends, raise some flowers and vegetables, arrange your stuff just as you find most convenient and relax from your day's labors.
People congratulated themselves when the “value” of their homes increased. Indeed, they even borrowed against that increased value, signing mortgages that- oops!- today exceed the “value” of the house. They played a risky casino game with the very center and focus of their lives. For years, the ultimate statement of foolishness has been “to bet the farm” on a risky gamble. It came to be that we were all betting the farm on a silly gamble. Well, we lost that game.
Homeownership need not be a foolish gamble. There is a superior form of homeownership that protects the homeowner against such disasters: affordable cooperative housing. The concept is simple: instead of owning your home directly, and taking on the mortgage yourself, you and your neighbors rent from a non-profit cooperative which you all own together. You don't sign any mortgage yourself; your housing cooperative does that for the whole neighborhood, in one blanket mortgage loan. So, you have a valuable asset- your membership share in your co-op- but you do not have a matching liability.
Further, your contract with your own co-op protects you against boom-and-bust market values, if it is an “affordable” co-op. “Affordable” means that when any member wants to move out, he/she is obliged by contract to sell back to the co-op, not to someone off the street. The co-op charges a very modest transfer fee, but that is a tiny fraction of the fee a real estate broker would charge you for selling a home you own by yourself. The resale price is strictly limited, generally set only to account for general inflation, and not by what single houses are selling for in the market.
You say you want to build your assets? Okay. Each month put a fixed amount into your credit union savings account. It accumulates, and it pays interest. Use the extra amount you would have had to pay on a more expensive single house. A credit union savings account is far more dependable than what you might have gained by speculative gambling in the local housing market.
Generally, the experience of affordable housing cooperatives is that they remain a better bargain over the years than do single houses, so the co-op generally has a long waiting list of people wanting to move in. You not only are protected against wild gyrations in the market value of local housing, you are also able to move when you want, for a better job, for retirement in warmer climes, or to be closer to your grown children- whatever reason you have for wanting to move.
Buying a single home also means you must pay the current interest rate on your new mortgage loan. But the co-op negotiated its mortgage loan long ago and the rate does not go up and up over the years.
Housing co-ops put money aside for future repairs and replacement of equipment, so they have cash in their co-op's credit union account to meet such expenses. Single family homeowners rarely do this and sometimes face financial difficulty when equipment needs fixing.
All in all, cooperative housing is superior to single family homeownership. The new economy beginning to take shape can be expected to develop more cooperative housing as we learn to make use of this better way of owning our homes.
Joel Welty - Joel Welty, who used to be an angry young man but is now an angry old man.
