How to help the poor buy homes
Joe Weisenthal has attacked NYU’s Dalton Conley twice for his op-ed saying that the US government should ramp up its efforts to promote homeownership among the poor. But the truth is that they’re both right about a lot of things.
Certainly homeownership in general is not the unalloyed good that Conley makes it out to be. It increases unemployment, for one thing, and as homeownership rises it has a concomitant deleterious effect on the lives of those people who don’t own their own homes — it essentially ghettoizes renters.
That said, homeownership is a good thing under certain conditions: if poor people buy homes in their own neighborhoods, with mortgages which cost them less than they were paying in rent, then pretty much everybody wins. And it’s largely that kind of situation which Conley is talking about when he brings up the example of Self-Help, in North Carolina.
Weisenthal is right though that programs such as Self-Help’s are difficult to scale. The best way to encourage them is through grants from the CDFI fund, which targets money at precisely those not-for-profit financial institutions which have proved themselves able to underwrite loans to America’s poor in a responsible and sustainable manner. That kind of underwriting is not easy, and it’s labor-intensive, and it requires having deep roots in the local community. In other words, it’s particularly ill-suited to being rolled out as a stand-alone federal program.
Dalton is right that in certain hard-hit areas of the country, the conditions are ripe for community lenders to help poorer Americans buy their first homes and thereby help to (re)build their communities. But let’s do this in a bottom-up manner, rather than implement yet another enormous federal scheme.