As the housing market crumbles, the locus of disintegration is among poor homeowers. The reasons are numerous. Many are economic factors associated with the population -- homeownership can be a risky investment for those with low or modest incomes. The risk is especially high for younger owners who are mobile and cannot bear making a long-term investment in one location. Homeownership is risky for those frequently changing jobs or self-employed. Homeownership is especially risky if the investment is tied to lending that is predatory.
Now we learn that Federal legislative incentives for homeownership benefit the wealthiest and do very little to increase ownership among the middle and low-income home buyers. Stephen Labaton in March 17, 2007 The New York Times reports:
The mortgage interest deduction alone is worth about $21,000 to a taxpayer in the highest bracket of income with a $1 million mortgage. But for a typical family that bought, say, a $220,000 house with 20 percent down, the break is worth about $1,600.
If this is not an example of class warfare, then the revealing demographics of lawmaker-benefactor are purely coincidental. Lawmakers come from the upper 2/5 of the population, and this legislation clearly privileges members the upper income brackets. Furthermore, the legislation is noticeably of little benefit to members of the lower 3/5 of the population. No matter how objectively described, the coincidence is hard to ignore.
Clearly it is time for federal and state lawmakers to go after predatory mortgage practices and the banks and brokers engaging in those practices. More has to be done, though. Federal lawmakers need to check the mirror and rewrite the federal laws that provide imbalanced incentives. They need to examine their biases and now provide more help for the poor and those who really need subsidies to buy a home. Who is prepared to argue that homebuyers with annual incomes over $100,000 need a 2.1% subsidy whereas those earning $50,000 or less annually get only a .7% subsidy?
Lawmakers, particularly Republicans and fat-cat Democrats, are about to lose their cache with the middle-class. What they fail to grasp is that they were elected with middle-class votes because the middle-class was deluded into thinking that Republican patronage for the wealthy would include them. Uh-oh, that didn't happen.
Homeownership has been, as Labaton notes in his NYTimes article, a Presidential mantra since FDR. The middle-class will soon feel the pain and agony that the poorest homeowners are now suffering, and then Republicans will need to worry. Middle-class pique becomes ideological anger when collusion and malfesance by the privileged rich lead to economic disasters. And, lookout, one's coming just in time for the next national election.