Griffin Young, American University
The political ramifications of unaffordable housing have already bubbled up in big-city politics, with cities like San Francisco making national headlines for blocking new development while simultaneously dealing with an affordability crisis. Although NIMBY (not in my backyard) views transcend the political spectrum, many of its proponents share a common trait: ownership. While the housing crisis locks many young Americans out of home ownership, rising home prices reward homeowners with a massive increase in home equity. In this way, soaring housing prices create winners and losers. Homeowners are incentivized to restrict supply by any means necessary, keeping the speculative value of their homes—and thus their wealth—high. Even as elevated interest rates impact buyers, fixed-rate mortgages insulate homeowners from the Federal Reserve’s hikes. In real terms, homeowners with fixed-rate mortgages pay less and less each year while being rewarded with steadily-climbing home equity. The wealth gap between these “haves” and “have nots” will only increase with rising home prices, and the political effects of a housing crisis might extend far beyond city-level planning.
Housing is a unique economic asset. It is a primary source of household debt and household wealth, all while being a crucial determinant of health and economic prosperity. In many ways, housing resembles the traditional role of a social safety net. Both provide long-term financial security, both require paying in (through taxation or mortgage payments), and both “pay out” at retirement age. These similarities have not gone unnoticed by politicians: President George W. Bush’s “ownership society” paired a single-family tax credit with Social Security privatization, pushing home ownership as a way to build “stability and long-term financial security.” In high-income countries, ownership rates and government welfare spending are negatively correlated, leading sociologists and political scientists to document the tension between an “ownership state” and a “welfare state.” While differences between countries are well documented, the political effects of a housing crisis (and the accompanying inequality) have not been thoroughly examined within the US.
As incomes rise, Americans become less supportive of social safety net spending. Those with higher incomes feel less reliant on government welfare, feel more financially secure, and are more tax averse. While an increase in liquid wealth decreases support for redistribution and social insurance policies, how will an increase in illiquid wealth affect behavior? Do homeowners see home equity as a replacement for social safety net policies? Are renters and homeowners becoming more politically polarized? Is home ownership the new dividing line in politics during a housing crisis?
Matching political surveys with local economic data can create a nationally-representative sample that tracks political opinions and local housing markets. If homeowners see rising home values (relative to income) as increased financial security, they would be less likely to support social safety net spending. This would drive a wedge between homeowners and renters, with homeowners becoming more secure and tax averse while non-owners see increased rents with no reward in the form of increased wealth. The data—collected from 2012 to 2020—paints a more nuanced picture. While homeowners were less supportive of social safety net policies, even after controlling for demographic factors, support for these policies grew as housing became less affordable. For homeowners, an increase in home equity does not manifest in stronger anti-welfare political views; in fact, it leads to just the opposite. Homeowners and renters show the same trend, with less affordable housing correlating with more support for social safety net spending. Ownership is a source of security—and homeowners know it—but higher prices do not evoke a stronger sense of stability.
Despite the similarities between housing equity and social safety net policies, homeowners do not lower their support for welfare spending as their home equity balloons. While this might be good news for supporters of government welfare, it reveals a startling truth about the housing crisis: There are no winners. Higher home values make homeowners’ balance sheets appear more desirable, but the lack of liquid wealth prevents families from feeling any more secure. No matter the increase in home equity, it will not cover day-to-day expenses. Although high speculative home values make it a seller’s market, sellers inevitably become buyers. Homeowners cannot realize gains and walk away—they too feel the negative effects of high prices. Measures of wealth tell a story of winners and losers, but the data reveals that in the post-pandemic housing market, everyone feels like a loser.
While rising home prices will widen the wealth gap between “haves” and “have nots,” the current crisis also presents a unique opportunity for unity and solidarity in an age of hyper-polarization. No one is immune from the consequences of a hot housing market, meaning that policies focused on increasing supply and improving affordability can gain support from owners and renters alike. As the affordability crisis drives net worths further and further apart, it just might create the political conditions necessary to bring Americans together.
This commentary is adapted from a longer piece: “The Political Economy of Housing Affordability, Ownership, and the Social Safety Net” (2023).