Stigmas and stereotypes.
Every ten years or so I actually feel sorry for reporters and real estate academics.
Sure, most of the time the academics are busy proving, scientifically and beyond a shadow of a doubt, that the real estate world is flat. And, sure, most of the time, the reporters are lip-synching right along.
But every now and then someone advances the scurrilous and un-collegial idea that the real estate world is round. This takes guts, since so many experts have staked their reputation on flatness. And because the experts tell us the real estate world is flat, every informed person knows it's flat. Besides, to many observers, informed and otherwise, flat is obvious, just makes sense. Sail too far and you fall off the earth.
So the academics and their publicists the press aren't responsible for all the nonsense emanating from the Real Estate Flat Earth Society, and every once in a great while they even run afoul of it. These days one of the Society's main tenets is that the credit crisis was caused by the poor, and not just the poor, but the uppity perfidious poor. No, they don't come out and say this, of course. Everyone except the lunatic fringe of the lunatic fringe knows enough to speak in code nowadays, so what they say is that "the subprime crisis was caused by the federal government's pressure on the mortgage banking industry, through a piece of rickety social engineering called the Community Reinvestment Act, to loan to low-income borrowers".
FDIC chairman Sheila Bair, one of those bleeding-heart liberals that plague the Republican Party, refutes this idea, most recently in a December 17, 2008 press release. "You've heard the line of attack", she says. "The government told banks they had to make loans to people who were bad credit risks, and who could not afford to repay, just to prove that they were making loans to low- and moderate-income people."
But where in the CRA, she asks, "does it say: make loans to people who can't afford to repay? Nowhere! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth...pure and simple."
If Bair's spirited defense of loans to low-income borrowers isn't enough to rile the Real Estate Flat Earth Society, along comes a University of North Carolina study that, as reported in the December 18 Raleigh (North Carolina) News & Observer, claims responsible lending to the low-income and minorities "has social benefits in addition to economic ones".
"The bottom line: Encouraging home-ownership is sound public policy." So how could a ruinous credit crunch and global financial collapse be "sound public policy"? Read on.
A few years ago another study, by an Ohio State University academic, also claimed that home-ownership provided social benefits. While the idea is attractive and plausible—and explains nearly eighty years of federal social engineering far better than "compulsive government meddling"—at the time I wasn't sure which came first, the chicken or the egg. I'm still not. Does home-ownership really make people "twice as likely as renters to vote in local elections...and more likely to be involved in their children's schools", as the UNC study claims, or are people already more involved in their community simply more likely to buy a home there? If the question can be phrased as "Is someone who puts down roots in her community more likely to put down roots in her community?", the answer is probably "Yes". Community involvement indicates commitment—commitment to many worthy things, including community—as does home-ownership. One is a sign of, and synonymous with, the other, not its cause.
So I'm not sure which precedes which, or even if it matters, but the reader comments following the News & Observer's article are just as interesting as the study's claims and, as always with comments on real estate articles, reveal where the Real Estate Flat Earth Society stands on the issues these days.
The three comments fall in two popular categories: "I'm a renter and I'm proud", and "Poor people ain't got no business owning homes".
A poster I'll call Renterpride is "a long time renter who prefers to rent". Why? Maybe because "not everyone can maintain a home themselves, and hiring out the work is costly". (Like landlords are known for maintaining their rentals?) Of course, by this reasoning the poor should never be encouraged to buy anything that requires costly maintenance. Like the used car that, unlike public transportation, gets them to work or school in less than three hours. Or major appliances like washing machines. No, for the poor among us, beating clothes on rocks by a stream is good enough.
Yessir, what "these folks" really need, says Renterpride, is "affordable rentals with good tenant selection to provide a safe environment". Paternalism, anyone? You poor "folks" don't go worrying your little heads about working your way up the socio-economic ladder. Public housing, preferably gang-free, is the best you can hope for. Know your place and stay there, you hear?
And note that Renterpride, who resents the stigma attached to renting, stigmatizes the poor.
Renterpride's claim to be "very offended by this stupidity" probably refers to the study's contention that, as a renter, he or she is twice as likely to be a rootless slug. This may explain Renterpride's suggestion that "these social engineering idiots at UNC should find something useful to study". Something that doesn't tread on Renterpride's tender toes, presumably. What's ironic about this disdain for academia is that the core of renter-by-choice and bubblehead informed thought (if such a thing exists) is so often firmly based on academia's wobbly theories on real estate, that snare and delusion to the unwary, and on the industry that sells it. Apparently an academic study is pure gold—unalloyed science for the ages—unless it challenges your beliefs.
The two remaining comments fall into the durably popular "I didn't get the gist of the article but I'll spout off anyway" category. "Home ownership may be good for the poor, but only if they can afford it", opines one astute observer, while another thunders "GOOD BUSINESS IS NOT LOANING MONEY TO PEOPLE WHO CAAN'T (sic? or is this just a Nawth Carolina accent?) AFFORD LOANS". Nobody said it was, not the academics who wrote the study and not the reporter who reported it, but that doesn't spare the latter from a sharp "WHY DOESN'T THE WRITER INVESTIGATE THE FORECLOSURE RATE AMONG THOSE THAT HAVE PURCHASED HOMES FROM HABITAT FOR HUMANITY WHICH RUNS CLOSE TO 50 PERCENT" (yes, by all means, let's let Wall Street off the hook for a once-in-a-lifetime global debacle and go gunning for Habitat) and the chiding "You report, we decide please!" Just the facts, please, and make sure they fit what I've already decided.
Now it's my turn to be "very offended", because in 1951 my parents were working poor. Maybe they weren't typical working poor—both were professionals with master's degrees—but, then again, maybe they weren't untypical then, and maybe they wouldn't be today. Because how many teachers and government employees can afford to buy a Bay Area home in 2008? (Answer: more than in 2007, but still not many.) What got my parents out of low-income government housing and into their own home, the first of several over the next fifty-seven years, was a VA loan that let them buy for almost nothing down. A VA loan that let them live their life in peace and stability, age in place and end up owning real estate worth forty times what they paid for it. A VA loan remarkably similar to the low-down Acorn loans Bank of America made in the late 1990s, not out of the goodness of its hardened-concrete corporate heart but at the prompting of the CRA and as penance for years of "red-lining" (refusing to lend in) low-income areas. Acorn loans, the kind of loans that moved responsible low-income borrowers into their own homes long before the Wall Street fast money boys and the subprime carpetbaggers started peddling their poisoned candy.
Home-ownership, an outcome far better than the two usually available to the responsible working poor, public housing and private slumlords, around the world and far more—how you say?—American.