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Opportunity and Homeownership: The Politics of Housing

 By Jill Mizell

June 29, 2011

Owning a home is integral to the core American values of mobility and opportunity but the costs of down payment and closing on a home are overwhelming obstacles for many Americans. The current Public Opinion Monthly analyzes recent research on the public's attitudes on housing opportunities and challenges for those who advocate for housing finance reform. 

Most Americans want the government to keep homeownership within the reach of low-income and middle-class Americans, ensure the traditional means of mobility and equity-building, and encourage growth in the housing market.  However impending Washington proposals do not reflect what Americans want. Most support proposals to assist homeowners to renegotiate their mortgage terms and prevent foreclosures, but oppose eliminating or decreasing the home mortgage interest tax deduction or raising the down payment requirement.  The latter policy proposals would make it more difficult and expensive to buy a home, and are in conflict with Americans’ desire for the government to encourage growth in the housing market, and to keep the benefits of homeownership within reach for all.

Importance of Homeownership and Barriers to Achievement

Homeownership continues to be integral to economic mobility and equal opportunity, and is an aspiration for a vast majority of Americans as a component of the American Dream: owning your own home averaged a score of 8.3 on a scale of zero through 10, where 10 means it is definitely part of the American Dream, according to the Allstate National Journal Heartland Monitor Poll VIII.  How people define the American Dream is shifting, as shown in the 2011 Xavier University American Dream survey, and discussed in the April 2011 Public Opinion Monthly.  When allowed to choose two options out of eight, “providing a good life for my family” continues to be the way most people define the dream, and there has been a 9 percentage-point increase in respondents who agree with this since last year (36% in 2010, 45% in 2011).  In addition, more Americans are defining the dream in terms of financial security (29% in 2010, 34% in 2011). The below visual demonstrates support for the various components of the American Dream:   

Xavier University “The American Dream” Poll 2011

A recent survey by the National Association of Realtors shows that more homeowners (56%) than renters (36%) are “very” or “extremely” satisfied with their lives, demonstrating the potential quality of life benefits of owning a home. A plurality of 36% of voters believes a home is their best investment, followed by a retirement savings program (33%), according to a recent National Association of Home Builders survey.  But homeownership has an important non-financial role in the American Dream: 40% desire owning a home because they want to have a place to raise a family (40%) (Xavier University American Dream Survey, 2011).

In addition, nearly three quarters of voters (73%) who currently do not own a home say that homeownership is a goal of theirs, but they cite down payment and closing costs as the largest barrier (31%, National Association of Home Builders, 2011).  Job uncertainty (21%) and credit score (16%) were the other obstacles to homeownership commonly mentioned by voters who want to own a home.

Government Solutions: Renegotiating Mortgages and Providing Foreclosure Relief

Relating specifically to homeownership, a 2010 poll by Americans for Financial Reform finds that three out of four Americans (75%) support requiring financial institutions to work with homeowners to renegotiate mortgages and allow more homeowners to stay in their homes.  Further, 72% agree that elected officials have not been touch enough on banks and mortgage lenders who violated rules and laws in the foreclosure process, and 60% believe elected officials have done too little to prevent foreclosures. 

Providing foreclosure relief to help individuals keep their homes (16%) was outranked only by cutting taxes for the middle class (37%) and making college more affordable (22%) when examined as possible actions the government could take to immediately help respondents with their own financial situation, according, to a Democracy Corps/ Women’s voices. Women Vote survey conducted in April 2010.  Foreclosure relief tied with providing government jobs for the unemployed (16%), and other proposed solutions that ranked lower included making sure women are paid the same as men who perform the same job (12%), increasing the minimum wage (9%), extending unemployment benefits (7%), and providing more affordable child care (5%).

On several points, U.S and foreign born Latinos are on the same side of the housing issue.  According to a 2011 survey of Latino citizen voters by impreMedia and Latino Decisions, equal majorities of US born (67%) and foreign born (69%) Latinos approve (strongly or somewhat) of requiring banks to provide lower interest rates or reduced payments for homeowners who currently owe more than their homes are worth.  Large majorities of US born (82%) and foreign born (77%) Latinos approve (strongly or somewhat) of lowering monthly mortgage for homeowners who don’t have enough money to pay their full mortgage payments.

However, there are notable differences between the two groups, including:

  • US born Latinos (79%) are slightly more likely to approve (strongly or somewhat) of providing mortgage payment assistance to homeowners who have recently lost their jobs compared to foreign born Latinos (73%)
  • 79% of US born Latinos disapprove (strongly or somewhat; a slight majority of 57% disapprove strongly) of making it easier for banks to foreclose on a home, compared to 43% of foreign born Latinos who disapprove (strongly or somewhat; 43% disapprove strongly) 

There was much support for and salience around the idea of imposing the foreclosure moratorium, a time period during which banks could not foreclose on delinquent mortgages, according to a poll conducted for the Washington Post in October 2010.  Half of respondents believed this was something the Obama administration should do, with 29% feeling this way strongly.  Only 13% believed strongly that this is something the administration should not do.  

Government Proposals: Home Mortgage Interest Tax Deductions

Across party lines, a large majority of Americans believe that tax incentives that encourage homeownership are a good idea.  In addition, there is bipartisan majority opposition to both eliminating and lowering the home mortgage interest deduction.  

Data from National Association of Home Builders, 2011

In addition:

  • 63% oppose lowering the mortgage interest deduction 
  • 58% oppose eliminating the deduction for interest paid on home equity loans
  • 53% oppose eliminating the deduction for interest paid for a second or vacation home
  • 55% oppose limiting the mortgage interest deduction for those earning over $250,000 per year
  • 53% oppose scaling back the mortgage interest deduction for homeowners with mortgages of $500,000 or more

Even when the point is made that eliminating the home mortgage interest deduction could help reduced the deficit by increasing government revenue, a strong majority (65%) maintains opposition to the proposal, on the grounds that the mortgage interest deduction helps “families achieve home ownership, which helps owners build assets for the middle class and provides stability to families.”  Republicans (69%) and Independents (69%) are slightly more likely than Democrats (59%) to oppose the proposal to eliminate the home mortgage interest deduction based on these grounds.

The impreMedia Latino Decisions survey found that US born (83%) and foreign born (82%) Latinos approve (strongly or somewhat) of providing additional tax credits for first time home buyers, though foreign born Latinos’ opinions are more intense (59% of foreign born Latinos strongly approve compared to 49% of US born Latinos).

The American public may be unclear about the role of government in making homeownership affordable for them.  Three quarters of homeowners surveyed in the March 2011 Heartland Monitor poll felt that they have not benefited from any federal government policy to promote home ownership, yet 80% of mortgage holders reported that they took the home mortgage interest tax deduction.  This disconnect in perception versus reality may be a driving reason behind the split – 46% to 46% – on whether or not the government should continue its level of funding for programs that encourage home ownership.

Home owners and renters both believe that the Mortgage Interest Deduction (MID) should not be targeted for change. 74% of owners and 62% of renters say it’s “extremely” or “very” important that the MID remain in place (National Association of Realtors, 2011).

Government Impediments: Raising Down Payment Requirements

A vast majority of the few Americans (92%) who are familiar with proposals in Washington to raise down payment requirements believe that these proposals will make it more difficult to purchase a home (National Association of Home Builders, 2011).  While voters are split on whether the proposals requiring a minimum of 20% down payment are a good idea (49% to 49%), there are striking differences by age and residence type – mainly by those who would be in the market to purchase a home. Mortgage holders between the age of 18 and 54 (58%) and renters between the age of 18 and 54 (59%) oppose the proposal. Those who favor the proposal include mortgage holders over 55 (52%), outright owners across all ages (18-54, 57%; over 55, 65%), and renters over 55 (53%).