- Today, most households have a personal stake in the economy through home ownership. At the beginning of World War II, less than 45 percent of U.S. households owned their own homes. Today, the number is now approaching 70 percent. Similar increases have occurred in other high-income countries.
Home ownership is an effective means of widely distributing wealth. With every mortgage payment, the household not only pays the bank but also itself. This is because part of the house payment is investment – the equity that is built up in the house. The household forced to pay rent is unable to invest any of its housing payment. It all goes instead to the landlord.
It seems clear that if the nation had continued to have a home ownership rate of 40 percent, middle-America would have considerably less wealth than it does today. The same goes for middle-Canada and middle-Europe. It is not surprising that nearly one-half of the total household equity in the United States, Canada, and Australia is in home equity.
How is it that home ownership has spread so widely? The principal reason is suburbanization: what critics pejoratively call "urban sprawl." At the same time that households were becoming more affluent, suburbs sprouted up around all the cities in the United States, western Europe, Japan, Canada, and Australia. This is more than coincidence.
. . . .
If today's anti-suburban policies had been in place at the end of World War II, it would have been illegal to build Levittowns, whether in Pennsylvania, New York, or the myriad other places where similar communities were developed. Any household wanting to own its own home would have been forced to buy in an overheated urban environment with much higher prices and smaller homes. Home ownership would have been lower, and the nation would have been poorer.
Without the Levittowns, our parents and grandparents would have paid rent most of their lives, and the equity that so much of the American Dream depends on would simply not have developed. There would have been fewer second mortgages, fewer new business startups, and fewer kids (such as urban planning students) going to college.
Homeownership, Prosperity, and Smart Growth
Writing in PA Township News, Wendell Cox makes a great point about homeownership and the consequences of the anti-sprawl/suburbs policy push (aka "Smart Growth"):