YOU ARE HERE: LAT HomeCollections

The Washington Scene

Home Affordability Held Builders' Responsibility

October 20, 1985|JOHN BETZ WILLMANN | Special to The Times

WASHINGTON — At least one prominent Washington-area home builder is adamant that home builders--not the federal government--should use their individual creativity and professional skills to produce affordable housing for young buyers.

Edward R. Carr, a second-generation builder whose firm sold 245 houses last year, takes issue with the University of California's Kenneth Rosen who contends that the federal government has an obligation to help first-time home buyers. Rosen, who heads the real estate and urban economics department at UC Berkeley, has recommended that U.S. tax laws be changed to include taxing capital gains on housing, just as if they were capital gains on any other investment, and then using the proceeds to subsidize mortgage interest rates for first-time buyers.

In taking an opposite tack, Carr focuses instead on moderating proposed tax changes that would have a negative impact on homeownership. "I insist that the housing industry itself has the obligation and also the profit motives to solve or abate the housing affordability problem without massive or complicated federal support," Carr said. He added that he and his colleagues must avoid going to the federal government for housing help because "we all are better off with less federal intervention in our economic system--not more."

On the other hand, Carr does not dispute a national obligation to assist low-income persons and families by providing medical care, housing allowances and support for other basic necessities. "Meanwhile, we can do more for potential homeowners by stabilizing our mortgage interest rates at a lower level than through any additional federal subsidy," he added.

Sold on Ownership

Carr and respected Washington realtor Earl Farr agree that the U.S. is not "ready to abandon the hope of homeownership for its younger generation." They also agree that proposed changes in tax laws should not discourage homeownership.

And the American public is certainly sold on homeownership. For the third consecutive year, a Gallup Nationwide Tracking Study showed that real estate topped the list of investments preferred by Americans--even more so than money market funds. But Real Estate Research Corp. of Chicago found that home buyers in this decade--unlike those in the 1970s--are buying new houses principally for use rather than as an expectation of a dramatic investment appreciation.

However, the element of owning a house that may be worth almost twice as much in 10 years after purchase, cannot be dismissed from the American residential tradition of the post-World War II years. But ownership for ownership's sake is becoming increasingly apparent. Garth Marston, former head of the Federal Home Loan Bank Board and now an author on realty topics, told Real Estate Today magazine: "I would rather buy a home I really like that would appreciate 10%, then one that would go up 50% that I didn't like as much."

You could say that's almost like marrying for love instead of money.

Pillars of Investment

Americans now have more than $3 trillion in equity in their homes, which thereby become pillars of both savings and investments. And chances are that homeownership may increase even beyond the near-70% figure of Americans now living in homes they own.

Is homeownership worthwhile?

Farr put it this way: "Owning a house is advantageous in terms of tax advantages, a sound investment better than most alternatives, an opportunity to move to a better neighborhood and all of the above."

Even professorial Kenneth Rosen would have to give an "A" grade for that answer.

Los Angeles Times Articles