Charlie Gardner dives into the question:
The vast majority of homes are either inherited, bought with cash, or else are self-built on cheap vacant land, although informal lending systems among friends and family members no doubt lie behind many of these cash purchases. In the absence of debt-financed home consumption, most new homes must be very modest to match the limited purchasing power of potential buyers.
Although one might expect this lack of financing to impair individual property ownership, a surprising 80 percent of Mexicans own their own homes. This compares to a rate of only 65 percent in the United States, where 70 percent of homes are encumbered with mortgages and only 1 in 10 buyers pays in cash (at least, until the recent surge in buying by institutional investors). As I pointed out in a previous post, the homeownership rate in the US has actually been more or less stagnant since the mid-1960s in spite of extraordinary efforts to expand the availability of credit.
In fact, homeownership in the US spiked after the introduction of Fannie Mae, VA loans and the FHA. Here's a historical chart:
I think there is something else at work here, though, beyond the influence of two very different lending environments, and it relates back to the modest size of houses observed in Mexican cities. It's been a point often noted that the average size of new American homes has been steadily increasing since 1950 even as household sizes have fallen.
He goes on to discuss the absence of very small homes from the US housing market over the last few decades. It's a point I agree with, and many smart people in the building industry acknowledge. For far too long, builders & designers have focused on a very narrow approach to the housing market, ignoring key demographics such as single people and single parents. One-person households now make up over 1/4 of the households in most markets.
What are some of the solutions? For one: build small houses, townhouses and apartments. Back in 2000, I had the great pleasure to work with John Anderson, Tom DiGiovanni and a team of excellent designers on the Doe Mill Neighborhood in Chico, CA. John & Tom were committed to doing a great project and delivering smaller, well-designed homes for the market. Their inspiration ran the gamut from the work of Ross Chapin to early New Urbanist communities. If we want more great places, there's no question the shortest route there is to have more developer clients like John & Tom. Here's a couple of shots of what was built:
Now, it's overly simplistic to say that this alone will increase homeownership in the US. Not to mention, it's just as simplistic to assume that homeownership is invariably a good thing. I'm of the camp that says it's terribly over-rated as a means to creating wealth, and a lot of people would be much happier and better off financially as renters. And, Gardner doesn't say that either in the piece. But in terms of a full debate about communities, housing and policy, it's clear that a great place to start are all the holes in the market that have been missed over the years.
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