• K Bledowski

    This is a very lucid, penetrating and overwhelmingly accurate
    portrayal of the issue. Here are a few digressions.

    “[The] U.S. growth model […] is based on housing finance and
    consumption, [whereas the German one is] is much less based on private housing
    consumption”. In fact, in both economies private consumption accounts for about
    70% of aggregate spending or income, so they’re not that different. What’s
    different is that a higher housing wealth in the U.S. than in Germany produces
    a higher consumption multiplier out of that stock of wealth in America than in
    Germany.

    “Homeownership [is] a form of private social insurance in
    times of welfare state erosion, pension cuts, and austerity, allowing ordinary
    people to save up money or to extract home equity to pay for health care bills.”
    This is a huge understatement. Investment in owner-occupied housing IS long-term
    saving. It is not dictated by ‘welfare state erosion’ because, if anything, the
    welfare state keeps getting bigger. Simply put, more people in the U.S. prefer
    to live in owner-occupied housing than do in Germany. There are many reasons
    for this (and Alexander mentions some of them) but “paying for health care
    bills” is not one of them.

    I would also take issue with the statement that “[s]ubsidizing
    homeownership largely benefits the well-to-do—those who are able to climb the
    property ladder.” It surely benefits the wealthy but what I took from the author’s
    exhaustive history of housing support in the U.S. is that it has targeted the
    middle class. If there is income and wealth disparity in this country, then
    housing wealth among the well-to-do is not the reason for it. It is the result.
    Other factors explain income and wealth inequality. By and large, the
    super-rich did not make their fortunes by speculating in housing.

    Also, there’s a wealth of info on the United States but much
    less on Germany, which serves as a (somewhat) distant comparator. Still, this
    contribution (and most likely the seminar which I have unfortunately missed) appears
    to be the most insightful that the AICGS has put up so far on the issue.

  • RSHouck3

    I agree with Bledowski. It is first rate. Some minor comments. 1) I would like to know how the same people stay in the same apartment in Germany for decades.2) He does not mention the role of home equity in paying for college. 3) Bremse = brakes, not breaks. And I suppose 4) the observation that the decline of the US middle class beginning about the time Ronald Reagan broke the ATC union was covered by telling people that they were doing fine because the value of their homes was going up.