Many analysts have zeroed in on housing as the reason millennials have failed to match their predecessors. As of 2019, millennials owned only 5% of the U.S. housing stock, compared with 15% for the previous generation at the same age. The homeownership rate for households headed by Americans younger than 35 was 43% in 2005, but only 31% in 2015. Instead of accumulating mortgage debt like their predecessors, they've racked up student loans and consumer debt.


The U.S. used to facilitate mass wealth-building via homeownership. The GI Bill helped WW II veterans buy homes en masse, and the expansion of the suburbs gave them and the boomers who followed plenty of new homes to buy. But those homes have appreciated in price and nationwide construction has stalled, leaving many millennials priced out of the market amid a slow-growing stock of housing. Today, U.S. housing, rather than a driver of wealth accumulation, has become an engine of intergenerational inequality.

Some countries have done a better job than the U.S. of using housing to build and transfer wealth across generations. One of these is Singapore. Although most of Singapore's housing is government-built and is technically government-owned, the government allows occupants to buy and sell 99-year leases that essentially function as title deeds. Homeownership, therefore, is near-universal. The government also gives out subsidies to help young families buy starter homes. Because the government manages the supply of new homes, it can ensure that young people earn a decent return by the time they retire.

The U.S. could adapt this system to promote mass homeownership and wealth creation for millennials and later generations. The government could build and sell new housing, especially in inner-ring suburbs, potentially using eminent domain to keep construction costs low. Young people -- especially young families -- could get down-payment assistance to buy their first home. By carefully managing the amount of new housing construction, the government could make sure that home prices appreciated enough to provide people with a decent return over their lifetime, but not too much to price younger people out of the market.

Each generation would thus get to enjoy what the WW II generation and boomers enjoyed -- the security and personal freedom of owning a home at a young age, coupled with the knowledge that their wealth would appreciate over time. And because down-payment assistance would be funded by progressive taxation, the system would redistribute wealth to those who weren't born with rich parents.

The alternative -- letting young Americans reach middle age without a stake in the U.S. economic system -- is both sad and frightening to contemplate because it could lead not just to ennui but to unrest. A housing system built loosely on the Singaporean model would allow today's young people to enjoy the same life progression as their parents and grandparents, preserving the American dream in perpetuity.

Comments: Be the first to add a comment

add a comment | go to forum thread