The American Dream Needs an Extensive Renovation

A home is more than just a place to live. It determines whom people interact with, where their children go to school, how they can apply their talents and how healthy they are. Ensuring abundant, affordable housing is essential to a nation’s prosperity.

By any measure, America is failing at that task. For the sake of the economy, society and even the environment, it must do better.

As of 2021, rent consumed more than half the income of more than 11 million families. The median new house price has risen beyond what an estimated 69% of households can afford, and has been a major driver behind a surge in inflation that the Federal Reserve is struggling to contain. Workers endure epic commutes that clog roads and pollute the air, or reject attractive jobs because they can’t afford to live nearby. Census surveys suggest that as of early November, more than 4 million households were on the verge of eviction or foreclosure. In major cities from San Francisco to Washington, DC, homeless encampments have proliferated.

How did the American dream go so wrong? Part of the problem is the way the federal government has promoted homeownership. During the mid-20th century, taxpayer-backed mortgages helped create the middle class — but also went disproportionately to white families, helping them build wealth while relegating others to disadvantaged neighborhoods. The mortgage-interest deduction, an accident in the tax code that costs the government about $26 billion a year, also flows mainly to the affluent, doing much more to boost the price and size of houses than to expand ownership.

Privileged communities have also at times moved to preserve their advantages. Local councils have instituted restrictions such as minimum plot sizes and maximum heights, along with resource-consuming approval procedures for new development. In many major cities, more than three-quarters of residential land is now zoned exclusively for detached, single-family homes. This benefits the incumbents by boosting the value of existing homes. It also prevents the construction of relatively affordable housing, entrenches segregation and — by pressing newcomers to either settle far away from job centers or gentrify other neighborhoods — promotes urban sprawl and displaces the poor.