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JCHS: The Homeownership Rate and Housing Finance Policy

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Former Freddie Mac CEO Don Layton shares what we can learn from the history of the homeownership rate.

On Thursday, Harvard’s Joint Center for Housing Studies (JCHS) released the first part of a paper outlining the history of the homeownership rate, the reality of what has happened in the past, and how to increase the rate in the future. The paper, titled “The Homeownership Rate and Housing Finance Policy” is authored by Don Layton, who was CEO of Freddie Mac from 2012 until 2019, and is Senior Industry Fellow with JCHS.

“This single statistic—currently running about 65%—is regarded as one of the most important comprehensive measures of how well the country’s socioeconomic system is ‘delivering the goods’ for the typical American family,” said Layton.

Despite the importance of the rate and the extent to which commentators, politicians and the American public have followed it, it is roughly the same as it was 50 years ago. It is this stagnation that motivated Layton to embark on “a look for fresh ideas.”

History of the Rate

When examining the history of the rate, Layton highlights three distinct periods the rate falls into:

  1. The four decades from 1890 to 1930 when the rate was 46.5%, give or take 1-1/2 percentage points;
  2. The four decades from 1930 to 1970 when the rate was established by the Great Depression and hovered around 46.5%;
  3. The five decades from 1970 to today, when the rate has been 65%, give or take 2 percentage points.

When examining the most recent period, Layton notes that the rate had a peak of 69% in 2004, however, this was in part due to the housing bubble forming which eventually burst in 2007-2008. “At a macro level, then, what was beginning to look like a sustainable increase in the homeownership rate to the 67 percent-and-maybe-higher range in 1999 and 2000 was swamped by the bubble. As a result, we will never know if the increase was, indeed truly sustainable or not,” he notes.

Four Deeper Dives

To give a full picture of the history of the homeownership rate, Layton goes into what he terms “four deep dives” in topics that “demonstrate why and how the rate behaved as it did.” These topics are:

  1. the Roaring ’20s: why the homeownership rate did not go up significantly;
  2. The Depression ’30s: the remaking of housing finance;
  3. The post-WWII “golden era” (1945-1970): why the homeownership rate increased so much;
  4. The modern era (1970 to today): the failure to materially increase the homeownership rate.

Room for Growth

While Part 1 of the paper was aimed at explaining the history of the rate, part 2 will be devoted to addressing important changes that need to take place to move up the rate from 65% to 70% or 75%. “This can’t realistically happen without addressing the major racial homeownership gap that exists,” preludes Layton.

To learn more and read the full report, click here.

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