World Crisis Online

The gap in home ownership between black and white Americans is the widest since records began 16 years ago, according to an analysis of US Census Bureau data.

US home ownership fell from a peak rate of more than 69 per cent in 2004 to 66.5 per cent in the last quarter of 2010, its lowest level for 12 years. But the decline is not uniform, with African-American ownership declining to 44.9 per cent in the last quarter while white ownership fell to 74.2 per cent.

In the past six months that gap, which previous administrations pledged to close, reached its widest level since the Census Bureau started collecting the information in 1994.

For all Americans, the idea that the government would drive the rate of home ownership has evaporated with the White House plan for housing finance, which winds down the government-sponsored mortgage guarantors and emphasises the role of renting. It is a stark change.

“You want to reinforce family values in America . . . Make it easy for people to own their own homes and enjoy the rewards of family life and see their work rewarded,” Bill Clinton, then president, said in 1995. Seven years later, announcing he would close the gap in the ownership rate between ethnic minority and white Americans, George W. Bush said: “I do believe in the American dream . . . Owning a home is a part of that dream.”

That bipartisan belief in the social and economic benefits of higher rates of home ownership has been shaken by the financial crisis. After a devastating housing crash, the administration has signalled a retreat, pledging to do more to support access to rented housing but reduce the government’s role in the mortgage market.

“It is the first time that we have got from an administration that rental housing is of equal desirability,” said Barney Frank, senior Democrat on the House financial services committee. “It does mark a sharp turn in recognition that decent rental housing would be the primary means of shelter for lower income people.”

Republicans, the administration and most Democrats have similar views. There is a chance of legislation this year to wind down Fannie Mae and Freddie Mac, the government-backed mortgage guarantors, and offer new subsidies to renters.

The extent to which the government push to expand lower income Americans’ access to mortgages contributed to the financial crisis is still debated. But the millions of Americans that are in negative equity or have lost their homes have helped to change the orthodoxy of home ownership.

Advocates of using government policy to improve access to housing are now focused on rental. “There is still going to be the need for some degree of support for rental affordability policies that the current system is not really dealing with,” said Raphael Bostic, assistant secretary at the housing and urban development department. “We want to make sure that there are some dedicated budget neutral financing for that.”

But just because the political consensus has switched to reducing the government’s role in home ownership does not mean all voices are in favour.

Maxine Waters, Democratic congresswoman from California, cheered the promise of more rental support but also expressed reservations: “After reading the proposals, my underlying concern is that they may radically increase the cost of home ownership, and housing in general.”

Homeowners’ withdrawal of equity to spend on consumer goods during the bubble has become widely disparaged as the “house as ATM”. But in poorer African-American and Hispanic communities, in particular, increasing home ownership was a potent symbol of arrival in the middle class, providing many families with the opportunity to bequeath a sizeable asset to children for the first time.

“This episode has been devastating to those communities,” said Mr Bostic. “The loss of wealth, the loss of equity has been substantial. It took decades to build and it’s going to take a long time to get back to that.”