Americans face fading dream of home ownership

After overhauling Wall Street and the U.S. health care system President Barack Obama's administration will — by January 2011 — tackle rules that have underpinned the housing industry for decades.

Obama's main tool for change is a shift in the policies of huge government-backed lenders that have provided mortgages for millions of middle-class Americans since the 1930s, but which recently needed bailouts worth hundreds of billions of dollars to stay afloat.

How the Treasury Department intends to reform the housing market is unclear. But one thing is certain: the state will no longer sustain home ownership rates at levels seen before the crisis.

With the creation of lenders Fannie Mae and later Freddie Mac, as they are commonly known, successive governments have fostered home ownership.

Ownership rates saw almost constant growth between 1940 and 2004, with a blip in the 1980s when interest rates rose prohibitively.

According to the historian and sociologist Thomas Sugrue, “every generation has offered its own version of the claim that owner-occupied homes are the nation's saving grace.

“During the Cold War, home ownership was moral armor, protecting America from dangerous outside influences.”

As William Levitt, the father of suburbia, once claimed: “no man who owns his own house and lot can be a Communist.”

Later, in the Bill Clinton era, home ownership was seen as an important element in achieving personal fulfillment, neighborhood stability and crime prevention.

But as millions of Americans struggle to pay monthly bills, the crisis has kicked up a painful realization that not every American might be qualified to own their own home.

That realization has forged Obama's approach, which is likely to break with the notion of a “home ownership society” supported by successive presidents across party lines.

In 1994 Democratic president Bill Clinton set a target of having 67.5 percent of occupants own their homes by 2000.

The goal was reached and taken further by his Republican successor George W. Bush who vowed to expand “home ownership for all Americans.”

The ownership rate rose to a peak of 69.2 percent in late 2004, according to figures from the Census Bureau.

But that figure has retreated dramatically with the crisis.

According to a recent study by the Federal Reserve, the 67.2-percent-rate of home ownership seen at the end of 2009 may actually inflated by around 5.6 percent, as some homes are in reality owned by banks rather than their occupants.

That would make current home ownership levels the lowest since the 1960s.

And the writing may be on the wall for further declines.

A move to overhaul Fannie and Freddie could further reduce access to capital for the less well-off, dampening a dream which has been embossed on the American political and social landscape for decades.

“To be clear, the government's footprint in the housing market needs to be smaller than it is today,” Shaun Donovan, Obama's head of housing policy, recently remarked.

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