Ken McElroy Online

The Home Buyer Gap

Ken McElroy
June 20, 2002

It used to be an easy choice on election day - if you wanted the race-pandering, wealth-redistributing demi-socialist, you voted for the Democrat. If you favored colorblind equality under the law, less bureaucracy and regulation, and free markets, you voted for the Republican. Well, the political waters just got a little bit murkier. The Bush Administration has launched an initiative to close the "home ownership gap" with various programs aimed at increasing the number of minority homebuyers.

There has been a lot for conservatives to complain about lately - the imposition of steel tariffs, a massive increase in federal involvement in education, a hugely expensive farm bill - but redistributing income, and targeting it by race, is a new low. Somebody needs to keep President Bush away from his new pal Ted Kennedy, before it's too late.

The Bush plan includes $200 million annually to assist families with down payments and closing costs, and approximately $2.4 billion in tax credits for developers to build 'affordable' homes. The proposal also calls for simplification of the home buying process, buyer education programs, and an increase of funds for groups like Habitat for Humanity that help lower-income people build homes.

According to the federal Department of Housing and Urban Development, minorities have a lower percentage of home ownership than whites. There are many reasons for the disparity, but they have little to do with racial discrimination by sellers or lenders. For example, you would expect that recent immigrants with limited English proficiency would have lower incomes and thus have more difficulty purchasing a home. The answer in that case is education, assimilation, hard work, and financial discipline, not race-targeted redistribution of taxpayer money.

Now, you would expect liberal Democrats to respond to any demographic disparity in America with a plan for redistribution of taxpayer funds. But a "strict constructionist" conservative? Has President Bush gone over to the dark side, and become a proponent of big-spending wealth redistribution and race quotas?

The United States government should not be targeting people based on the color of their skin, whether for good motives or bad motives. Nor should the government be in the business of redistributing money from one citizen to another. Using other people's money to court minority voters isn't compassionate, conservative, or "strict constructionist." But that is precisely what the Bush plan seems to be advocating.

This is nothing but race-based affirmative action, a quota system for homebuyers. The Bush Administration plan 'A Home of Your Own, Expanding Opportunities for all Americans' states, "the reality is that homeownership opportunities are not available to everyone." Here they have fallen into the trap of confusing opportunity with outcome.

It is typical on the left to assume that any unequal outcome is the result of discrimination. Discrimination is assumed, for example, in disparate educational achievement. But just as a disparity in study habits may have more to do with college admission rates than racism, so other factors influence home ownership rates.

It could be argued that home ownership is a public good, and something along the lines of a tax credit to aid first time homebuyers might also be a public good. But why not make such a tax credit available to Americans of all races? Why racialize the issue at all?

Bush could have done more good on the issue by talking about the bureaucracy and excessive regulation that drive up home prices. Often the people who complain about the lack of affordable housing are the same people that advocate restrictive zoning, open space set-asides, numerous environmental impact studies, and the like. Bush could use his bully pulpit to explain that you can't have both unlimited open space and more affordable housing; these are competing goals that must be balanced by local communities.

Additionally, shifting part of the cost from homebuyers to taxpayers does nothing to lower the cost, it only lowers the cost for some, and raises it for others. It may very well even drive up average home prices by increasing demand for homes. Legislation and good intentions can't rewrite the basic laws of economics.

One part of Bush's plan that will be beneficial to buyers calls for simplification and standardization of the paperwork and process of buying a home. This will lower closing costs and help bring in buyers who may have been scared off by the complexity of the process. This is conservative, lowering barriers for all without helping some at the expense of others.

The Bush Administration should rethink this plan to bring it more in line with the conservative values he claims to believe in - less regulation, lower taxes, free markets - and leave the vote buying and race pandering to the other side.