America Needs a Way to Revive the American Dream

The idea of helping the lower-middle class by using the federal government to encourage homeownership is, to put it mildly, out of favor. There’s a popular narrative that the housing bubble of the 2000s — and, by extension, the financial crisis and the Great Recession — were caused by the government making or encouraging cheap loans to low-income Americans. That narrative is a myth — the leading cause of the bubble was private banks making bad loans, mostly to speculators rather than to low-income owner-occupants. But the myth is unlikely to die, meaning that it will be an uphill battle to convince recession-scarred Americans to support the idea of expanding homeownership.

That’s a shame, because for all its drawbacks, homeownership is still a crucial source of wealth for everyone who isn’t rich.

There are big obstacles to building wealth for many Americans. Stocks — the obvious alternative to real estate — can be extremely volatile, and lower-middle-class people can’t afford to run the risk of having their assets wiped out. Stocks are also difficult to understand; people who try to invest their own money tend to do very badly, and people who use professional managers to invest for them tend to pay large fees that swamp their returns. This keeps low-income people out of the market.