Why Discourage Home Ownership?

The Internal Revenue Code discourages home ownership.

"Home ownership" in its original sense, that is. "Home ownership" before the meaning of the phrase morphed into something closer to "living in a house on credit."

A recent newspaper article called the changed meaning to my attention. Somebody had come into money, big time. Generously, the lucky guy then did something that must have been difficult for a reporter to describe:

Editor: Your story says he bought his relative a house. How is his low-income relative going to keep up the mortgage payments on a fancy house?

Reporter: There is no mortgage, chief. This guy actually bought the house. He paid for it!

Editor: Well, you better say so in your story. Make it, "He bought his relative a house, free and clear."

The federal income tax deduction for home mortgage interest may seem to encourage home ownership. But interest on refinancing that drains away any build-up of home equity is also deductible. So is interest on the homebuyer's favorite solution to out-of-control credit card debt: home equity loans. Once a couple buys a house on credit, the Internal Revenue Code encourages them to keep living in it on credit.

Not so long ago, avoiding full home ownership was almost a national duty. Remember then Fed Chairman Greenspan's hope that homebuyers would keep borrowing and spending their growing home equity in order to keep the economy humming?

Today, a difficult investment environment and a shaky Social Security system already threaten the financial future of families. Shouldn't they be encouraged to achieve full home ownership when they retire?

The deduction for home mortgage interest has long been a sacred cow. But the Brits gradually did away with tax relief for mortgages. Couldn't we give it a try?