International Comparison of Home Ownership Rates

In his testimony before a Senate subcommittee last week, American Enterprise Institute’s Alex Pollock provided an interesting international perspective on homeownership rates around the world:

“In the days of Fannie and Freddie’s pride, their representatives and political supporters used to frequently say, “American housing finance is the envy of the world!” It really wasn’t, at least based on my discussions with housing finance colleagues from other countries. But many Americans—including members of Congress—thought it was, just as they mistakenly thought and said that the U.S. had the highest home ownership rate in the world. We didn’t and don’t. This is apparent from the International Comparison of Home Ownership Rates (see chart above). The U.S. ranks 17th of 26 economically advanced countries, or about two-thirds of the way down the list.

I think we can agree that we would like our society to have a property-owning democratic citizenry, which includes widespread home ownership. But the international perspective makes it clear that many countries achieve home ownership levels as high or higher than ours with no government-sponsored enterprises. It turns out that these levels can be achieved without tax deductions for the interest paid on home mortgages, without our very unusual practice of making mortgages into non-recourse debt, without government mandates to make “creative” (that is, riskier) loans, without 30-year fixed-rate loans, and with prepayment fees on mortgages.

Of course, as bubbles and busts in other countries show, you can also get in trouble with different systems. At a minimum, we should never assume that the particular historical development so far of the U.S. housing finance system is definitive.”

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