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The homeownership window is closing



The middle class in America is falling behind.  The middle class is defined as families with incomes between the median family income and the 80th percentile of family incomes.  The upper middle class is defined as families with incomes at or above the 80th percentile.  Last year, the median family income was $130,000; families at the 80th percentile earned $242,000.


For decades, incomes of families in the upper middle class have grown more rapidly than that for middle-income families.  This decompression of incomes has resulted in greater income inequality, and for many middle-income families, the gateway to the upper middle class has been closing.  Loss of upward mobility and decompression of incomes is a major source of dissatisfaction and conflict in American society.


Historically, homeownership has been one of the most important pathways providing upward mobility for middle-class families.  But the closing opportunities for homeownership, especially for younger generations, have become a flash point of intergenerational conflict.


My family’s experience with homeownership is a good example of this upward mobility.  I moved to Boulder as a new assistant professor at the University of Colorado in 1965.  My salary as an assistant Professor was $7,000, which placed me squarely in the middle class in Boulder.  I was able to purchase my first home for less than $15,000, reflecting the free market for housing in Boulder before city planning.  Over the years, we moved into several homes, using our home equity for the down payment.  We were also able to use our home equity to help finance a college education for several children and grandchildren.  Homeownership provided the pathway for my family and other middle-class families to significantly improve our income and wealth.


Homeownership no longer provides a pathway for upward mobility for middle-income families in Boulder; indeed, middle-income families are disappearing from Boulder.  Most of Boulder’s work force lives in surrounding counties with significantly lower housing costs and commutes to work.


Public policy debates often ignore the decompression of incomes and lack of mobility for middle-class families.  Public policies to redistribute income and wealth tend to target the wealthy, such as California’s proposed billionaire’s tax.  Unfortunately, wealth taxes have unintended consequences.  California citizens watch as billionaires leave the state, taking their businesses with them and diminishing the prospects for families left behind.


Public policies targeting the poor also have unintended consequences.  For example, the city of Boulder designed a housing program targeting low-income families.  The median price for homes in Boulder is now close to $1 million.  The city has allocated millions of dollars for a program building homes for a few hundred low-income families.  Price controls limit the ability of these homeowners to build up equity in their homes.  Much of the benefit of this housing program is accrued by realtors, bankers, and lawyers who generate fees in these transactions.  When this housing program was first enacted, some realtors purchased the homes, circumventing income restrictions, but Boulder has ended this fraud in the housing program.


The real fraud in Boulder’s housing program, however, is that it does nothing to provide a pathway to homeownership and upward mobility for middle-income families.  In fact, for more than half a century, the city of Boulder has pursued tax and regulatory policies that limit the affordability of homes for middle-class families.  When the Boulder City Council announced plans to restrict construction of homes within the city limits half a century ago, my colleagues at the University of Colorado were ecstatic.  Many of them had purchased homes in the “Hill area,” which now has some of the most expensive homes in the country.  


The city of Boulder and the state of Colorado have spent millions of dollars attracting corporations to relocate here.  Boulder recently attracted the Sundance Film Festival from our neighbor Utah, further driving up home prices.


Boulder is only one of the many wealthy ghettos across the country where public policies benefit the wealthy.  Policies that provide subsidized housing for the poor allow them to claim that their policies benefit the poor and middle-income classes, but except for low-income families eligible for subsidized housing, the reality is that only the wealthy can now afford to live in Boulder.


It is time to tell city planners in Boulder and other wealthy ghettos across the country that enough is enough.  If cities really want to provide upward mobility for middle-income families, they should eliminate the many tax and regulatory policies that are putting homeownership out of reach.



Barry W. Poulson is professor emeritus at the University of Colorado Boulder and serves on the Board of the Prosperity for US Foundation.

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