How important is home ownership to a community? Conventional wisdom says the higher the ownership rate, the more attached, involved and committed people are to where they reside, and the more stable their own lives are likely to be.
It is that premise that's long driven housing and economic policy, right or wrong, in America. Improving home ownership rates has long been considered a good thing, though cascading home values have reopened that debate.
So what if we learn that the "official" home ownership rate in America is puffery and that the real rate is much lower? And what if we also learn that in certain metro areas — Tampa Bay being one of them — the "real" home ownership rate is shockingly lower? What does that mean for the local community in terms of stability and commitment?
A revealing analysis by researchers at the Federal Reserve Bank of New York found that figuring the real or effective home ownership rate from the "official" number can be determined by subtracting those people living in homes with negative equity, also known as people who owe more than their home is worth in today's market.
Officially, the nation's home ownership rate was 67.2 percent at the end of last year. But back out those with negative equity, and the difference between the official and effective home ownership rates, or what the Fed authors call the "home ownership gap," is about 5.6 percentage points. That means nationwide, the effective rate of home ownership is lower, closer to 62 percent.
That home ownership gap widens dramatically in metro areas like Tampa Bay. Officially, Tampa Bay's home ownership peaked several years ago at 74.1 percent. It now stands, officially, at 67.6 percent — still high.
But let's back out all those folks living in homes with negative equity. In Tampa Bay, that's a lot of folks, and their subtraction brings Tampa Bay's home ownership to just 51.2 percent. That's a home ownership gap here of just over 16 percentage points, a huge difference.
Nor is Tampa Bay the worst. Miami's home ownership gap is 22.5 percentage points. Out west, Phoenix's is 28.2 percentage points. And the king is Las Vegas, whose current "official" home ownership rate is a respectable 58.6 percent until you back out everyone with negative equity.
Then Las Vegas has an effective home ownership rate of just 14.7 percent and a home ownership gap of an astonishing 43.9 percentage points. The Case-Shiller home-price index was used to predict the number of underwater borrowers.
Are these New York Fed researchers just having fun with numbers, or might there be an important message in their analysis? The old argument, theses researchers say, is that because home owners have a financial interest in their property, they have incentives to take measures that will maintain or increase the value of that property, ranging from fixing a leaky roof and improving a neighborhood to staying more informed about government actions.
But what motivates home owners will not motivate people who owe more than their homes are worth. The Fed folks say they should be treated like renters and not be counted in home ownership rates. They are, the authors conclude, "renters in waiting."
Is this a bad thing? The implication is metro areas like Tampa Bay that face bigger home ownership gaps will suffer more from a decline in metro stability and commitment. But we've never experienced a housing decline of such magnitude, so this is new territory for even the housing gurus.
At the least, when it comes to home values and the virtues of ownership, we have become a nation of skeptics.
Robert Trigaux can be reached at email@example.com.