Forget the “American Dream” for home ownership. We need a system for a 21st Century that fits our flexible and mobile economy.

Question: How will the economic downturn change the face of rnhome ownership? 

Richard Florida: Well, it’s rnfascinatingly interesting to me about, that the role of home ownership rnand housing in the American dream. And in the book I say, “You know, rnthere are really two American dreams.” Actually a student said this to rnme, he said, “You know, Professor Florida”—he wasn’t American, a Latin rnAmerican guy— said, “I read somewhere that the American dream is about rneconomic opportunity, but elsewhere I see it’s about owning a home, rncould those two things be in conflict?”

One of the things we’ve rnalways done really well in America is during these resetting periods, rnduring these crises, these remaking periods, of course, we’ve changed rnour infrastructure. Right, we build railroads during the first one, and rnsubways and cable cars. During the second one, we built interstate rnhighways, new power distribution systems and so forth, new ways of rneducating ourselves, mass public education early on, universities later.rn But we’ve always been able to change our housing system to suit our rnneeds. 

During the first great reset in the 1870s, in the '80s, rnwe moved lots of people off farms and into cities. Many of them were rnrenters, some were owners, but that shift in our population and the rnshift in the way we house people from small, farming villages to major rnurban centers, was a big part of our growth. And then after World War IIrn with suburbanization, we created a nation of homeowners. About 40 rnpercent of Americans, maybe a little more, were homeowners before the rnwar, after the war it went up to 60, and then at the pinnacle, nearly rnhit 70 percent. 

What we’re finding now though, is that era of rnhome ownership, which so drive the suburban economic machine—really, rnwhen you think about it, it fed those industries. The auto industry, thern steel industry, the chemical industry, the appliance industry, all rnthose, all those industries that drove American greatness, were really rnfacilitated by suburbanization. You bought the home, you had to fill it rnup with appliances, you had to buy a car, and then a second car, and rnthen a car for the kids. So it drove the economic machine. Now that’s rnbroken, I think. 

And it’s actually something I write about in rnthe book, but I’ve been studying in great detail with my research team rnat the Martin Prosperity Institute very closely since. It seems to me rnthat we went overboard in our approach to home ownership and when we rnactually looked at the data... This is so ironic, places with the rnhighest levels of home ownership have low rates of growth; they tend to rnbe older, lagging cities with older economic structures; they tend to bern less innovative; they tend to have lower levels of human capital, of rncreative, economic activity; lower wages, lower incomes; and the people rnthere have lower levels of well-being. 

The ones that have lower rnhome ownership, they’re stronger economies, they’re more innovative, rnthey’re higher wages, higher incomes. And I thought about this and it’s rnnot only that those cities are more expensive, right? Los Angeles and rnNew York and San Francisco and Seattle and Boston, they’re not only morern expensive, so obviously fewer people can afford houses. Actually by rnhaving a lower level of homeownership, and that’s around 50 or 55 rnpercent, where the big, the cities that have a lot have 80. It actually rnmakes them quite fast and flexible. And I find this really interesting. rnIf you lose your job in Detroit or Cleveland, you own your house: you’rern stuck. You can’t even move to another part of Detroit or Cleveland for arn job, never mind to a place that might have more economic opportunity onrn the east or west coast. You’re stuck and you’re stuck with that house rnand you can’t get rid of it and you have to pay for it. 

If you rnwork in New York or Los Angeles or San Francisco and you lose your job, rnfirst thing you can do is downshift to a cheaper apartment, and if you rnneed to move to a new region, when your lease ends, you can up and go. rnSo I actually believe, the Urban Land Institute says we’re falling in rnhome ownership. We’re going to come down to about, I think, they think, rnanywhere to about 62 percent, I think we’re going to go a little lower. Irn think a nice balance is about 55 percent, with the rest of the people rnrenting. I do think we need to reinvent rental housing, though. I think rnthe kind of rental housing we have now, where you go find a landlord on rnCraig’s List and you get a place and they don’t fix the windows and the rndishwasher breaks and you’re doing it; that’s crazy. I think with all rnthe condos that are vacant, in fact, we’re even seeing this in Miami. rnAnd I see this when I go to Miami, it’s actually my cycling route. I rncycle down through the city and through the City of Miami, into Key rnBiscayne. You see all the condo towers that went bankrupt, that were rndistress sales, now being turned to rental. And what’s interesting is rnyou’re renting from a real rental agency, the housing is nice and high rnquality, but it’s very affordable, lots of people are streaming back rninto downtown, empty nesters, young people, people with families, more rnstreet-level activity. 

I even imagine something more than that, rnwhere you could sign up with Acme Rental Company, or XYZ Rental Company,rn and if your job changes in New York, or San Francisco, Toronto where I rnlive, and you want to be closer to where you work, you can switch rnapartments. Or if you transfer to the West Coast or the Midwest or rnwherever it is, San Francisco, Chicago, you can basically be part of rnthat rental company’s units there. Some way, and I think with the excessrn inventory—according to one analysis, we now in the United States have 8rn years, 103 months, of excess housing inventory; well, somebody’s got torn do something with that. If companies over the course of the reset in anrn entrepreneurial fashion begin to roll that up, begin to provide mass rnrental housing, if you will, and what gives me—I talk to a lot of rndevelopers and I speak to developers' forums, I was just at the Urban rnLand Institute: multi-family housing is one place people are actually rnprofitable in. 

But the thing is, every time we’ve changed in rnAmerica, had a crisis, we’ve reinvented our housing system, and our rnhousing finance system, and even now, I’m talking to public policy rnmakers and decision makers in Washington who are really thinking this rnthrough, who are saying, you know, "We have gone overboard with home rnownership, we have to dial back, and how do we reconfigure our housing rnand housing finance institutions and policies to encourage a better, rnmore flexible form of housing, which is more in sync with the needs of rnan advanced economy. 

So I actually think, one of the hopeful rnrays of optimism I see, I think the United States may be out in front ofrn this and it may be one of the first countries that is really rethinkingrn what would be a housing, mortgage... housing finance system, rent-own rnsystem for a 21st Century flexible and mobile economy. 

Question:rn How can the government respond to the foreclosure crisis most rneffectively? 

Richard Florida: Most urban economists rnand smart housing economists and thinker urbanists are on this. We have rnto stop the unbelievable subsidy that we’ve provided for single-family rnhome ownership. When you add up the tax incentives, the financial rnincentives, the subsidies to the secondary mortgage market institutions,rn the freeway subsidies, the highway subsidies, the infrastructure rnsubsidies, it’s billions, hundreds of billions and trillions of dollars.rn And we have to stop that, we have to make our housing system more rnreflective of a market. And I think our public policy... I don’t want torn say it has to favor rental, I don’t think we need a massive public rnpolicy. We just have to stop the madness in subsidizing home ownership rnand causing people, some people to make bad decisions. One of the thingsrn that brought on the crisis is there were "evil people on Wall Street rndoing all these bad things and everybody has the pitchforks out and rnthey’re after them," but there are a lot of Americans who made really rnbad decisions. I find it just unbelievable how people would go and buy arn house with nothing down and that they couldn’t afford. That’s not the rnway my parents brought me up. I live in Canada, I had to put 25 percent rndown, and Lord knows, if I tried to get up and walk away from my house rnin Toronto, they’d attach my wages for the rest of my life. I can’t justrn jingle mail the keys back in. 

So I think we do need a system rnthat’s more responsible and a system that doesn’t create those crazy rnincentives. I tell the story, it was the "60 Minutes" show with this rnwoman from Miami and they were asking her, she said she had five rnapartments that were under water, five condos. And they said, “How did rnyou get five condos under water?” She said, “Well, only as a side thing,rn I’m an acupuncturist.” I mean, it’s unbelievable that a woman who’s an rnacupuncturist could walk in and have mortgages on five multi-million rndollar condos and then say, “Well, I didn’t even think about the rnmortgages, that was a sideline, I do acupuncture.” Who would give rnsomebody like that a loan? 

Now that madness has stopped, rnobviously. I think just thinking about a system that’s sensible... but rnobviously one of the big points of “The Great Reset,” is this: We can’t rngrow our economy, we can’t build new industries, whether that’s rnsoftware, high tech, biotech, modern health care, gene therapy, we can’trn move, build new industries and entertainment in media and the rnexperiences, performance, we know a lot of the money to be made in the rnperformances, people seeing performances, consuming live entertainment, rneven buying art, all of these experiential things are personal rndevelopment, lifelong education, holistic health. If we’re spending, thern average is about 55 percent of our income for housing and energy and rntransportation. And in some cities, it’s 75 percent plus and then you rnadd in education costs, you add in health care costs, no wonder people rnwent into debt! How are you going to build the industries of the future rnif you have no money to buy that stuff with? 

So one of the rnthings “The Great Reset” is saying is that during the Depression and rnactually before that, we made agriculture a lot more efficient, we made rnfood a lot cheaper. Herbert Hoover said "we have to have a car in every rngarage, a chicken in every pot." In order to get the car in every rngarage, we had to make agriculture cheaper, we employed most of our rnpeople in agriculture, now we employ 1 percent of our people in rnagriculture. Same thing with housing. We still have to house ourselves, rnwe still need transportation, we still need cars, but they can’t consumern 50, 60, 70, 80, 90 percent of household income. We need to free up rnspace, free up budget, free up demand. That’s what that new way of life rnhas to be. Less expensive, more efficient housing, less expensive, more rnefficient transit, less expensive, more efficient energy, that’s going rnto open up the space to grow a new knowledge and create a new economy rnand really power our growth into the future.