Earlier this week I explored the Dean Baker ‘right to rent’ concept as a method of dealing with the foreclosure crisis. Rent as a solution to the housing and economic crisis is clearly gaining momentum – the Obama Administration announced it would spend over $4 billion to provide affordable rental housing:

The idea is to pay for the construction of low-rise rental apartment buildings and town houses, as well as the purchase of foreclosed homes that can be refurbished and rented to low- and moderate-income families at affordable rates.

Analysts say the approach takes a wrecking ball to Bush’s heavy emphasis on encouraging homeownership as a way to create national wealth and provide upward mobility for low- and working-class families, especially minorities. Housing and Urban Development Secretary Shaun Donovan’s recalibration of federal housing policy, they said, shows that the Obama White House has acknowledged that not everyone can or should own a home.

Bush’s “ownership society” nonsense played no small role in the generation of the housing bubble and the economic catastrophe it has now left us. It gave the ideological basis for massive sprawl and for lax lending practices designed to push homebuyers into ridiculous and exotic mortgages that people could not afford. Obama’s new plan is not just a shift away from this nonsense, but a welcome method of addressing it, especially if a big chunk of that $4 billion goes to purchase foreclosed homes and renting them out at affordable rates.

What it may also signal is the beginning of a long-term shift in American housing policy away from an emphasis on homeownership. Thomas Sugrue, one of the best historians of the 20th century United States working in the field today (and whose work has been a strong influence on my own  work as a historian), penned an excellent op-ed in the Wall Street Journal this week about the place of rent in the “new American dream”. Sugrue’s point was that mass homeownership was a product of the New Deal, and that it isn’t necessarily the only or the best way to provide economic and housing security to Americans:

For most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality….

If there’s one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic. James Truslow Adams, the historian who coined the phrase “the American dream,” one that he defined as “a better, richer, and happier life for all our citizens of every rank” also offered a prescient commentary in the midst of the Great Depression. “That dream,” he wrote in 1933, “has always meant more than the accumulation of material goods.” Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold.

Most people seek security in life. They want to ensure that if they have a roof over their head, that they can keep it. That if they have an income, they can keep it. If they have savings in the bank, they can keep it.

Homeownership should be one of many options to produce that. And during the middle decades of the 20th century, it was. Homeownership became widespread but using a home as an asset, as a source of wealth, or as an ATM was a product of the post-1978 world. That’s no small coincidence, as 2 of the 3 great asset bubbles of the last 30 years have been housing bubbles. The result was a massive transfer of wealth upward, a Potemkin economy, and widespread immiseration.

Sugrue’s argument is that we need to drop the emphasis on homeownership as government policy and start finding ways to promote stable rentership. This has a lot of implications for California that I explore over the flip. The upshot: an emphasis on rent can help revive the California dream of enjoying this beautiful, wonderful state with basic economic security.

The single-minded emphasis on homeownership has badly distorted California’s economy, land use, and politics. Bringing housing policy back into balance and providing policy support for rent can fix these distortions.

Housing markets in California have become dominated by a “drive till you qualify” mentality. Because the California dream of the 20th century was defined by owning a detached single-family home in a residential neighborhood, land use policy followed that path. Multiple-family housing, such as apartment buildings, are expressly forbidden by zoning in many California suburbs, especially in those areas that could benefit from it (close to transportation nodes, in walking distance from shops and other amenities). The tyranny of SFH zoning means that available land is quickly eaten up, and more and more land on the urban fringe must be converted into sprawl.

The economic consequences of this are utterly ruinous. Commute costs are an enormous portion of suburban household budgets, with money going to oil companies instead of local transit agencies. When the price of oil rises, households see how dangerously exposed they have become. When gas prices parked themselves above $3/gal for the first time in 2006, it caused the housing bubble to burst. The specter of long-term higher oil prices makes much of California sprawl utterly untenable.

The failure of sprawl to meet the demands of homeownership-as-policy suggests a need to provide more housing opportunity in the existing coastal urban cores. Affordable, dense rentals in the city centers would help revive the California dream by cutting the costs of living and commuting for a lot of people, particularly the middle-class and those in the service industries. Shorter commutes and cheaper housing – especially unencumbered by a mortgage – would leave more money in the pockets and savings accounts of Californians at a time when this is desperately needed.

But as I’ve examined before, homeowners in these coastal centers tend to be vehemently opposed to adding more density. They are deeply wedded to an obsolete model of 20th century urban aesthetics, and cite concerns about their home values to justify their NIMBY attitudes. Sugrue’s point is essentially that government should ignore these concerns, that stabilizing home values is not government’s job and that housing should be a place to live and not an investment asset.

Of course, California has gone further than most other states in enabling this homeowner aristocracy. Prop 13 gave them an enormous subsidy to stay where they are, keep housing in the desirable coastal areas off the market, price out younger and first-time buyers, fuel sprawl, and jack up housing costs. The elimination of rent control through the Costa-Hawkins Act in 1999 did not make things easier for long-term renters in these coastal areas, driving many to find housing further inland, with higher commute costs.

Homeowner NIMBYism is also a big obstacle to the infrastructural developments we need to address the problems of the 21st century. As I’ve charted on my high speed rail blog NIMBYs in San Mateo County are trying to block construction of the HSR project along the Caltrain corridor. We see similar obstructionism across the state, motivated by a jealous hoarding of property values.

If we are to revive rent as a cornerstone of the California Dream (it’s enabling me to live that dream here in Monterey, by the way) we will need to embrace policies that make renting fair and desirable. Rent control must be restored, and tenants’ rights need to be expanded and rigorously enforced.

We also need to explore new forms of rental ownership. Cooperative housing, tenancies-in-common, and public ownership of rental housing with strong tenant self-government are all possible methods of promoting renting. The suburban zoning rules mandating single-family homes and banning multi-family housing have to go as well.

Bills like Darrell Steinberg’s SB 375 help force this to happen by limiting sprawl and forcing land use policy to consider the impact on the environment.

These steps, combined with federal initiatives like that announced by HUD this week, can be the starting points of a true effort to rebuild the California dream.