After too-easy mortgage lending brought the world economy to its knees in 2008, lots of people have been chewing over the question of how to make the housing market less prone to, you know, blowing up. One idea: 50% down payments.

This goes to the very heart of the all-American idea that everyone should aspire to own their own home. It is not a very good idea, economically speaking! Because everyone cannot really afford a home. And if people insist on buying homes whether or not they have the income necessary to do so, then someone must provide them with the loans to do so, and those loans will rest on shaky economic foundations, and sooner or later they will collapse, as happened in the subprime crisis of 2008.

So, what to do? Eduardo Porter today notes that, despite the GLOBAL CRISIS brought on by weak mortgage lending standards just a few short years ago, we have utterly failed to reform that lending system enough to prevent the same thing from happening again, once short-term economic conditions indicate to financiers that there is money to be made on subprime lending again. (That is already happening now.) Porter suggests that since we know that Wall Street will always plunge headlong into (too much) risk, America should just lose the "home ownership for all" conviction and move towards becoming a nation of renters: "Germany is doing fine with a homeownership rate of 45 percent, compared with about 65 percent in the United States, which is actually down from a peak of near 70 percent in 2004."

Home ownership as a luxury good? Well, yes. Homes are fucking expensive! It is a little bizarre to assume that everyone should expect to own an asset worth hundreds of thousands of dollars at some point, given how little income normal people in America generally make. Renting involves much less risk, for renters. And besides, real estate has historically been a much worse investment than the stock market, in the long term.

But how do you make the general public let go of the dream of owning a home, given the generations of propaganda that have gone into making that such an essential part of the American dream? Here's a crazy idea: instead of letting people purchase homes with as little as 5%, or 10%, or 20% down, raise that up to, oh, 50%. Yes, this would put home ownership out of the reach of millions of Americans. (And yes, this is probably an extreme figure, for that reason. Still, we're just thinking here.) Consider, though, the fact that people who are actually rich consider a huge down payment to be exceedingly responsible, for the very reason expressed above: it mitigates risk. Here is a quote from a Bloomberg story on a new Florida condo project:

"The U.S. buyers have made up an increasing share of luxury beachfront condominiums and, like our foreign buyers, they have shown little resistance to larger deposits," Perez said in an e-mail. "Most feel that if they can't put a 50 percent down payment, they probably should not be buying."

Easy for them to say—they can afford a 50% deposit. The point here is just to consider the fact that pushing down payment sizes down to the point that very non-affluent people can buy houses by obtaining huge mortgages carries a ton of risk, for both the buyer and the lender. Affordable housing in America will always be mostly rental housing. There's nothing wrong with that.

Owning a house sounds like a pain in the ass anyhow. Landlords! Make them fix all your stuff. It's the only satisfaction of being in the rental class.

[Photo: Flickr]