June 5, 2004

BY CHRISTINE M.J. OLIVER

More than 68 percent of Americans live in homes they own -- a record high figure. The real estate and housing industries -- including mortgage giants Fannie Mae and Freddie Mac -- cite it to demonstrate their value to consumers. The past two administrations, as well as members of Congress, have pointed to the homeownership rate as evidence that the economy is recovering.

However, a closer look suggests that self-congratulations may be a bit premature. A study released last month by the Center for Housing Policy of Washington, D.C., looks at homeownership rates from 1978 to 2001. The startling conclusion is that homeownership among working families with children is actually lower today than it was in 1978.

Although the overall homeownership rate declined from 65 percent to 64 percent between 1978 and 1991, it rebounded sharply, rising to 68 percent by 2001. In contrast, the homeownership rate of families with children has never recovered from the losses experienced in the 1980s. In 1978, 70.5 percent of families with children owned their homes. In 2001, the share was 68.4 percent.

Low- to moderate-income working families with children were hit particularly hard. In 1978, 62.5 percent of all such families owned their homes. In 2001, their homeownership rate was just 56.6 percent.

The decline in homeownership among these working families with children was pervasive. It affected both dual-income and single-income families. While the rate among Hispanics fell just less than 1 percent, among blacks the decline was 5 percent. This was despite the fact that increased minority homeownership has been a stated priority of the last two administrations. The share of children in working families living in owner-occupied housing declined from nearly 66 percent in 1978 to 58 percent in 2001.

How did this happen? Part of the shift can be attributed to the increase in households headed by single parents, who are traditionally less likely to own. Homeownership rates among single parents with children have consistently trailed that of couples by more than 20 percentage points.

However, the changing composition of families tells only part of the story. In most housing markets, the incomes of working families with children -- both single-income and dual-income -- simply failed to keep pace with the rising costs of housing. Between 1978 and 2001, rising homeownership costs -- mortgage payments, utilities, taxes and insurance -- outpaced the income growth of many working families by 45 percent.

The solution sounds simple: Increase the supply of affordable housing geared to working families with children. But obstacles stand in the way. In suburban communities, working parents with children report they are unable to locate affordable housing that is accessible to their jobs. Some communities limit moderate-priced homes or restrict apartments and condo developments to seniors. ''Child proofing'' is a way for localities to avoid paying for schools, teachers and other social services for children. It also is shortsighted policy. Too often, essential workers such as teachers, police officers, hospital workers and retail clerks can't live in the communities they serve.

The federal government (and in turn the states) need to use both carrots and sticks to open doors to housing for working families. They could distribute grants, tax credits and bond funds to reward localities that adopt more inclusive policies, such as affordable rental housing to help working families make the transition to homeownership. They also could actively enforce the federal Fair Housing Act, which prohibits discrimination against families with children.

Why does homeownership among working families with children matter? Studies have shown that children of homeowners are more likely to do well in school, less likely to have behavioral problems, and less likely to become pregnant. This is particularly true for lower-income families. Therefore, the homeownership rates of working families with children have important implications that extend beyond the housing market to the future well-being of the next generation.

Christine M.J. Oliver is a member of the Center for Housing Policy Advisory Board and president and CEO of the Chicago Dwellings Association.