【正文】 by the Centre for Community Capital, part of the University of North Carolina, Chapel Hill, casts some doubt on that conclusion. It pared a group of people who took out subprime loans with a group of borrowers from the Community Advantage Programme (CAP), a governmentbacked scheme that lends to the sort of people who might have had a subprime mortgage. The default rate for CAP borrowers was only a quarter what it was for subprime mortgage holders, even though the ines and backgrounds of borrowers were similar. Since the real problem lay partly in the mortgages, rather than the borrowers, this suggests the subprime crisis was a financialmarket mess, as well as a housing one. Does that also imply that home ownership has the economic benefits that its proponents claim? Two pieces of evidence seem to support such a view. The first is that housing has fared better in the crisis than other assets. Share prices are around 50% below their peaks in many countries, so pared with shareowners, homeowners have not done badly. However, home ownership in a downturn has one big disadvantage: most people buy shares outright but homes on margin (ie, they put down a small stake, if anything). If share prices fall by 10%, you lose 10%。 if house prices fall by 10%, you may lose your entire savings. The value of American homeowners’ equity in their own houses has slumped from a peak of $ trillion in 2021 to just $ trillion at the end of 2021. This undermines one claim that homeowning is economically beneficial. The other piece of evidence for home ownership’s benefits is that the houseprice fall has so far spared most existing homeowners from absolute losses. In America, for example, house prices have fallen back only to where they were in 2021. There were roughly 29m house sales in the United States between 2021 and 2021, pared with 115m households, and anyone who bought before then is probably sitting on a nominal profit. However, as Harvard University’s Martin Feldstein points out, if house prices rise, people feel richer and borrow and spend more. If they feel poorer, they may cut back even if the price of their house has not fallen below what they paid for it. Subsidies to home ownership have thus increased economic volatility. They boosted consumption, as homeowners used their houses as collateral to finance consumption or investment. In America mortgageequity withdrawals reached $9 trillion between 1997 and 2021—equal to more than 90% of disposable ine in 2021. This gave homeowners more to spend in the good times but less in bad ones. In Britain homeequity withdrawals added the equivalent of 3% of posttax ine to households in the fourth quarter of 2021 but subtracted 3% a year later. So changes to house prices aggravate the economic cycle. Recent research by the IMF finds that a quarter of the 100odd recessions since 1960 have been associated with houseprice busts and that these contractions “are deeper and last longer than other recessions do”. Subsidies to home ownership have also weakened financial services. They encouraged more people to buy houses (which was the point), but, logically enough, also encouraged lenders to take greater risks with housing. This was fine while house prices were rising, but the fall exposed how vulnerable banks’ balance sheets had bee. Moreover, if public policy aims to create wealth, there are other ways of doing it. People could invest their savings in the stockmarket and rent their homes, for example. Had they done so in the past two years, they would have done worse than homeowners. But for three decades before that, equity prices easily outstripped property prices (see chart 2), so in the long run equities have been a better bet than houses. (Admittedly, this strips out the effects of share dividends and imputed rents, which favour property.) Housing suffers from two further weaknesses as an investment. It sucks up disproportionately large amounts of money, falling foul of the idea that investors should diversify: in America the equity tied up in houses accounts for 45% of the worth of the average householder. And it is illiquid. If you need to raise money, you cannot sell a room or two, whereas you can always sell a few shares. It is hard to argue houses are the best asset for building wealth. “Perhaps the most pelling argument for housing as a means of wealth accumulation”, argues Richard Green of the University of Southern California, “is that it gives households a default mechanism for savings.” Because people have to pay off a mortgage, they increase their home equity and save more than they otherwise would. This is indeed a strong argument: socialscience research finds that people save mo