McMansions and the Mortgage Credit

Completed the always painful and frustrating process of doing my taxes last night. As someone that likes to think about good design, I continue to be amazed at the byzantine structure of our tax code. Ostensibly, the many, many (MANY!) rules and regulations in the US tax laws are supposed to push people towards the behaviors that we, as a society, want to encourage. For example, take the home mortgage deduction. Promoting home ownership is a good thing, right? Well, that's what I've always thought, but watching the ecologically disastrous and soul-crushing sprawl taking over our country I've started to have second thoughts.

This rethinking was sparked again by Thomas Frank's "Let them eat McMansions!" article where he claims that "we have sprawl, wars over cheap gas, stagnant wages and longer hours because your boss wants this awful, ugly house." Heh. Beyond the snickering, however, is a darker truth: these ugly opulent houses are damaging to our social fabric. Frank provides plenty of examples in the article, but on tax day, this was the most interesting fact to ponder: what sparked the McMansion trend in the first place? A: Our tax policy!

There have always been grand houses in America. What put them into mass-production in the mid-’80s? The most obvious answer is that decade’s transfer of wealth to professionals and managers, a shift made possible by the top-bracket tax cuts of 1981. Where corporate earnings had previously been spent on skyscrapers and company planes, it now poured into the personal bank accounts of executives. Tax policy then steered those executives’ spending toward residential real estate. According to James K. Galbraith, “The 1986 Tax Reform Act removed the deductibility of non-mortgage interest,” leaving mortgage interest as the only remaining deductible type and thus “creating a powerful incentive for households to try to own their own homes.”

Essentially, those with extra money look to take advantage of a legal tax haven by sinking more and more of it into ever growing houses. And so this is what the market provides! I'm actually in the market for a house right now - a "mid-level home," meaning ~2000 square feet, with 3-4 bedrooms and a half-acre or so of land.  It's shocking how few new houses meet these specifications.

Why no Corporate Bankruptcy Stigma?

James Surowieck , writing in the New Yorker, makes a good point about walking away from debts as a corporation and as a private person:

Paying your debts is, as a rule, a good thing. But the double standard here is obvious and offensive. Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense.

I had never really thought of this before, but Surowieck makes some really great points. He even offers a potential corporate/private solution to the dept issue:

They could have helped keep people in their homes by writing down mortgages (the equivalent of the restructuring that American Airlines’ debt holders will now be confronting). And there are plenty of useful ideas out there for how banks could do this without taxpayer subsidies and without rewarding the irresponsible. For instance, Eric Posner and Luigi Zingales, of the University of Chicago, suggest that, in exchange for writing down mortgages in hard-hit areas, lenders would take an ownership stake in a house, getting a percentage of the capital gain when it was eventually sold.

Property Fraud

Thank goodness it's not affecting me, but there's rampant property fraud going on around the country, as banks are foreclosing on properties that they can't even prove are theirs, and in rates that prove that they are not being properly reviewed. The Big Picture has the grimy details.

Parental Stress

The NYTimes has an interesting piece out about how fathers are dealing with their new role as not just provider but nurturer as well. As the downer title (Now, Dad Feels as Stressed as Mom) implies, the short answer is: Not very well.

...several studies show that fathers are now struggling just as much — and sometimes even more — than mothers in trying to fulfill their responsibilities at home and in the office. Just last week, Boston College released a study called “The New Dad” suggesting that new fathers face a subtle bias in the workplace, which fails to recognize their stepped-up family responsibilities and presumes that they will be largely unaffected by children.
Fathers also seem more unhappy than mothers with the juggling act: In dual-earner couples, 59 percent of fathers report some level of “work-life conflict,” compared with about 45 percent of women, according to a 2008 report from the Families and Work Institute in New York.
The research highlights the singular challenges of fathers. Men are typically the primary breadwinner, but they also increasingly report a desire to spend more time with their children. To do so, they must first navigate a workplace that is often reluctant to give them time off for family reasons. And they must negotiate with a wife who may not always recognize their contributions at home.

I'm always a bit leery of these articles that take statistical trends and abstract them out to absolutes - in short, anything that states things declaratively. Myself, I've never felt any subtle bias in the workplace about the duties i've needed to provide as a father, but I've always been very upfront about what I feel my parental duties require. I also try, as much as I can, to steer clear of the more damaging gender roles. Having said that, Kelly and I have fallen into a certain division of labor with the kids, and that she spends more time thinking and planning for the future then I, leading to her feeling, in the article's phrase "psychologically responsible, and that’s a burden... That psychological responsibility adds to the sense of feeling like you’re doing more, even though it may be somewhat invisible." But all in all I think that we've worked out a good arrangement - for now, at least. (Who knows what tomorrow will bring as the kids get older!) And both of us certainly try to support and acknowledge each others efforts. Having said that, I know that needing two incomes does put a stress on things - there's never enough time to cook, to put as much attention into the kids after work as you'd like, and daycare is certainly not an ideal way to raise your children, regardless of the quality of the caregivers - but at the moment we're doing the best we can. And I don't feel unduly stressed at any given moment.

Seven Years

It was seven years ago today that I somehow convinced my lovely wife to give up her single life in favor of my old bones. I came out on top of that deal! For those of you that don't know her, she's a dynamic, powerful, beautiful, and endlessly joyful woman that keeps finding new ways to make me happy. She even gave me two sons! In short, she's an amazing woman, and I'm looking forward to her keeping me laughing and singing until I'm old and gray.