Big Houses, Big Green Problem

Home construction pumps a lot of money into the economy. But do we want to return to economic growth based on the conspicuous consumption of big houses? Episcogranny goes on a holiday home tour and finds one monster house troubling:

Today, though, there was one home that almost troubled me, a three year old home custom built for a fairly young family. The home was gorgeous, don't get me wrong, but it was so large it seemed, well, gratuitous. Perhaps 5000 square feet, probably larger, it had a complete outdoor kitchen/entertaining area, tennis court and pool also. After we left, one of my friends (a physician's wife) asked what I had been wondering--"What do people do to make enough money to afford that?" Not only the house, but to fund the lifestyle that goes with it; very nice furniture and lots of it, help to clean it all, an expectation to entertain, utilities, etc ["Can a House Be Too Big?" Episcogranny, 2009.11.08].

Don't let that thinking get into too many consumers' heads. The last thing Uncle Sam and a whole lot of home-builders want is for more people to decide that they can get by with 1233 square feet, or that they would rather live in an old neighborhood close to downtown instead of snapping their own patch of new urban sprawl. Thinking small and getting along with the houses we have could save us all a lot of time and money... but it would also mean a flat economy for years to come.

But America loves big houses, and so does the tax code. Alas, the new extension of the $8000 home buyers credit pushes Americans ever further toward lifestyles with a bigger carbon footprint:

But the real problem with the credit is that it continues the long-standing federal push toward far-flung McMansions and away from dense, apartment living. In the 1950s, the Interstate Highway System encouraged Americans to flee older urban areas. Nathaniel Baum-Snow of Brown University found that each “new highway passing through a central city reduces its population by about 18 percent.’’ The home mortgage interest deduction further encouraged suburbanization, because rental units are disproportionately in cities while owner-occupied homes are disproportionately distant from city centers.

This pro-suburb, pro-big home policy push helps keep America’s households consuming plenty of energy, both inside the home and in the car. On average, as density doubles, household gasoline consumption falls by about 110 gallons per year. When a household moves from living 2 miles away from a city center to 10 miles away, gasoline consumption increases by more than 100 gallons annually. Smart environmentalism should push against tax policies that encourage more suburban sprawl [Edward L. Glaeser, professor of economics, Harvard University, "With Tax Break, a Big Carbon Footprint," Boston Globe, 2009.11.05].

Funny: why don't I hear Republicans complaining about the home buyers tax credit as social engineering? Of course, some economists argue that the tax credit isn't really to blame, that most of the folks buying houses would still be buying (and buying big) even without the tax credit. The root problem is our own urge to consume. I like to think that part of the cause of this recession, or at least its persistence, is folks realizing they just don't need to commit themselves to big houses, big cars, and big energy consumption. GDP growth and Wall Street be darned, I hope that realization sticks.

By the way, the home buyers tax credit is another bailout that Senator John Thune isn't inclined to stop: the Senate passed this extension 98–0.