February 28, 2014 10:06 pm

What if NY’s housing market tanked?

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From Ms Alice Bray.

Sir, I enjoyed reading the different views on owning or renting a home (“To buy, to rent – or take the third way?”, House & Home, February 21) and look forward to future instalments (would love to hear from a contemporary of Lucy Kellaway who first invested in real estate at the same time as her, but perhaps in Detroit instead of London). These stories help us remember that just as there are few one size fits all solutions in life, there are few one size fits all solutions in real estate.

Yet one wouldn’t know that from the position of government – especially the US government. A variety of incentives favour and prop up US homeowners (not to mention the real estate business). Tax laws offer deductions for home mortgage interest and real property taxes. The Sandy storm recovery effort has shown us that government believes so strongly in home ownership that it will continue to support people who buy or build homes in hazardous areas (like flood plains) through grants, loans, buyouts, and subsidised low-cost federal flood insurance. I sometimes wonder what would happen if the real estate market in a high-cost area like New York were to simply tank the way it did in the 1970s. Would homeowners just muddle through it as they did then? Or, since houses are now investment vehicles in addition to homes, and with college educations and retirements on the line, will they, like bankers and Sandy victims before them, expect to be “made whole” by the government?

Alice Bray, New York, NY, US

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