Riots and Revolutions

Does homeownership reduce strife and civil disobedience?

Palm Coast, FL – August 19, 2011 – REALTORS® build communities and hence are naturally one of the strongest protectors of communities and property rights. With this in mind, it was very disconcerting to see—even for a few days—hooligans smashing properties and controlling the streets of London and elsewhere in England.

One can turn to the so-called experts and find just about any reason for the cause of the riots. Some will say broken homes and cuts in social spending cuts contributed. Others will point to a soft justice system and the slow police response for fear of police brutality lawsuits. A host of other arguments will be laid out without being able to definitively find the underlying causes. There are just too many variables and too few cases of this kind to empirically test and validate a hypothesis. (It is like trying to find an algebra solution containing 3 equations and 4 variables). In other words, no experts will be proven right or wrong however reasoned or wacky the arguments may be. Debates and shouting among academics and between political parties, therefore, could be unending.

What we do know, however, are the many well-established societal benefits of sustainable homeownership (though not bubble homeownership). Research studies have consistently shown that the children of homeowners do better in school and have lower juvenile delinquency rates than children of renting households, even after controlling for socioeconomic variables. It could be due to home-owning families feeling rooted and invested in the community and having a long-term outlook to their life. By contrast some renters and their children may have only the most short-term time horizon. Recent psychology studies have shown how long-term planners, via delayed gratification, come out further ahead in nearly every life outcome measure compared to short-term planners who are only on the lookout for the here and now.

Egypt also provides a dramatic reminder about the importance of real estate ownership to society. Egyptians did not have free elections and this could well be the dominant cause for the revolution.  The groundswell of rebel support may have been aided by that fact that many have only a fuzzily-defined ownership of their property. According to Hernando de Soto, a Peruvian economist, about 92 percent of Egyptians do not have a clear title to their residences. One should not be surprised that a small spark could tip a country into a full blown revolution in such a case. The bloody Russian Revolution and the nasty Chinese Civil War of the last century are also good reminders of what could happen in a society where a massive number of people are tenants and non-owners. There were no doubt many genuine grievances for the uprisings but one should not dismiss the landowning aspect out of hand. The massive number of non-owners was easily persuaded of the need to remove the landowning class to improve their life and country. One key post-revolution activity in both Russia and China was over land reform.

By those standards, America is fortunate not to have experienced major social disruptions of such a magnitude. A supermajority of the population owning land and homes may be part of the reason. It is well worth noting two quotes from the most impactful Presidents of the last century – one Democrat, one Republican. Franklin Delano Roosevelt said that “a nation of homeowners is unconquerable” in the midst of the Second World War. Ronald Reagan at a NAR convention assured the REALTOR® audience by saying “we will preserve the part of the American Dream which the mortgage interest deduction symbolizes.” Both Presidents evidently understood the immense yet intangible social benefits of home ownership.

In a slight digression, while recently reading history, I could not help but naturally pull for Joan of Arc and France.   When defeating the English army many centuries ago Joan always asked, unlike her English counterparts, if the food offered was obtained honorably (not stolen from peasants). Similarly, I cheered, a few centuries later in history, this time for the British and against the French when the Duke of Wellington put an end to Napoleon’s conquering of Europe at Waterloo.  It’s easier to empathize with the Duke of Wellington after learning about Napoleon’s tolerance for and encouragement of his soldiers to steal food from local villages, while Wellington ordered the immediate execution of his own soldiers if they took things not their own. There is a feel-good aspect to stories like this where people through patience and hard work win in the end.

Again, it is very difficult to prove empirically (i.e. in a way that meets statistical testing requirements) the genuine causes of riots or of social stability, including the true value of home-ownership in society. But good people will respond and do what they believe to be right. Just as the Germans banned drunken British hooligans at soccer games in 1980s, the recent rioters and looters need to understand that society will not stand for it. If new elections and new legislations are needed to prevent rioting and punish rioters, that will be done. That’s because an overwhelming number of people inherently understand the difference between right and wrong and will vote as such.

Source: National Association of Realtors®