Thursday, May 31, 2007

The Mortgage Deduction

Ségolène Royal walked straight into a fist. She had accused Sarko of "lying" to the French because he had promised a tax deduction for mortgage interest, but his minister of the budget had announced that the deduction would apply only to mortgages incurred after the election date, May 6, and not to those for which applications were already under way.

She should have known better. Sarko promptly overruled his budget minister and turned the small contretemps into a ringing affirmation: "What I said, I will do." Did she think she was dealing with a political amateur or cheese-paring miser?

The cost to the treasury was hardly uppermost in Sarkozy's mind. A study has shown that 85 to 90 percent of the French who don't own property want to, and the home ownership rate in France is lower than in other European countries (52 percent in France compared with 80 in Spain, for example).

The Socialists opposed this measure on grounds of cost and justice: they claimed that the benefit would go mainly to the better off. But that depends in part on how it is formulated, as a tax credit or a tax deduction. In any case, the demand exists. In pure Keynesian terms, the proposal makes sense: it's likely to stimulate aggregate demand while contributing more to social welfare than, say, digging holes and filling them up again or building a nuclear aircraft carrier.

One wonders if the opposition to the measure doesn't have more to do with its symbolic than with its fiscal and distributive implications. Ownership equals bourgeoisification, and bourgeoisification equals a rightward shift in the electorate. Doesn't Karl Rove make the same calculation: in the current New Yorker (June 4, p. 42) he says "more market-oriented ... equals making you more center-right in your politics." But more home ownership also equals more expenditure on home maintenance, more employment in services and construction, more entry-level jobs for the currently unemployed. The symbolic interpretation may be looking at things the wrong way round.

The idea that a propertied citizen is a conservative citizen has a long pedigree in political theory, and the struggle to assert the rights of citizenship for the unpropertied was long a hallmark of progressive politics. But social democrats can't go on thinking this way.


Anonymous said...

...and as Ségolène Royal has reproached Sarkozy for not reforming the hospital budgets right away, as promised, I bet that will be the next seems that Sarkozy was truly "hurt" as he said himself several times during the campaign, and he wants to prove his sincerity and humanity - more hallmarks of what you call "progressive politics".

gregory brown said...

It seems to me one cannot talk about this policy out of the context of attainable housing more generally. Since the 50s, French housing policy has promoted, in stead of home ownership, attainable housing by allowing muncipalities, regions and various private sector entities, including both profit and non-profit, to build middle-range rent-controlled appartments (HLMs). Contrary to popular belief, these come in a much wider variety than the famous "cites".

This housing policy was accompanied by a focus on public transport, on urban planning that ensured amenities were accessible to concentrated residential areas, and in short on promoting urban density, not as in the US on suburban sprawl through promotion of new home construction, new road construction, etc.

(Not that the RPR didn't find a way to convert this policy into a steady flow of kickbacks from construction contractors, utilities companies, and operators of publicly-subsidized housing.)

In recent years, as rents have gone up substantially especially in the larger cities, regional and city governments -- under a law passed by the socialists -- are required to ensure a certain percentage of new home construction is in the attainable housing category. (Sarkozy, as mayor of Neuilly and as president of the regional council of Hauts de Seine, blatantly violated this law.)

So that the issue is far more than about homeownership; its about whether or not the larger approach to land-use planing in France will continue to focus on urban density or will move towards the US and UK model which has allowed extensive development of new housing and promoted road construction and with it higher energy consumption, greater carbon emissions, and a general removal from engagement with the sort of public and civic institutions -- from public transport to public parks to sociologically hererogeneous sociability at the local cafe or the local creche or ecole (which of course will no longer be tied to locality anyway, for much the same reason I would suspect).

In short, I agree that there is a politically significant consequence to this issue and I agree that its something that social democrats need to address, but I don't think that the issue is home ownership per se, not at all; I think its housing density, access to amenities, civic interaction and not inconsequentially, general disposition towards the larger society.

I'll close with another reference to French politics in the 90s -- back when Tapie was the star of the center-left, and campaigning in Marseille, he went door to door in a neigbhorhood that had seen a spike in FN voting. He noticed that the construction of a new highway overpass had cut this neighborhood off from pedestrian access to the nearby shopping area, and when he went in and spoke to older, white, formerly left-leaning voters and they voiced outrage at immigrants overwhelming the public sector, insecurity, etc, he found that the city had not responded to their concerns, and they concluded the city government was only concerned with Arab immigrants, not their neighborhood. They felt they had no one to turn to, and they were afraid of being left out.

Thats the way you make a right-wing voter, and Karl Rove as well as Nicolas Sarkozy know it -- make them afraid, make them believe the public services have been taken away from them to be given to "others," and they'll oppose you even if you promise to improve their public services. Give them no interaction with "others" and build a sense that solidarity or fraternity has been abandoned, and they'll vote against you simply because they're afraid.

Unknown said...

Good points, Gregory. Nevertheless, the issue of land use planning is separable from the question of ownership incentives. One can aspire to own an apartment in a dense city neighborhood as well as a single-family home in a suburb or edge city. French preferences in regard to urban vs. suburban or exurban living are certainly changing, as preferences elsewhere are changing. Making ownership possible could shift the political dynamic in useful ways. Allègre accused Hollande of seeking "frontal opposition" rather than seeking a more subtle strategy. In this instance it might make sense to take his advice.