Op-ed pick: Why Americans choose a big house over a safe retirement

Michael Milken argues in a column in the Wall Street Journal that the U.S. government is encouraging Americans to invest in a big house rather than their future.

Uniquely among nations, the U.S. gives mortgage borrowers a trifecta of benefits: extensive tax advantages, no recourse against the borrowers’ nonresidential assets if they walk away, and typically no protection for the lender if the borrower prepays the loan to get a lower rate.

He goes on to explain how Americans have misused these advantages.

In the housing-boom decade before 2007, many buyers decided that the largest-possible house (with an equally large mortgage) was a better idea than a retirement fund or their children’s education.

By contrast, according to CLSA Asia-Pacific Markets, middle-class households in 11 Asian nations spend an average 15% of income on supplemental education for their children—nearly as much as the 16% spent on housing and transportation combined. Americans spend only 2% on supplemental education and 50% on housing and transportation. For American home buyers taking on big loans, there was no margin for error if they lost their job or the roof leaked.

You can read his entire (concise) critique of housing policy here.

Here’s an infographic from the BBC illustrating housing sizes, measured in square meters, in different countries.


  • Hugh Shakeshaft

    For those of us in the non-metric world, a 100m2 home is equivalent to 1,076ft2.

  • Jamie Wellik

    You always need to be careful when comparing statistics across international borders.

    The BBC information on house sizes is interesting, but it isn’t relevant: house prices compared internationally would be a much better indicator of how much people spend on houses. And just a quick look at overseas real estate prices will find the SAME amount money buys you much more house in the United States, so the conclusion that American’s spend disproportionately on their housing is false. (But the fact that our homes are MUCH larger than almost all the population-dense rest of the world remains.)

    The Mliken article also mixed in supplemental education expenses: with a public education system that provides $11-12,000 on average for K-12 students (among the highest worldwide), the need for U.S. households to pay for supplemental education, I would suspect, is much less than in Asia.

    It will take a while for the U.S. housing market to return to “normal” after the bubble of government backed, overleveraged mortgage financing that crashed in 2008.