America is a nation of majority rule, and one outcome of that is that the majority typically looks out for its economic interests. Take the uneven treatment of property taxes. About 70 percent of all households own their homes; the rest live in rental units. But, according to a nationwide study by Jack Goodman, properties rented as apartments (as opposed to being owned by the resident) on average are taxed at higher effective property tax rates--about 25 percent higher in 2001, and the gap has grown since then. But fiscally favoring homeowners over renters may prove to be shortsighted in a world of escalating energy costs and a changing income distribution.

The tilt toward resident-owned property starts with federal income taxes. Among other benefits, property tax and interest on home mortgages are deductible and capital gains on home sales are not taxed. Tax preferences for homeownership amounted to $140 billion in forgone federal taxes for fiscal year 2005. The federal tax expenditure is reinforced by similar deductions in state income taxes, and the great bulk of this tax relief goes to the highest-income taxpayers.

Another factor is a trend in residential development. For the past 20 years, a large portion (an estimated 50 percent) of new housing was built in developments that have community or homeowner associations. These developments, often typified as the "gated community," cover large tracts of land but seldom contain multi-family rental units. The associations, supported by dues, provide many services that normally would be supplied by local governments in traditional neighborhoods and are effective in keeping local property taxes low. How big an effect this has been nationally is open to question, but the move to "private government" is surely a factor in holding down tax rates for the homeowners.

Many localities have little multi-family housing and, in fact, discourage it. Opposition is based in part on economics. Even though apartments house smaller families, those families are typically less well off. Apartment properties tend to generate less tax revenues per unit to offset local government costs. Thus, an apartment-dwelling family may have half as many kids in school, but if the apartment's taxable value is only one-third that of a single-family house, the apartment will be seen as a fiscal loser. Widespread use of fiscal impact analysis by local governments as a basis for land-use decisions has been a major factor in curbing the growth of multi-family housing.

But the financial favoring of single-family dwellings, as opposed to fostering denser housing development, has increasing drawbacks.

Compact and efficient living and working patterns create a sense of community and reduce reliance on the automobile. This view of development has been out of step with achieving the American dream of a suburban lifestyle. But the past couple of years of rising energy prices, and the growing realization that global competition for oil creates risks and tensions, are dimming the allure of SUVs, lawn mowers and long commutes. Accordingly, the attraction of denser development should increase.

Another factor is that there are likely to be proportionally fewer persons who can afford single-family dwellings in the future, especially as interest rates continue to climb. While recent U.S. national income has been growing and employment levels have stayed high, the real incomes of Americans in the lower three-fifths of income distribution have stagnated. Over time, less affluent households will need affordable housing opportunities that are closer to jobs and increased mobility to go where jobs can be found. That may not mean the equivalent of "worker housing," as found in European cities. But it appears that denser, less expensive and transit- friendly development will increasingly be needed for a growing share of the population. Property tax regimes and land-use schemes that do not consider--and that effectively hinder--meeting those needs may be obsolete policy, avoiding new realities and favoring a lifestyle possible for fewer of our citizens.