I mean, don’t get me wrong, home ownership is awesome for some – even for many – but I don’t think we talk enough about whether it’s such an unimpeachable good thing that it deserves quite so many subsidies.
We traditionally have subsidized home ownership in myriad ways.
A quasi-government guaranty (followed by a $800 Billion assumption of liabilities in 2008) of mortgage guarantors Fannie Mae and Freddie Mac.
Federal FHA/VA loan programs for first-time home buyers and veterans to encourage home-purchasing with as little as a 3% down payment.
Mortgage-interest tax deduction ($200 Billion in foregone tax revenue).
And yet, the benefits and effects of such subsidies are questionable
We do not have an appreciably higher percentage of home-owners in the US vs. other countries that lack such subsidies
3% to 10% down-payment mortgages default more frequently (50% more frequently) than 20% down-payment mortgages, serving both home-buyer and bank poorly.
Americans tend to react to the mortgage interest subsidy by buying bigger homes, rather than saving the money.
The mortgage interest tax deduction is regressive, in the sense that it primarily benefits folks with incomes higher than $100,000, and a household with a larger home and mortgage benefits more than a household with a more modest home and mortgage.
Houses, which often constitute a high portion of household net worth, are a very illiquid investment.
Housing, as a sector, tends to add volatility to the economic cycle – making booms more manic and busts more depressive.
Surowiecki summarizes nicely: Given the extraordinary subsidies aimed at the sector – compared to other worthy areas of subsidy – is it all worth it?