Obama Considering Making It Harder to Buy a Home

President Obama could make buying a home more difficultUnbeknown to most consumers, there is a seismic shift coming in the American real estate industry. The Obama Administration is contemplating fundamental changes to the national housing policy.

As yet, this is something for various think tanks, government officials, lobbyists, and academics to argue over, but it will come to affect virtually every single American citizen in one way or another. I wrote about this on my blog for the industry insider folks, but wanted to see what you, the consumer, knows or thinks about the issue.
According to the Washington Post, the Obama administration will walk away from the longstanding policy of encouraging homeownership towards encouraging affordable rentals combined with "sustainable homeownership" by winding down "some government backing for home loans, but increase the focus on affordable rentals."

The Treasury Department has asked for and received public comments (which, in our contemporary politics, means lobbyist comments) on seven broad questions about housing policy.
Changes of this magnitude will impact everyone. Current homeowners may find that they can no longer deduct mortgage interest; future homebuyers might find mortgages harder to get; home sellers will naturally see a drop in price as demand dries up; renters might find it easier to rent with government subsidies, but landlords may face new regulations. Or none of that may happen. No one knows as yet what that policy will ultimately look like, but it does appear that we may be headed for a new era in American history of homeownership.

The key phrases, I think, are "sustainable homeownership" and "balanced policy".

"Sustainable homeownership" suggests that the administration believes that the past policies of encouraging homeownership through channels like Fannie Mae and Freddie Mac have resulted in people who couldn't afford to own homes being saddled with enormous debt they couldn't repay. The massive foreclosure crisis, which is still ongoing, wiped out the net worth of millions of families. No matter what the final form, if this reform comes to pass, there is little doubt that the effect of such a policy would be fewer buyers, fewer homeowners, and lower home prices across the board. That is the whole point of a "sustainable" homeownership policy after all: Only allow those who can comfortably afford a home to buy one.

The handmaiden to the "sustainable homeownership" policy, of course, is the so-called "balanced housing policy." Plainly put, it means that instead of encouraging lower-income families to buy homes, the United States would encourage them to rent for longer, until they get to the financial position to be able to buy a house "sustainably". Such a policy could mean anything from rent subsidies to low-income families all the way to a national rent control regime, and just about everything in between.

But the effect will be to lower the price of rentals and provide a level of permanence to renting such that it can be a reasonable substitute for buying a home for the low-income family. For example, I have trouble imagining a rental policy that doesn't include some level of regulation over when and by how much a landlord can raise rents, and when and under what circumstances the landlord can evict a tenant. The whole point of a policy that encourages rentals, after all, is to create affordable rental housing that the renter can depend on.

Policy wonks and government officials and lobbyists will spend months debating various aspects and details of the policy. But for the average consumer-citizen, the questions might be simpler, if broader in scope.

Is homeownership still the American Dream? Or in the aftermath of the Great Recession caused in large part by the credit crisis triggered by the housing market, is it more of an American Would-Be-Nice, if not an outright American Nightmare? What is your attitude towards owning a home vs. renting longterm?

Should the government even have a housing policy at all that is separate and apart from anti-poverty policy? Put another way, does the middle class and the wealthy need government help at all? (For what it's worth, the mortgage interest deduction tends to benefit the well-to-do who itemize their deductions.) Or should "housing policy" be just another element of our national social welfare programs, such as food stamps, Social Security, Medicare, and unemployment insurance?

Between landlords and tenants, whose interests are more important for the government to protect?

Why should taxpayers, by way of the government, be involved in housing finance? What societal benefits accrue to all of us by financing housing -- whether rentals or homeownership?

I suspect you have your own questions as well as thoughts and answers on such a large issue as national housing policy. I'd be interested to see them.

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