Last month, I wrote:
But after 50 years of meddling in the market, reducing the support for housing is going to be exceptionally complex and chaotic. And the chaos isn’t going to be evenly distributed. It’s going to be a matter of long, complex laws whose outcomes are carefully and secretly influenced. Groups who aren’t photogenic or sympathetic will lose out. (I’m thinking “DINKs” in gentrified urban areas.) Groups who aren’t already well-organized with good lobbyists will lose out. (See previous parenthetical.) Those who believed that the government housing subsidy would go on forever will lose. (“Unmeddling Housing,” January )
Now, the New York Times reports on the administration’s plan, calling it “audacious:”
The Obama administration’s much-anticipated report on redesigning the government’s role in housing finance, published Friday, is not solely a proposal to dissolve the unpopular finance companies Fannie Mae and Freddie Mac. It is also a more audacious call for the federal government to cut back its broadly popular, long-running campaign to help Americans own homes. The three ideas that the report outlines for replacing Fannie and Freddie all would raise the cost of mortgage loans and push homeownership beyond the reach of some families. (“Administration Calls for Cutting Aid to Home Buyers,” New York Times)
Audacious would be to put the mortgage interest deductions on the table. This is a move in the right direction, but it’s not going to let people express their real preferences in a market. It will continue to distort the market, reducing people’s flexibility to move, and encouraging them to make their major asset a non-liquid one which is likely to decrease in value as the US population ages.