Obama Administration Rethinks Home Ownership

It started with the popular desire to dissolve what some consider to be the cause of the 2008 melt-down - Freddie Mac and Fannie Mae, and has spread to rethinking the tax write-off of home ownership - a clearly unpopular notion for many.

The administration published a report on Feb. 11 that analyzed the option of dissolving Fannie and Freddie and how to replace their function. The report noted doing such would most certainly "raise the cost of mortgage loans and push homeownership beyond the reach of some families." The administration doesn't appear to be deterred by that possibility though.

"...administration officials said they had concluded the country could no longer afford to sustain its commitment to minting homeowners. Better to help some people rent."

The government "must help to ensure that all Americans have access to quality housing that they can afford," the report said. "This does not mean our goal is for all Americans to be homeowners."

From History News Network: Origins of Freddie Mac and Fannie Mae?: "Fannie Mae was created in 1938 as part of Franklin Delano Roosevelt's New Deal. The collapse of the national housing market in the wake of the Great Depression discouraged private lenders from investing in home loans. Fannie Mae was established in order to provide local banks with federal money to finance home mortgages in an attempt to raise levels of home ownership and the availability of affordable housing...."

Full Story: Administration Calls for Cutting Aid to Home Buyers



It's Time to End Taxpayer Subsidies to Home Owners

Our national priorities are badly misplaced by continuing to subsidize home ownership and high home prices with the tax deductions we home owners enjoy for mortgage interest payments. All that this deduction has done is help inflate the cost of housing -- it is factored into our decisions of what we can afford to buy.

This tax deduction amounts to a federal subsidy to home owners well over $100 billion annually while those actually in need of housing assistance get subsidies totaling well under $10 billion a year.

I am not suggesting eliminating the deduction for property tax because it seems resolutely unfair to make taxpayers pay income tax on what they have to pay in property taxes (usually the largest single tax anybody has to pay, except for the wealthiest households).

Now that housing prices have returned to rational levels from the unsustainable speculative pricing of the past two decades, it's time to gradually eliminate this subsidy to the most financially well-off among us.

But it can't be completely eliminated in one fell swoop. Let's reduce the deduction by 5 percent a year over 20 years or 10 percent a year over 10 years. That will allow for the change to be factored into home prices and nobody gets hurt. The average mortgage in this nation has a life of around 12 years. This is the fair approach rather than instantly eliminating the deduction.

Daniel Lauber, AICP
AICP President 2003-2005, 1992-1994
APA President 1985-1986

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