Big news out of Washington: Fannie Mae and Freddie Mac – which many (including me) think were at the heart of the financial collapse, and currently have some stake in the vast majority of post-crash mortgages – may be getting wound down soon. This NYT is reporting that the Obama administration may be releasing three plans at the end of the week, and the preferred (!) one is to shut down the two lenders entirely.
These lines also stood out to me:
Representative Scott Garrett, the New Jersey Republican who is chairman of the House subcommittee that deals with housing finance, on Monday told a mortgage conference in Florida that the government should leave the mortgage business.
“I believe that, if there is to be any government assistance to homeownership, it should be limited to first-time homebuyers or rental housing,” Mr. Garrett said.
Note that “rental housing” isn’t “homeownership” at all.
Personally I think it’s a good idea to get the government out of encouraging homeownership entirely, on the grounds that homeowners are more likely to be in the perverse position of wanting the cost of housing – a basic expense for everyone – to go up, resulting in pervasive government interventions like anti-density zoning and blowing up the housing bubble. But even beyond this indirect sprawl promotion, they have inherent anti-density biases like their refusal to fund small mixed use projects.
Hmm. In principle I agree, but in practice aren’t Fannie and Freddie basically responsible for the existence of the 30-year mortgage? This could change the housing landscape very, very dramatically.
That’s very encouraging. Just a few years ago it was only the most radical free-market Republicans that wanted to close FNMA and FHLMC. Official Washington laughed at them. Now it’s in the mainstream conversation.
Of course, the risks and crisis we were all warned about had to actually smash the economy to make it happen.
“Home Ownership” is the same thing as “rental housing” if the occupant has no equity. Make them bring cash to the closing.
Few people realize the role that the cult of homeownership and its government enablers had in the housing collapse.
Well said, Stephen. In addition to its pro-sprawl component, I feel like programs like this are another way our culture tries to confuse people into thinking they can afford more than they can to live excessively beyond their means. Consumer spending = good. Consumer credit = good. The housing bubble helped produce some of the largest and least efficient homes in the country that we are now saddled with. Having more difficulty in obtaining a mortgage could be one way to help diminish the More-is-More mentality in suburban real estate.
While in principle this all sounds nice, in reality, as Alai wrote below, Fannie/Freddie were responsible for the 30-yr mortgage that allowed middle class families to own their homes, and defining what was the “American Dream”. Blaming home ownership on sprawl is like placing the symptom before the disease (blaming the messenger). Or more likely, confusing association for cause and effect.
While there are economic realities that no longer allow for sprawl and car dependency to continue, I don’t see how this relates to home ownership. Sprawl is largely a design and zoning issue created and sold by developers and the government from the 50’s on. That is, families bought these homes because they were sold this version of American life and because this is what was built for them to buy.
Appropriate density can be achieved in the suburbs by converting single-family units to 2-level and 3-level housing units, each with its own family and with individual entrances, guarding privacy. Street redesign and public transportation availability can also complete the process of conversion into a walkable, sustainable community. Zoning laws can be rewritten to encourage walkability, proximity to everyday amenities, and mixed use. None of the above has anything to do with ownership type. Multi-family units can be sold to each family individually the same way the single-family unit was/is sold.
Of course, it is more convenient for banks to give loans to a few wealthy landlords than to individual families. But I personally don’t look forward to the time when the average American family is dependent on earning their livelihood from an unstable global economy, and on wealthy landlords who can throw them out anytime they can’t pay the rent. All of it sounds like it will continue to increase the gap between wealthy owners and the rest.