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Commentary By Nicole Gelinas

Building a Mortgage Meltdown for the Rental Market

Cities Housing

Is the private sector allowed to do anything anymore? For nearly 80 years, Washington has subsidized homeownership — creating massive distortions both in house prices and in what neighborhoods look like. Now the feds will subsidize rental homes as well — expanding government control over even more of the economy.

The American home-buying world doesn’t even resemble a free market. Americans owe $10.3 trillion on mortgages. Fannie Mae and Freddie Mac, the government-guaranteed mortgage giants, hold $5 trillion of that debt. The Federal Reserve holds another $1.8 trillion. Smaller government entities like the Federal Housing Administration and Federal Home Loan Banks round out the government sector.

Government guarantees and direct lending keep mortgage rates low. They also keep home prices high, because the cheaper you can borrow, the more you can pay for a house. They discriminate against cities, where most people rent, not buy.

And they’re not good for the environment. Government subsidies of large single-family homes mean suburban sprawl and long commutes.

We put up with all of this in the spirit of “encouraging” homeownership. The idea — not backed by much evidence worldwide — is that when you own your property, you’ll be a better citizen and help create a more stable community.

This is the American creed, right or wrong, and we’re going to stick to it.

Or not.

Read the entire piece here at the New York Post


Nicole Gelinas is a senior fellow at the Manhattan Institute and contributing editor at City Journal. Follow her on Twitter here.

This piece originally appeared in New York Post