For Housing, Government Has Been the Problem, Not the Solution

What statement(s) related to housing—policy, or otherwise—would you want to hear in the presidential debates?

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Rather than appeal to their base or pander to special interests, it would be a rare delight to hear the presidential candidates state the obvious: that America’s housing policies, particularly as they relate to mortgage finance, have been a costly failure. The candidates could do one better and state that this failure has not been from the usual Washington spin of “lack of resources” but from a massive misallocation of resources, directed by various levels of government, that have made America immensely poorer. Only through an honest admission of this failure can either candidate hope to move forward toward helping repair our housing and mortgage markets.

Presidents for decades, if not since the beginning of the Republic, have made the obligatory praise of homeownership.  What the next President needs to do is also mention that housing tenure is fundamentally a personal choice, and not one that should be driven by Washington.  Widespread private property ownership is certainly one of the characteristics that distinguish America from much of the rest of the World.  But renters are not second class citizens.  They are not a public health concern waiting for a cure.  And of course most of us homeowners are also renters at some point in our lives.

The presidential debate should also focus on the fundamental question of what makes America wealthier.  Is it using fiscal and monetary policies to create asset bubbles, such as in the housing market; or is it investing in human capital, so as to increase labor productivity, ultimately increasing real wages and incomes, which would also eventually increase consumption demand for housing.  

It would also be of interest for the candidates to state what they believe the true nature of housing is, as it relates to families.  Is it an investment or is it consumption, a component of one’s basic needs.  Do the candidates understand that policies to drive up the price of housing force potential homebuyers to stretch even further, potentially eroding their already meager saving?  It would be helpful to hear the candidates state what they believe the objective of federal housing policy should be:  to increase its investment value, which ultimately drives up housing prices, or to see housing prices and costs, over time decline, freeing up family wealth to be spent elsewhere, such as on education or health care.

At a most basic level, I would like to hear the candidates speak to what is beneficial to America’s families and economy, and not a targeted attempt to please various constituencies, housing or otherwise.

Mark A. Calabria is Director of Financial Regulation Studies at the Cato Institute.

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