This post was originally published by the Ripon Society.
A 1996 Wall Street Journal article once described us as the “odd couple” of federal housing policy. While hailing from different backgrounds and holding divergent political views, we remain united — some 17 years later — in our belief that ensuring broad access to decent and affordable housing is a goal our country must never abandon. This sentiment has guided the work of the Bipartisan Policy Center’s Housing Commission and is a key principle of the commission’s report, Housing America’s Future: New Directions for National Policy. We are privileged to serve as co-chairs of the commission, along with former Senators George Mitchell and Mel Martinez.
Meeting our nation’s diverse housing needs requires a strong and stable system of housing finance. That’s why a major focus of the commission’s work has been, and will continue to be, housing finance reform. While hard to believe, we are approaching the fifth anniversary of the government’s decision to place Fannie Mae and Freddie Mac under conservatorship. Yet, today, our nation’s policymakers are still pondering the fate of the two mortgage giants and there is no consensus on what the future of our nation’s $11 trillion housing finance system should look like.
Today, Uncle Sam dominates the housing market in a way never seen before in our nation’s history, with the government supporting nearly 83 percent of single-family mortgages. Private capital flows into the housing finance system but assumes little of the credit risk associated with mortgage lending, which is ultimately borne by the American taxpayer through government insurance and guarantees.
The commission believes that a housing finance system so overwhelmingly dominated by the government is unsustainable over the long term. We therefore recommend the elimination of Fannie Mae and Freddie Mac over a multiyear transition period and the use of various “policy dials” during this transition to encourage the introduction of more risk-bearing private capital into the system. Reducing the government footprint and encouraging more private participation will protect taxpayers while providing for a greater diversity of funding sources.
Former Senator Kit Bond and former Housing and Urban Development Secretary Henry Cisneros serve as a co-chairs of BPC’s Housing Commission.