Lydia DePillis provides a primer on the housing speech Obama gave yesterday. Yglesias analyzes the speech:
[T]he administration isn’t pushing for any major rethink of housing policy in the wake of the crisis. The idea that the government should encourage people to make leveraged investments in owner-occupied housing and that these investments should be the cornerstone of middle-class savings is alive and well with us. Concurrently with that conceptual framework came a policy framework for the future of Fannie Mae and Freddie Mac that hews closely to a bill that’s been introduced in the Senate by Bob Corker and Mark Warner. As befits a bipartisan bill this is a very moderate piece of legislation. It’s a small-c conservative bill that tries to address some of the problems with the old Fannie/Freddie system but tries to achieve essentially the same goal—have the government intervene in housing finance to promote 30-year fixed rate mortgages for owner occupied housing as the normative paradigm in American life, while gesturing at a handful of ancillary social goals.
Yglesias later asks why the government should encourage 30-year fixed rate mortgages, which are unheard of in many other countries:
If you cross the border into Canada it’s not like people are living in yurts. It works fine. But since homebuyers have to carry a bit more interest rate risk, they seem to purchase slightly smaller houses. … [I]t’s not a coincidence that Americans live in the biggest houses in the world. But is getting people to live in marginally larger houses than they otherwise would an important policy goal? I don’t really see why.
A Bloomberg editorial urges Obama to “avoid the siren song of homeownership for everyone”:
The best way to prevent mortgage borrowers from defaulting is to make them put a large amount of equity — at least 20 percent — into their homes upfront. It’s roughly analogous to the sensible requirement that banks use less leverage.
Minimum down payments and strict debt-service ratios have the added benefit of mitigating destabilizing swings in house prices. Economists have shown that, during the recent housing bubble, prices rose as down payments fell. This empowered buyers who had been shut out of the market, which pushed up prices and temporarily increased the homeownership rate — until it came crashing down.
Barro likewise wishes that Obama would stop lauding homeownership:
Americans want to be middle class, and if we keep telling them that homeownership is the “most tangible cornerstone” of middle classness, and the best available evidence of whether you’ve worked hard and been responsible, they’re going to keep wanting to buy houses.
Why not instead emphasize that renting—that is, not taking all the money you have in the world and putting it into a highly leveraged real estate investment—is a perfectly valid life choice, even for people leading prosperous, middle-class lives?
Along the same lines, Douglas Rice points out that more “than a third of American households are renters, but only less than a fourth of federal spending on housing assistance goes to renter households.”
The Dish 