Government Should Not Promote Home Ownership

Government should not have policies that "promote home ownership". The very idea implies interference in the free market. Yaron Brook wrote a very good piece, Predatory Legislating, for Forbes in December, attacking the ridiculous "Mortgage Reform and Anti-Predatory Lending Act of 2007", legislation passed in the House in response to the "subprime mortgage crisis". The entire commentary is worth reading, but here are the two paragraphs on the fundamental point that is so often missed in the press when folks are talking about how the subprime mess arose:

The government does not need to crack down on lenders. It does need to take responsibility for its role in promoting irresponsible lending and borrowing practices through its myriad interventionist programs to "promote homeownership." The very concept of the government having such a goal means that it facilitates borrowing and lending that would not occur on the free market--i.e., a market in which people are held fully responsible for their decisions.

One example of this is the Community Reinvestment Act, which literally forces banks to lend to people with high credit risk. Another is the Federal Reserve's policy of creating artificially low interest rates, which encouraged financial institutions to lend out more money for mortgages than they otherwise would have--and which helped artificially bid up housing prices and fed the fervor that buying a home at any price is a can't-miss investment that all Americans should make. The government's promotion of home-buying was a recipe for irresponsibility--and that's exactly what it produced.