Government Favors Debt Slaves Over Renters

We knew it all along. The Wall Street Journal now confirms it. This article by Nick Timiraos recently appeared in the Journal.

During the housing boom, critics increasingly complained that the government devoted too many resources to homeownership and too few to more affordable options, such as renting. Now, during the bust, the government’s commitment to ownership has grown even larger, according to a new report from the Congressional Budget Office.

This year, the government devoted four times the amount of budgetary resources to homeownership as it devoted to rental housing, or around $230 billion in spending and tax breaks for homeowners compared to around $60 billion for renting, the CBO reported. Around two-thirds of Americans are homeowners, according to the Census Bureau, though the rate fell to around 67.5% earlier this year, from a peak of 69.2% in 2004.

The report notes that, until recently, most government support for homeowners came in the form of tax breaks that don’t require government spending but result in the government collecting less in taxes than what might be owed.

But recent efforts to help stabilize a fragile housing market means that government spending now accounts for around half of federal support for housing, including a $75 billion tab for the government’s loan modification programs and taxpayer money to keep Fannie Mae and Freddie Mac in the black. That doesn’t include aid that the government has agreed to give to state housing finance agencies through Fannie and Freddie, or any aid that the Federal Housing Administration may need in the future. FHA officials say the agency won’t need taxpayer money unless housing deteriorates further, but the agency last week said its capital cushion had fallen to very low levels.

Several top officials in President Obama’s administration have a background in supporting multifamily housing, and the administration has indicated that it would do more to support a balanced housing policy than others in the past.

But in an interview last week, Shaun Donovan, the secretary of the Department of Housing and Urban Development, said that the need to stabilize single-family housing remains the top priority, for now, of the federal government when it comes to housing policy.

“Given the fragility of where we are right now in the market, it’s important that we focus on ensuring that we recover to stability before we engage the kind of wide-ranging discussion” that would examine support for owning versus renting, Mr. Donovan said. “We need to have a healthy debate in this country about the balance between homeownership and rental. I think our immediate focus is around the immediate crisis.”

The Obama administration tipped its hand earlier this year about its willingness to challenge sacred cows when it suggested limiting some of the mortgage-interest deduction that some higher-income earners might be able to claim on their tax returns. Mr. Donovan, who previously served as New York City’s housing commissioner and worked before that as an assistant housing secretary in charge of multifamily, said that a top priority would be to ensure that “the federal government doesn’t discourage rental housing.”