Consider everything the government does to support the housing market – and this has all been going on for quite a while:
- Tax deductibility of mortgage interest
- Federal Housing Administration (FHA)
- Government National Mortgage Association (Ginne Mae – GNMA)
- US Department of Housing and Urban Development (HUD)
- Federal National Mortgage Association (Fannie Mae – FNMA)
- Federal Home Loan Mortgage Corporation (Freddie Mac)
I have no idea what the real cost of all these agencies and subsidies is but you can bet it’s a lot of money. Just to give you some idea, the mortgage interest deduction alone costs the government about $100 B per year. FHA is likely to lose $50 B in the coming years. And you know all those mortgage bailouts? The government got back all their money from the banks but what they aren’t going to get back is the money used to bail out Fannie and Freddie. Fannie Mae and Freddie Mac have cost taxpayers $150 B. Then there is the operational cost associated with all this.
The sad thing is that the longer these programs stick around the more dependent the housing market becomes upon them. FHA is said to represent 1/3 of all new mortgages and FNMA and GNMA represent 90% of all new mortgages. OK…how is that possible? But that’s what those articles say. Is there overlap? Suffice it to say that between all those programs it’s a huge percentage.
I realize that this is not the best time for the government to pull the rug out from under the housing market but at some point this over-the-top government support for a single industry just has to end. And you know what? If home prices fall as a result wouldn’t that achieve another government objective – i.e. housing affordability?
Fortunately, in those articles linked to above it sounds like the pendulum is finally starting to swing in the other direction with various politicians calling for dismantling all this nonsense. But already the realtor and homebuilder lobbies are lined up and down the halls of congress trying to maintain their preferential treatment. And you thought the oil lobbyists were bad.