The interventionists are trying to defend against the argument (well, more than argument; fact is the word) that federal meddling in the housing market with Fannie Mae and Freddie Mac created the disastrous bubble and therefore we ought to have the federal government completely get out of this field. They’re claiming that government intervention was necessary back in the New Deal era because mortgage finance was too expensive, thus limiting home ownership to the rich.
Cato’s Mark Calabria annihilates that assertion in this Cato@Liberty post. He shows that prior to the New Deal, home ownership was hardly something just for “the rich” since more than 45 percent of Americans owned their homes. Moreover, that was at a time when the population was on average much younger than it is today. Younger people are more likely to rent than own.
I’d add this point. Capital is scarce. There’s only so much money available for people and businesses to borrow. If the cost is high for mortgages, that’s because it’s in high demand for other possible uses. Federal meddling can’t make more capital available, but only alter the market’s allocation. That appears to help some people (home buyers) but only by hurting others, such as people who might have gotten better jobs if businesses had been able to expand, but didn’t.
