Whence Unstable Housing Finance?

Over the weekend, Thomas Sugrue, a highly regarded history professor at Penn, wrote a piece in the Wall Street Journal that implied that we over-subsidize homeownership, and that government programs have produced instability in the housing market. I am not sure either is true.

With respect to home ownership, for those at the margin of owning, net subsidies may flow more to rental than owner housing. Section 8 vouchers support renting, not owning, and the mortgage interest deduction provides no benefit to those who don’t itemize–i.e., low income households. It is well established that Fannie (NYSE:FNM) and Freddie (NYSE:FRE) do no better, and perhaps worse, than the private when it comes to providing first time homebuyer with mortgages. The government does encourage overconsumption of housing for high income households, but that is a different matter.

As for stability, well, as Professor Sugrue correctly points out, it was the housing market of the 1920s, which was financed in the absence of any public sector support, that helped produce the Great Depression. And the preponderance of unstable mortgages originated in this decade were originated by purely private players.

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About Richard K. Green 103 Articles

Affiliation: University of Southern California

Richard K. Green, Ph.D., is the Director of the USC Lusk Center for Real Estate. He holds the Lusk Chair in Real Estate and is Professor in the School of Policy, Planning, and Development and the Marshall School of Business at the University of Southern California.

Prior to joining the USC faculty, Dr. Green spent four years as the Oliver T. Carr, Jr., Chair of Real Estate Finance at The George Washington University School of Business. He was Director of the Center for Washington Area Studies and the Center for Real Estate and Urban Studies at that institution. Dr. Green also taught real estate finance and economics courses for 12 years at the University of Wisconsin-Madison, where he was Wangard Faculty Scholar and Chair of Real Estate and Urban Land Economics. He also has been principal economist and director of financial strategy and policy analysis at Freddie Mac.

His research addresses housing markets, housing policy, tax policy, transportation, mortgage finance and urban growth. He is a member of two academic journal editorial boards, and a reviewer for several others.

His work is published in a number of journals including the American Economic Review, Journal of Economic Perspectives, Journal of Real Estate Finance and Economics, Journal of Urban Economics, Land Economics, Regional Science and Urban Economics, Real Estate Economics, Housing Policy Debate, Journal of Housing Economics, and Urban Studies.

His book with Stephen Malpezzi, A Primer on U.S. Housing Markets and Housing Policy, is used at universities throughout the country. His work has been cited or he has been quoted in the New York Times, The Wall Street Journal, The Washington Post, the Christian Science Monitor, the Los Angeles Times, Newsweek and the Economist, as well as other outlets.

Dr. Green earned his Ph.D. and M.S. in economics from the University of Wisconsin-Madison. He earned his A.B. in economics from Harvard University.

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