Do We Need Government Programs To Have A Healthy Housing Market?

As someone who almost always specialized in government backed mortgage programs as both a real estate agent and as a loan officer, I've always felt a huge contradiction between that and my libertarian political views.

Although I've used those government programs to put many people into homes, I've always known - based on the economics I've spent so much time studying - that government interference in the economy is NEVER the best option in the long term. (Read Henry Hazlitt's "Economics In One Lesson" if you still base your opinions on what you learned in high school, college and the mass media)

There are always unintended consequences from government efforts to prop up or influence the economy. Consequences that are almost always bad and difficult to correct.

Few industries are as intricately tied in with government interference as the real and mortgage industries. With everything from tax incentives for homeowners to outright government backing of the secondary mortgage market, government in the United States has been deeply entwined with the real estate and mortgage/banking industries for almost a century. People today have no experience whatsoever with a housing market free of government interference and thus no idea what life would be like without it.

Interestingly, a great example of what life might be like without government propping up the market can be found in our neighbor to the North, Canada. U.S. citizens most often think of a socialist economy when we think of Canada. Yet surprisingly Canada's housing market is relatively free from government interference and Canada didn't have anywhere near the housing implosion experienced in the United States.

In spite of the fact that the government in Canada isn't constantly propping up the housing market, Canada has a slightly higher rate of home ownership than we have in the U.S.!! (68 percent vs. 66 percent). Yet Canada has no mortgage interest deduction, no quasi-public implicitly government backed mortgage corporations like Fannie Mae, Freddie Mac and Ginnie Mae, no Community Re-investment Act, and if you walk away from a home a bank has full recourse to come after your other assets and your present and future salary.

For more information on this, I encourage everyone to read "Housing Crisis? Look to Canada for Answers" by Jim Powell of The Cato Institute.

I really think there is a way out of this mess that can leave us with a more stable housing market free of the booms and busts we've had so often since the government decided to micromanage the real estate market.

Carl Pruitt

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