Two analysts I follow have diverging opinions about residential housing finance.
PIMCO's Scott Simon, who predicted the housing collapse back in 2006, thinks the government backstops in housing should operate more like a utility (a government-sanctioned monopoly).:
Guarantees degrade underwriting standards over time. Historically, a primary justification for guarantees has been to increase the availability of finance to politically important groups with higher credit risks. It is inevitable that this will continue to happen, requiring the government to lower underwriting standards, and resulting in more risky mortgages.
Government guarantees always underprice risk. All federal guarantees underprice risk in order to provide a subsidy for lending. That is their purpose. And taxpayers will be exposed to losses in the future, as those risks materialize.
Guarantees inflate housing prices by distorting the allocation of capital investments. The artificially increased capital flow will make mortgages cheaper, boosting demand for housing and pushing up prices, ultimately creating another bubble.
This is the most dangerous unintended consequence of government subsidies. Two examples, unrelated to housing, are health care and education. Since the inception of Medicare, health care costs have risen by 2.5 to 3 times the inflation rate, to the point where the only solution to a government-engineered industry was a complete government takeover of the industry (which willl distort costs even more). In education, the expansion of Pell Grants and student loan guarantees created so much "monopoly money", that education costs rose at twice the annual inflation rate. The solution to that government engineering was a complete takeover of the education finance industry.
Maybe Randazzo is wrong and Simon is correct. Perhaps housing IS too important an industry to trust to the free market. In that case, housing can be rationed by the needs of the population rather than economic forces. Certain people are probably more important than others to the State. Their value to the State's agenda could be rewarded with subsidies while others, who don't contribute to the State's agenda, can just pay more.
We're in the middle of a vortex right now. I think that lower housing prices are the most egalitarian affordable housing program available because it sufficiently matches supply and demand but, then again, I'm not a member of a favored political class. I still cling to the notion that competition is the best way to organize society.