Department of Numbers

Wednesday October 22, 2014

New mortgage rules to subsidize housing.

From Matt Yglesias:

The FHFA is going to be less of a tight-ass in a number of regards, essentially upping the level of subsidy that is provided to mortgage lenders. This will make it cheaper for some wannabe home buyers to buy homes, it will increase the value of some existing home owners' houses, and it will generate plenty of profit-seeking opportunities for realtors and banks.


Unfortunately, it's also a proposition that exacerbates and entrenches everything that's wrong with the past generation of housing policy. There are two real ways to make houses more affordable. One is rising wages, and the other is greater abundance of housing supply. Tinkering with credit policy offers a short-term boost, but doesn't do anything to address the underlying issues.

This policy isn't about housing affordability or even (to my mind) access to credit. It's about stimulating the economy by manufacturing more buyers for an expensive durable good (a new house) without having to improve their actual financial standing. More jobs and more income from those jobs is a better course.