Homeownership Reconsidered

Homeownership is a big part of the American self-image. That accounts for the unusual support the U.S. government provides homeowners. This includes subsidies of about $150 billion a year in federal income-tax deductions for mortgage interest and property taxes. Additionally, the U.S. employs huge programs to keep interest rates low by reducing the risks that mortgage lenders take on. Many countries have higher rates of homeownership; few underwrite it to the same extent.

The U.S. homeownership rate in 2016 stood at 63.5 percent, where it was two decades ago, after reaching a record annual peak of 69.1 percent in 2005. The financial crisis provoked cautious reconsideration of the social benefits of homeownership. If 5 million people could lose their homes through foreclosure (with 6.3 million stuck with homes worth less than their mortgages) in five years, the new thinking goes, maybe a lot of them would have been better off renting. Now fewer people have a choice. The tight U.S. credit market for homebuyers is preventing many renters from taking advantage of the recovery. Prices have also risen almost to where they were at the peak. Before becoming U.S. Treasury secretary, Steven Mnuchin said it was a priority for President Donald Trump to end government control of Fannie Mae and Freddie Mac, which are the largest providers of mortgage funds. Mnuchin hasn't yet said what he wants Fannie and Freddie to become, though in his confirmation hearing he said he wanted to find a way to protect taxpayers while also keeping capital flowing to the mortgage market, which is what Fannie and Freddie largely do. In April 2017, Trump said he would offer a tax-reform package that would keep the federal tax break for interest paid on mortgages but eliminate one for payment of state and local taxes, including property taxes. This would raise the cost of homeownership for some. In one of his first moves as president, Trump reversed a decision by President Barack Obama to cut federal mortgage-insurance premiums to make it easier for first-time and lower-income homebuyers.