The Corner

The Cost of Promoting Home Ownership

USA Today has a story about the costs and benefits of programs meant to promote home ownership.

The government spent $230 billion last year to promote homeownership through tax breaks and spending programs. The biggest chunk — $80 billion — went toward the mortgage interest deduction, according to the Congressional Budget Office.

Michael Stegman, housing policy specialist at the MacArthur Foundation, said the mortgage tax break goes primarily to the wealthiest households. A study this year by the Tax Policy Center of the Brookings Institution and the Urban Institute noted that the mortgage deduction was worth just $91 a year to families earning less than $40,000 — and $5,459 a year to those making more than $250,000.

These programs are expensive and it’s not clear what their benefits are — except the mortgage-interest tax deduction, which is very important in my book. Don’t get me wrong: I don’t think that policies promoting home ownership make any sense. For one thing, it’s not like the alternative to owning a house is to live in the street. Plus, it’s not clear that we aren’t past the point where more owned homes in a neighborhood would make it any safer. And I am no fan of tax credits anyway, as I would rather move toward a consumption-based tax system, or at the very least a tax system where the tax base is wide, it doesn’t look like Swiss cheese, and the rates are low.

That being said, I am surprised that the article only focuses on the mortgage-interest deduction. The piece claims that it’s the biggest chunk of the money spent, but doesn’t say anything about other $170 billion spent last year to promote home ownership. I suspect they focused on this program because it’s the one they can present as a handout to wealthy taxpayers (as if wasteful, ineffective handouts to less-wealthy taxpayers were okay).

Of course, the best — by which I mean most annoying — part of the article is this quote from economist Mark Zandi:

The government, seeking to overhaul the housing market after the collapse of mortgage giants Fannie Mae and Freddie Mac, is unlikely to touch the politically sacrosanct deduction anytime soon.

But analysts suggested that the government’s debt — $8.8 trillion and growing — meant that housing subsidies might one day face the knife. “We can’t afford it,” Zandi said.

When I read things like that, I understand why we are in such big financial troubles. According to Zandi, we can afford a $3.8 trillion budget that funds private interests, corporate welfare (roughly $90 billion a year), programs like education that should be paid for by the states, some $400 billion in grants to the states, bloated entitlements, parks, golf courses, museums, opera houses, NPR radio programs, and loan guarantees to all sorts of industries and people who can’t convince a bank that they’re worth lending money to — but we can’t afford to have taxpayers keep some $80 billion of their hard-earned income?

Just once, I’d like the first solution out of these experts’ months to be “We have a big spending problem and so we can’t afford our government.”


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