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Against Mortgage Subsidies

Arnold Kling argues from what amounts to libertarian first principles, asking “How does your having a mortgage loan benefit me?” Tyler Cowen piles on with additional considerations. I think these additional considerations are more persuasive, because one’s initial instinct is to kind of shrug at the irrationality of public policy aimed at pushing people onto the “own” side of the “rent/own” equilibrium as just one of those things that doesn’t make sense but also doesn’t really matter.

The trouble, as Tyler notes, is that these policies are connected to some very real problems. Homeownership reduces the mobility of labor and thereby makes it more difficult to recover from recessions — people can’t just go to where the jobs are. Along those same lines, encouraging people to take their savings in the form of a home exposes them to an unnecessary amount of risk. If the factory in your town closes, you’re going to want to draw on your savings. But nobody’s going to want to buy your house in the down where the factory just closed down. These same policies also encourage people to live in bigger houses than they would otherwise buy, which is bad for the environment.

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