Two Views of Housing Policy
Glenn Hubbard and Chris Mayer
Recent news articles suggest that the Treasury Department is considering a plan to offer a 4.5% mortgage for home buyers for a period of time. Let's hope it does. It would help arrest the decline in house prices that is at the base of the ongoing financial crisis and recession.Ed Glaeser and Joe Gyourko
Encouraging everyone to make highly leveraged bets on housing was patently a mistake. Housing policies of the past also erred by aiming at amorphous, often contradictory objectives, including higher homeownership rates, more affordable housing units and, most recently, higher prices. Those policies then mistakenly applied the same policy medicine to every housing market, whether housing was abundant and inexpensive or scarce and unaffordable. The problems of old-style housing policy are well illustrated by the unwise proposal being considered to provide subsidized loans to home buyers at 4.5 percent interest.