Experts: U.S. can no longer afford housing tax breaks

[Hilarious Clinton 452]

WASHINGTON Federal housing policy offers the wealthiest Americans billions in tax breaks without delivering much bang for the buck in increased homeownership, critics told government policymakers Tuesday."We aren't getting our money's worth," Mark Zandi, chief economist of Moody's Analytics, said at a government conference on reforming housing policy.

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.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.

The U.S. homeownership rate (66.9%) is about the same as Canada's and is lower than Australia, Ireland, Spain and Britain's even though "these countries provide far less government support for homeownership," Michael Lea of San Diego State University wrote this year.

For now, the government is neck-deep in housing. Private money has fled the market in the wake of a housing-market meltdown. Fannie, Freddie and other government agencies have filled the gap, guaranteeing more than 90% of new mortgages.

"Without government guarantees, mortgage rates would be hundreds of basis points higher, resulting in a moribund housing market," said William Gross, managing director of bond fund Pimco. "We don't want government in the housing market, but it's a necessity."

Treasury Secretary Timothy Geithner told the conference "there's no clear consensus yet" on reforming the way mortgages are financed. He promised "fundamental change" in the way Fannie and Freddie do business: They used an implicit government guarantee to borrow cheap money and make big bets in the housing market. When their gamble went bad, taxpayers picked up the tab.

http://www.usatoday....sing18_ST_N.htm

Edited August 19, 2010 by John Galt

[mawilson 2,133]

Relax, they are not going to touch that one with a ten foot pole, or risk creating another housing crisis.

[Hilarious Clinton 452]

Relax, they are not going to touch that one with a ten foot pole, or risk creating another housing crisis.

good point

[I AM NOT THAT GUY 5,715]

Go ahead. My mortgage is paid off.

:dance: :dance: