Redistributing wealth to the Rich?

Many people are placing the concept of homeownership under attack. There is more and more debate whether we should limit government assistance to homeowners. The administration just came out with their Reforming America’s Housing Finance Market: A Report to Congress. The report acknowledges the advantages of homeownership:

“…which has helped millions of middle class families build wealth and achieve the American Dream.”

The paper also talks about curtailing a century of government assistance for American homeownership (ex. the elimination of Fannie Mae and Freddie Mac):

“But our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.

Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters.”

At the same time it speaks of increasing its support for rental housing:

“The Administration believes that we must continue to take the necessary steps to ensure that Americans have access to an adequate range of affordable housing options. This does not mean all Americans should become homeowners … we should ensure that there are a range of affordable options for the 100 million Americans who rent, whether they do so by choice or necessity.”

In a press release announcing the administration’s points, Housing and Urban Development Secretary Shaun Donovan is quoted:

“We must continue to take the necessary steps to ensure that Americans have access to quality housing they can afford.  This involves rebalancing our housing priorities to support a range of affordable options, from promoting much-needed financing for quality, affordable rental homes to ensuring the availability of safe, and sustainable mortgage products for current and future homeowners.”

This is not just a matter of semantics. In his prepared testimony before the House Committee on Financial Services, Treasury Secretary Timothy Geithner said:

Our goal is not for every American to become a homeowner.”

The administration is taking a strong stance against government’s role in supporting homeownership. This would be a major change in policy. Assistance for homeownership has been important to America for a century. Many young people were able to attend college because their parents were willing and able to refinance their home to pay the tuition. Many American business owners got their start-up capital by taking an equity loan on their house. Renters won’t be able to ask their landlords to help pay their child’s college tuition. Renters can’t expect landlords to finance the development of the new product they discovered.

If we start to create a land with greater numbers of renters, those able to still purchase property will get wealthier collecting the rents from those who can no longer attain the American Dream. The administration calls for more support for these developers:

“The Administration will explore ways to provide greater support for rental housing. One option would be to do so by expanding FHA’s capacity to support lending to the multifamily market.”

This will lead to the redistribution of wealth in this country with the owners of the rental units building family wealth with profits generated by this real estate.

Diana Olick in an article for CNBC Realty Check quotes Democrat Melvin Watt of North Carolina:

“…there’s not going to be any home ownership at the low income level…Rich people will have home ownership and rich people will make money on apartment rentals, but we’ll be a renter nation for low-income people.”

We have to make sure this is the America we want.

Courtesy of KCM Blog

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