Housing Reset

The housing market has had more ups and downs in the past six years than an angsty teenager, yet while the path to recovery appears hopeful, the debate has intensified over the government’s role in creating recovery policies.

“Can’t we just do policy once and let it settle in, let it percolate and do some work?” George Mason professor of finance Anthony Sanders asked. “The more we’ve interfered, the market does not heal.”

Sanders was one of six panelists at Thursday’s American Action Forum (AAF) to discuss the current state of the housing recovery. The first panel, composed of executive vice president Joseph Tracy and Fannie Mae mortgage director Richard Koss, analyzed market data and expressed hope for market stabilization in the near future.

Sanders, joined by AAF President Douglas Holtz-Eakin, former chief economist Jared Bernstein, and Progressive Policy Institute member Jason Gold, took part in the second panel discussion and touched on the implications of various market reform policies.  The George Mason professor expressed his concern that most government policy initiatives, such as the REO (Real Estate Owned)-to- rental program, are not the most efficient ways of dealing with the housing problem.

“I’m not against [REO-to-rental sales]. I think it’s great that Fannie and Freddie want to dispose of their foreclosure assets,” said Sanders.  “Butwhy are we doing the same thing over and over, constraining it to be rental? Why is the government picking the ownership form? Why don’t we put them out them and let the consumers pick: buy or lend? Why do we perpetuate the government dictation of ownership form?”

An original supporter of big intervention, Sanders said that he eventually strayed from this philosophy because he felt that interventionist programs did not do enough to bring about immediate and effective change.  This reformation has not made him completely hostile towards government, however, and he believes that it has a role, albeit a smaller one, in stabilizing the housing market.

“Getting rid of all government involvement is a pipe dream; it’s not going to be there. What we have to do is move toward a sort of risk sharing model where you have the homeowner (borrower), the lender, and then the government as a kind of backstop of last resort sitting down there.”

Richard Thompson is an intern at the American Journalism Center, a training program run by Accuracy in Media and Accuracy in Academia.

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