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There's a more benign explanation for US housing policy to promote ownership too.  The US experience of the Great Depression and earlier recessions were marked by the stirring tragedy of mass homelessness.  People by the millions, with families and children, were pushed out on the streets without homes when they could not pay the ever higher rents.  (Which had to go higher to justify the ever higher costs of building new residences for a growing population.)

The policy solution was to give people more control over their housing through ownership entitlement to their homes instead of through rental contract entitlement, but the problem was that no bank in their right mind would lend more than 5 years out to working homebuyers on modest wages and salaries, and home building prices required mortgages of 20 to 30 years before middle class families could expect to be able to buy and own their own homes.  Thus the federal government created long term mortgages through establishment of secondary market for them by copying the already successful federal farm credit system model of GSEs (government supported enterprises) of a generation earlier, which was itself an adaptation of the 19th century German Landesbank model. Fannie Mae and Freddie Mac were born and to this day remain the only stable market which provides for home mortgages. Despite all the problems such as the recent crisis, mass homelessness has never returned to the pre-1930's levels again.  

by santiago on Fri Aug 27th, 2010 at 06:14:24 PM EST
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