Janneke Ratcliffe, Senior Fellow at American Progress and Mark Calabria, Director of Financial Regulation Studies at the Cato Institute, closed out the 2013 Governor’s Housing Conference with a spirited discussion on the role of the federal government in housing, housing finance reform, and the changing trends in housing.
During the closing plenary, “Straight Talk on Housing: Real Solutions, Opportunities, and Challenges,” Ratcliffe referenced Housing Virginia’s HOUSING 2020 presentation, “What is Shaping the Future of Housing in Virginia”. This policy trends project demonstrates that demographics, economic conditions, housing finance, and “green” housing all contribute to the major shifts being observed in today’s housing market. With these trends in play, presenters showcased varied perspectives on the state of affordable housing but both urged attendees to move away from the idea of a “right” number of homeowners versus renters in setting housing goals for the future.
Mr. Calabria provided a free market perspective proposing that it is important to work on setting policies that allow individuals and families to decide what is best for them when it comes to housing choices. Mr. Calabria suggested that many current policies embedded in the tax code and the government role in the mortgage security market skew homeowners towards taking on more debt. Rather, Mr. Calabria advocated strongly for a changes in the tax code towards low, simple, flat rates with few, if any, deductions that he believed would both improve economic growth and housing affordability. He suggested to entirely eliminate the mortgage interest deduction (MID) and the deduction for local property taxes. In addition Mr. Calabria believed that Fannie Mae and Freddie Mac should be abolished, along with other policies that transfer the risk of mortgage default from the lender to the taxpayer.
Mrs. Ratcliffe offered a counter point, advocating for a continued government role in backing mortgage securities as the housing market continues to recover and arguing that Fannie Mae and Freddie Mac are critical to preserving the 30 year fixed rate mortgage for low and moderate income homeowners. She also restated that there is a critical need for a reformed multifamily finance system to meet the demand for affordable rental and that the system must provide access to safe and affordable mortgages for all creditworthy borrowers.