The Coming Rental Housing Crisis

In a 6/26/10 editorial, Stop dreaming: Home ownership is not for everyone, the Wall Street-bashing NJ Star-Ledger acknowledged that government policies brought about the financial crisis. They wrote:

"Owning your own home has been part of the American Dream for decades. But what if home ownership isn’t for everyone?

"Sheila Bair, president of the FDIC, had the guts to raise exactly that question recently before a group of nonprofit housing developers. Gutsy, and long overdue. As we’ve witnessed over the past few years, helping people buy homes they could not afford did them no favor and helped bring on our financial crisis."

I left the following comments:

zemack June 26, 2010 at 11:42AM
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So, the Star-Ledger wants us to “stop dreaming”. OK, then. Are American liberals ready to let go of their utopian dream of central economic planning?

The federal government’s affordable housing crusade began under FDR with the creation of agencies such as Fannie Mae, which killed off the originate-and-hold bank mortgage lending model in favor of originate-and-sell. Over the decades, through regulations, tax policies, government guarantees, political pressure, Federal Reserve monetary policies, and so on, layers upon layers of government interference was built up in the housing and mortgage markets. The purpose, as the Editors point out, was to expand homeownership.

The financial crisis we’re still not out of was the culmination of these government policies. I’m glad to see that acknowledged here. Never mind the irresponsible lenders and borrowers. They are culpable, but they are minor “moving parts” and are just convenient scapegoats. The private players represent merely the consequential face of this crisis. The fundamental cause was yet another failure of central economic planning. Without the government's housing and monetary policies, this crisis simply could not have happened.

I never cease to be astounded by how often the Star-ledger correctly identifies a problem, and then misses the obvious conclusion. The lessons of 150 years of central planning’s failures continues to multiply. So, do we get a call for an end to the government market interventions that the Editors finally admit was the cause of our problems? No, we get vastly expanded government control under the cover of “financial regulatory reform”. And do we get a call for an end to the homeownership crusade? No, trhe market distortions remain, and we get a call to make the same policy mistakes in the rental housing market!

To fix the problems the government itself caused, we reward the government with more power. The entire financial system right down to the consumer ATM transaction will be forced into a bureaucratic straightjacket under a powerful new central planning maze. The financial industry will be private in name only, as is typical under fascism. Then our brand new affordable rental housing crusade will establish the groundwork for yet another crisis that will not be allowed to go to waste. Then we will see de facto nationalization turn into outright nationalization, the final step and ultimate goal of the socialists.

The Editors dream on, and the nightmare approaches.