Commentary

Is Obama Making Home Ownership an Entitlement?

Ever since the housing bust, restoring stability to the housing market has been a cornerstone of both the Bush and Obama presidential administrations. Most recently, President Obama introduced programs to reduce financing costs for mortgages originating or secured by the Federal Housing Administration and Ginnie Mae. This new initiative, however, is another step toward converting federal housing policy from one focused on housing opportunity to one guaranteeing homeownership as a new middle-class entitlement. I discuss this in more detail in a commentary published over at RealClearMarkets.com (March 15, 2012). I note in part:

“President Obama forcefully argued for “no bailouts, no handouts, and no copouts” in his State of the Union Speech in January, but it’s hard to take those words seriously after examining his housing and homeownership policies over the last three years. In fact, the White House is well on its way to orchestrating a very large middle class bailout as it transitions its federal housing policy from one that strives to create housing opportunities, to one that establishes homeownership as an entitlement.

“This policy shift became much clearer this month when the Obama administration announced directives to lower financing fees at the Federal Housing Administration (FHA) and Veteran’s Administration (VA). The fees will make it even easier for households to secure home mortgages, but will separate loan approval decisions from estimates of borrower risk. Since FHA is already dangerously close to becoming insolvent (it is currently leveraged higher than Lehman Brothers was when it declared bankruptcy), this puts taxpayers at a greater risk of having to offer another bailout down the road.”

For more on the financial crisis, see the work by my colleagues Anthony Randazzo and James Groth on the Reason Foundation’s Housing Policy page.

Samuel R. Staley, Ph.D. is a senior research fellow at Reason Foundation and managing director of the DeVoe L. Moore Center at Florida State University in Tallahassee where he teaches graduate and undergraduate courses in urban planning, regulation, and urban economics. Prior to joining Florida State, Staley was director of urban growth and land-use policy for Reason Foundation where he helped establish its urban policy program in 1997.