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End all housing loans?

Debate Information

All housing loans in the United States are insured by the federal government, therefore they are all subsidies. Even if your home loan was from a private bank, it was still federally insured by the US government. It works like this (you may want to get comfy for this).

In 1929 the stock market crashed, and many believe the pivotal fulcrum was because of a housing market bubble that artificially raised the value of houses. In the 1920s, anybody with a face could get a loan, even for a house. That was a bad economic practice which ended in disaster. After that, every single privately stopped making home loans because not only are home loans considered a risky loan, they are considered a bad loan because it ties up all that money only for the bank to get a small percent in the end. 

The FDR administration considered homeownership to be of huge importance. Since no private bank wanted to be in the home loan market, the federal government introduced two federal programs aimed at starting the housing market again. The FNMA (Fannie Mae) and the FHLMC (Freddie Mac) were government loans for private banks. Without a massive pool of funds, it was virtually impossible for a private bank to make money off of a home loan. The two government programs were designed to give the banks the money for the home loan up front. That policy would make it so the money from the home loans were not tied up for many years, and would dually make it possible for banks to now have the overhead to make more home loans. 

But there was a catch in this policy. It has never been totally clear who exactly it was who would be on the hook if a loan was not able to be paid back. The federal government insures all the loans, but the individual banks are supposed to pay the government back even if the loans are not paid.   

 This has become a harmful economic policy, but also they are not only harmful economically, they are a harmful environmental policy, and a racist policy. Here are some of the harmful side effects of this policy of federally funded home loans.

1. It perpetuates urban squal.

2. It is known to use a policy known as redlining (not giving loans to non-white people).

3. It artificially raises the value of houses, which raises the cost of houses.

4. It is the only reason housing market bubbles occur.

5. It raises the national debt.

Home loans are nothing more than subsidies for the affluent. Stock market crashes can, and have occurred because of housing market bubbles. No other country on earth offer home loan subsidies because it's such a terrible policy. I propose we end this outdated policy and bring some semblance of calmness to the economy.        



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