Although the current candidates for President have been relatively quiet about the issue of housing, Bernie Sanders has finally released a major plan calling for universal housing:
“Homeownership has always been the American Dream. What’s more, housing is a fundamental human right. Yet, our housing market is completely broken. It benefits Wall Street while screwing Main Street. Giant multinational banks are making billions of dollars hawking predatory mortgages, and our government is in cahoots with them through banks like Fannie Mae and Freddie Mac. It’s time that we return the American Dream to the American people.”
He calls his plan, titled the New American Dream, an important part of his overall campaign to combat income inequality:
“The primary source of income and wealth inequality in this country is from homeownership. But far too many poor families are shut out of the opportunity to improve their lives because of big banks working hand in glove with the government. We have to change that if we’re going to combat inequality.”
The full press release is here.
Sanders’ plan has several components:
- Eliminate all current housing and housing finance programs, and consolidate them all under HUD as the Universal Housing program. The GSE’s will be merged into the Federal Reserve, and be converted into an actual lender, rather than simply guaranteeing loans.
- Similar to Obamacare, all households will be required to purchase a primary residence if they do not already own one. Low income households (qualification guidelines are identical to Obamacare) will qualify for government loans written directly by FHA with no down payment requirements; all such FHA loans must be used only for houses whose prices are below the median value for the area.
- Subsidized households will have their monthly mortgage payments which will be no more than 25% of household income deducted directly from their paychecks, as Social Security is currently done. Any gap between the mortgage amount and the 25% household income limit will be paid by HUD.
- In order to finance the program, the mortgage interest deduction will be eliminated, and there will be a tax assessed on all unsubsidized mortgages. Additionally, the plan calls for surcharges and taxes on most financial activities, from hedge fund profits to stock trades.
- HUD will work with the real estate industry to create the equivalent of healthcare.gov, where families can go search for housing in their local area, see if they qualify for assistance, and begin the process of purchasing the home.
- HUD will also work with the homebuilding industry to identify areas where lower income housing stock is particularly low, and provide interest-free financing for such building projects to increase the stock of low and middle income housing.
- Failure to purchase a home will result in a tax penalty, again, similar to Obamacare.
The actual plan itself is over 80 pages long in PDF form, and I’m in the process of reviewing it. You can read it for yourself here.
This smells like desperation on the part of Bernie Sanders, who is making inroads into Hillary Clinton’s lead, but hasn’t closed the deal. It’s one thing to propose free college for everyone, which is itself unaffordable, but to propose homeownership for everyone is insane. On the other hand, we do have some precedent in Obamacare which made it clear that the government can require individuals to purchase something and then tax/penalize them if they do not purchase it.
I can’t wait to see what NAR has to say about this. More once I’m done reading the full proposal.