In 1995, The Clinton Administration unleashed a BAD housing policy called The National Homeownership Policy that called on “partners” to streamline mortgage lending standards to increase homeownership rates (allowing ALT-A lending). It worked, but it also drove home prices through the roof. And it exploded nearly destroying the banking system.
Not learning from past housing follies, Presidential hopeful Joe Biden, a veteran of 47 years in the US Senate, is now proposing a truly awful housing policy … again.
Help families buy their first homes and build wealth by creating a new refundable, advanceable tax credit of up to $15,000. Biden’s new First Down Payment Tax Credit will help families offset the costs of homebuying and help millions of families lay down roots for the first time. Building off of a temporary tax credit expanded as part of the Recovery Act, this tax credit will be permanent and advanceable, meaning that homebuyers receive the tax credit when they make the purchase instead of waiting to receive the assistance when they file taxes the following year.
Sounds good? Sounds like free government cheese, but in the form of a home.
But here is one major problem with Biden’s proposal: existing inventory of homes available for sale is near an all-time low and home prices are near an all-time high.
Let’s see. Low available inventory, massive Fed stimulus resulting in historic low interest rates and now a $15,000 tax credit for first-time homebuyers? This will result in a further soaring of home prices. To infinity and beyond.
Oops, they did it again. BAD housing policy with bad outcomes. Biden should stick with HUD Secretary Shaun Donovan’s emphasis on affordable, green rental units.