Homeownership is an important engine of economic growth and provides a path to prosperity for low- and middle-income families. Policies that simply aim to make homeownership more accessible, though, overlook essential safeguards for responsible homeownership. The most recent housing crisis provides ample evidence of this flawed approach, and is the source of enduring pessimism about the housing market. Policymakers should reform housing policy to reduce barriers to responsible homeownership and upward mobility.
First, the mortgage-interest deduction should be fixed. The current mortgage-interest deduction disproportionately benefits higher-income families. Current policy also artificially increases the price of homes, which pushes homeownership further out of reach for some families. Substituting a flat tax credit for the current mortgage-interest deduction could fix some of these problems.
Second, reforming how working Americans make down payments for homes. Reforming the Federal Housing Administration, specifically the mortgage-insurance guarantee program, by implementing a special savings vehicle would allow low-income households to build a meaningful amount to make a down payment on a home.
Third, to address the affordability crisis in many American communities, municipal zoning budgets should require local policymakers to make tradeoffs between the costs and benefits of both zoning regulations and new development.
Finally, families living in manufactured housing need greater protection. In many states, they do not enjoy the same rights as owners of site-built housing. Providing greater protections for these homeowners will increase the housing options available to families.