The U.S. housing market continues to stumble. The median home price is now at its lowest level since April 2002 and the percentage of Americans who believe that homeownership is a safe investment continues to decline. Meanwhile, policy is largely at a standstill. Treasury Secretary Tim Geithner continues to urge a go-slow approach on the phase-out of government supported mortgages through Fannie Mae and Freddie Mac. And all House Republicans can come up with is trying to kill the Obama Administration’s efforts to stem foreclosures through the Home Affordable Mortgage Program (HAMP) and other related programs.
Economist Robert I. Lerman has proposed a cost-effective way to reinvigorate the stalled housing market: The federal government should provide a million vouchers that allow low-income renters to become homeowners and allow some of the two million holders of rental vouchers to convert them into homeownership vouchers.
The plan is outlined in a memo entitled “Homeownership Vouchers: A Plan to Reinvigorate the Economy While Helping Low-Income Families.” It’s written by .
The basic idea is that these vouchers would create a new pool of potential owners to buy up depressed housing stock. Since the federal government already provides rental vouchers, it may as well turn those rental vouchers into ownership vouchers. And actually, doing so would save the government money, since in almost all housing markets mortgage payments would be lower than the market rent.
The plan has other benefits as well. As Lerman writes:
A rise in home prices would reduce the number of homeowners who find their homes worth far less than their mortgages. It would discourage these “underwater” homeowners from walking away from their mortgages; allow more families to refinance at low interest rates, thereby reducing the rate of foreclosures; and, ultimately, it would generate new construction jobs and spur associated job growth. Increased home values also can play an indirect role in job creation, since more small business owners would again be able to use their home as collateral for loans to maintain and expand their business.
In short, “Homeownership Vouchers” is a smart way to stimulate the housing market, expand the dream of homeownership to low-income families, and give the economy some added juice, all while potentially saving the government money.
