Personally I don’t believe in government intervention because when they intervene, people will figure out ways to obviate government action.
Mortgage interest deduction was supposed to make houses more affordable. But the market automatically priced in the subsidy into the price of homes.
When the Federal government took away the non-mortgage interest deduction, people simply took out home equity loans to make their car and appliance purchases. The end result was the same to borrowers in terms of taxes. But it inflated homes prices because mortage interest deduction became more valuable so more people bought houses for the tax breaks. Plus consumers lost out because loans that were previously unsecured, became secured by the homes they could barely afford (and as we are now finding out, cannot afford).
As data shows, home equity is the lowest in many decades as people borrowed on their homes.
We are entering interesting time with record debts and little equity and savings.
