by John L. Ligon, Norbert J. Michel
The Heritage Foundation
February 07, 2014
Backgrounder
The U.S. government became increasingly involved in the housing market in the 1930s, and the perceived success of this involvement has led many people to suggest the private housing market cannot properly function without a government guarantee. The government programs initiated in the early 1930s were nationalized versions of innovations that had long existed in the private market. Furthermore, nationalizing these advances did not eliminate financial risk; it only expanded it and shifted it onto taxpayers. The evidence shows that government guarantees were not a main driver of the postwar housing boom. They did, however, contribute to an unsustainable increase in homeownership in the 2000s. Eliminating the government-sponsored enterprises (GSEs) would minimally impact the overall U.S economy and would most likely improve it. Congress should eliminate the GSEs and ensure nothing remotely similar to these entities is ever created again.



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