Heritage Report Blames Extensive Federal Mortgage Policies for Rising Home Prices
The Heritage Foundation argues that heavy government involvement in mortgages has lifted housing costs without boosting homeownership.
In a new Heritage Foundation report, economics director John Gibbs claims that extensive federal intervention in the mortgage market has made housing less affordable rather than expanding ownership. He points to a $10 trillion federal experiment that inflates demand while construction lags, citing Federal Reserve Bank of St. Louis data that the U.S. homeownership rate has stayed near 62-65 percent since the early 1960s. The report highlights that the government backs roughly 70-80 percent of new mortgages through the FHA, Fannie Mae and Freddie Mac, a share far higher than in most European nations and Canada.
Gibbs argues this safety net encourages lenders to extend more credit, raising buyers’ willingness to pay and driving up prices. The analysis suggests the policy benefits existing owners and widens the affordability gap for newcomers. To curb the trend, the report proposes capping the value of loans the government will purchase and shifting toward shorter-term mortgages that accelerate wealth accumulation for homeowners.
Why it matters
Understanding how federal mortgage policies affect housing prices helps voters assess reforms that could improve affordability.
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