A Stitch in Haste

He uses the subprime crisis and the housing (not-quite) crisis as an opportunity to check premises:

But here's a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?

Good question. Much of Krugman's piece is entirely reasonable, straightforward economic analysis (e.g., the fact that renters can relocate, to a better job for example, more easily than a homeowner can). Point conceded.

As for me, I am on record as opposing repeal of the mortgage interest deduction, not so much because I think it was a wise policy decision ab initio (I don't), but because it would be fundamentally unfair to those taxpayers who reasonably relied on that deductibility when making their "rent or buy" (and subsequently their "if buy, then buy what") decisions in the first place. As unfair as the tax code may be, arbitrarily changing the rules after the game has started only makes it more unfair.

More (via EclectEcon):

borrowing to buy a home is like buying stocks on margin

Only if you don't believe in that pesky notion of actually paying off your mortgage and building some bona fide equity in the property over time.

Better to say "borrowing to flip a home is like buying stocks on margin." But that wouldn't exactly buttress Krugman's thesis, which is that home ownership (rather than home speculation) is also risky and costly.

Backpedaling a bit:

Because the I.R.S. lets you deduct mortgage interest from your taxable income but doesn't let you deduct rent, the federal tax system provides an enormous subsidy to owner-occupied housing.

True enough, but which do you think Krugman would prefer: making both deductible, or neither? (I would guess "both" — but with caps to make the tax code yet more progressive.)

Incidentally, the deductibility of mortgage interest, along with certain other deductions — is limited beyond certain income thresholds (i.e., if you're rich enough, then your ability to deduct mortgage interest becomes limited). Which, to liberals, still means that the rich "don't pay their fair share." Somehow.

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Elsewhere on the topic of "homeownership as public policy" —

The subprime mortgage fiasco is sending tremors through Wall Street and has brought the U.S. economy near (if not into) recession. For African Americans and Latinos — the primary victims of the debacle — the mortgage meltdown may widen the considerable gap in wealth that already exists between whites and people of color.
...
"We estimate the total loss of wealth for people of color to be between $164 billion and $213 billion for subprime loans taken during the past eight years. We believe this represents the greatest loss of wealth for people of color in modern U.S. history," the Boston-based organization United for a Fair Economy noted in its report "Foreclosed: State of the Dream 2008."

As I noted in a comment over at To The People:

When banks refused to loan to unqualified minorities to purchase unqualified properties, they were denounced as "redliners."

When banks commenced loaning to unqualified minorities to purchase unqualified properties, they were denounced as "predatory lenders."

For these disingenuous malcontents, it's always the same: You start at "denounce" and then work your way back to fit the particulars.

See also, "Predatory Borrowers."