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Hitting the brake with your foot on the gas

October 15, 2009

Tax Analysts reports ($link) that some congresscritters are trying to attach an extension of the $8,000 homebuyer credit to an unemployment insurance bill. The credit is slated to die November 30.

As a matter of economics, the credit is of course insane. That matters not when congresscritters seek votes and the all-important lobbyist money. Still, it would be nice if this effort to prop up the price of homes in the face of a glut would face up to simultaneous government efforts to push home prices down.

Off the top of my head, some tax and government policies that prop up home values:

- The homebuyer credit
- The mortgate interest deduction
- Easy money from the Federal Home Loan Bank, Fannie Mae, Freddie Mac, etc.

Government programs that work to push down home prices, either by subsidies or increasing supply:

- The low-income housing credit, which subsidies residential space.
- Section 8 subsidies
- Rehab credits for old buildings

When you have one foot on the brake and the other on the gas, you don't get anywhere, and it's bad for the car.