Because taxpayers subsidize it by accepting looser underwriting standards.
You shift the demand curve, but not the supply curve, so now more money is chasing the same asset, so buyers pay more and sellers benefit. Same as student loans.
You also increase money supply when taxpayers “eat” the loss for defaulted loans, lowering the purchasing price of the currency in general.
Finally, the decision makers can overshoot or undershoot how much to move the demand curves, resulting in a misallocation of society’s resources. Again, see student loans and even home loans.
Market rates are very different. There are a host of middle men making massive profits on loans. This is why there is an industry around it.
If you offer non-profit loans at break even cost, this is much lower than a company with higher overhead and a profit margin
I do not see how anyone could know this, since it requires predicting economic conditions 30 years in the future. The government is guessing just as much as a non taxpayer funded lender would, except the government does not have to worry about running out of cash.
1) The government doesnt need to make a profit 2) The government has access to capital at a lower rate.
Put together, it should be clear that they could buy or back a mortgage at a rate below breakeven in the private market.
What are the tax incentives (in the US)?
On a federal level, all I can think of is mortgage interest tax deduction, but that was greatly neutered in 2017 TCJA, and less than 10% of Americans can benefit from it. And that is a tax incentive to borrow money to buy a home, not a tax incentive for home owners.
Only other one is 1031 exchange, but that is rarely needed for typical homeowners and is available to all real estate owners.
On a state/local level, I guess there are some locales with property tax adjustments, but other than that, I cannot come up with any.
... but most places don't have the stones to tax imputed rent [1]: Belgium, Iceland, Luxembourg, the Netherlands, Slovenia, Spain and Switzerland being exceptions.
I have one condition though. If I should pay tax on imputed rent, then Google and Facebook should pay taxes everytime someone clicks on a sponsored link that takes them to their own property. Every time I bring up this idea that companies must pay taxes on funny money they spend within the organization, people yell at me. Microsoft should pay taxes Windows licenses that they use internally. No, you can't give yourself a "discount" and say well we charged ourselves zero dollars so we owe no taxes. Pay taxes on the market rate. Either make it free of cost for everyone or pay taxes when you use things internally.
Why? Taxes should be the minimum required to provide for the core services of government. Big governments are dangerous. Also taxes have deadweight loss.
Could they just say we "licensed/sold" it at a loss, and therefore take a tax deduction?
If that didn’t exist there wouldn’t be 30 year mortgages. How that distorts the real estate market is a big open question but my guess is it drives up real estate prices.
Of course that has been a continuous policy decision for almost 100 years so it’s nothing new.