>What? Of course Fannie and Freddie guarantee the MBS they issue
Yes, they guarantee the MBS they issue, which is on a minority of all loans. The fact remains they do NOT guarantee most mortgages. They guarantee conforming loans, which are around 40% of all mortgage loans. And of all conforming loans, they only end up buying ~60% of them. So they at most guarantee around 24% of all mortgages, which is certainly not most mortgages.
>Alice, who ....
Ignoring the other side where landlords write stuff off and renters get tax breaks. On the ownership side, you're also missing lots of tax changes.
So not identical.
Also, the govt has an interest in property ownership as they have solid evidence that people owning property in a region make them less more stable. So there's very good reason to provide tax incentives for policy reasons. It's been shown that tax incentives, dollar for dollar, are pretty good incentives compared to most other forms of government spending to affect policy.
>The IRS already taxes tons of benefits based on the imputed income, even if no cash changes hand.
And they have tons the other way too - all because they desire to affect outcomes. So that they can do it is not really strong evidence to if they should do it, unless you address all the reasons they desire to do it.
>Not if the supply of housing is completely inelastic.
Which it is not [1]. "most areas that are widely regarded as supply-inelastic are, in fact, severely land-constrained by their topography" which is not most of the country.
[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1193422