The Congressional Budget Office has estimated that in 2009, $230 billion of federal funds, including tax subsidies, was spent to promote homeownership.

The visionary chairman of the FDIC, Sheila Bair, recently delivered a speech in Washington to a housing group urging the federal government to re-examine almost three decades of policies that helped create a 69% homeownership rate, a rate she said may "ultimately prove unsustainable."

We concur with Chairman Bair's contention that federal tax policies may be harmful to homeownership, but we do not concur that the 69% homeownership rate reached in 2006 is inherently unsustainable.

According to Eurostat, close to 75% of families within the European Union are homeowners.

These high rates have occurred despite the absence of massive homeownership subsidies in Europe.

In contrast, despite massive U.S. tax subsidies the U.S. homeownership rate is well below the European rate. According to the Congressional Joint Committee on Taxation, the U.S. government spent $600 billion for mortgage deductions and $200 billion over five years for property tax deductions and capital gains exclusions over the last five years (not to mention over $135 billion recently provided in subsidies to Fannie Mae and Freddie Mac).

Currently, most property tax deductions, capital gains exclusions and mortgage interest deductions disproportionately benefit the very affluent who purchase expensive mansions and help artificially increase the cost of homeownership for all.

We could have a homeownership rate for all Americans, including blacks and Latinos that is equal to the European Union rate and to the present white rate in the U.S. (72%) by reducing the tax subsidies and redirecting them. For example, over a period of 10 years the tax subsidy system could gradually be modified so that the maximum tax credit, adjusted for inflation, is $5,000 annually.

This credit could eventually be limited to those at 120% or below median income in the region and possibly just for first-time homeowners. These policies will ultimately serve the upper middle class as well, since they will eliminate the artificial housing bubble caused by $200 billion a year in direct and indirect federal housing subsidies.

The direct cost of this $5,000 annual tax credit, assuming 15 million families are eligible each year, would be only $75 billion, versus the $230 billion the Congressional Budget Office estimated were our costs in 2009.

This also would provide Fannie and Freddie with the clear purpose of encouraging homeownership among underserved communities. With these modest subsidies, we could eventually reach the levels of homeownership for blacks, Latinos and Southeast Asians that now exist for the white population in the U.S. and the almost 75% within the European Union.

It is impossible to determine just how modest and inadequate the homeownership rate is for blacks and Latinos who have been hit hardest by subprime loans, loss of equity and living in homes where they are deeply underwater.

The New York Federal Reserve's chief economists recently provided one measure of this problem. They stated that the 67.2% official homeownership rate for 2010 is overstated because it does not exclude families deeply underwater who are in reality renters. They suggested a gap of at 5.6% between the listed rate and the real rate, if deeply underwater families were excluded.

The data available shows a disproportion of blacks and Latinos facing foreclosure and it is possible that up to half of blacks and Latinos in many hard-hit areas of our nation are deeply underwater.

During Bair's speech to the Housing Association of Nonprofit Developers, she also emphasized the need for far greater consumer education.

We concur but believe that a significant amount of consumer education must begin not after the purchase of a home, but well before the purchase of a home, and be continual and sustainable to ensure that families are fully prepared.

The debate about the value of homeownership versus renting is needless given the enormous benefits of homeownership that go well beyond the potential increase in equity. Every index of good citizenship, higher educational attainment, personal achievement or higher income heavily favor homeownership. Despite their many weaknesses, there is a need for Freddie Mac and Fannie Mae, though their priorities and directions must be changed to primarily support homeownership among low- and moderate-income families.

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