We, the undersigned economists, write to strongly advise against excessive new regulations or federal interventions as a response to current trends in the housing market. Market corrections have already begun, with financial institutions writing down bad debts and adopting new lending standards to avoid future foreclosures. Legislation to create new underwriting standards will reduce competition and restrict consumer access to credit. Additionally, efforts to bail out or shore up lending institutions create a moral hazard that would slow the adjustments required in the marketplace.

figures. the whole home ownership scam is a moral hazard in the first place. an easy way to cut massive amounts of money from the federal budget. these investments perpetuate detroit-style misinvestments by spreading people out.

The government’s existing real estate programs also create barriers to change in market demand, particularly when it comes to newer mixed-use developments (developers, for instance, seeking an FHA loan for mixed-use properties must limit the share of commercial space to qualify).

Smart Growth America isn’t suggesting that the federal government get out of real estate all together. The criticism isn’t that Uncle Sam intervenes, but that he intervenes ineffectively. “Are we really achieving what we want? And do we even know what we want to achieve?”

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