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Housing Finance: Past, Present, Future


  • Boleslav Gulko


This paper examines the evolution of the housing finance industry in the United States during this century. Beginning in the 1930's, the industry became the main tool of the federal housing policy that encourages the new construction of single-family homes. We argue that the incentives provided to home owners-e.g., cheap mortgage capital and the mortgage interest deduction-may serve the policy goals only in the short term, and the short term ended thirty years ago. In the long term, the incentives are not only ineffective but also harmful. In particular, they lead to economic distortions and dislocations such as the bifurcation of the central cities and suburbs, the boom-and-bust cycles in real estate, the demise of the S&L system and others. The paper recommends to privatize the FNMA and FHLMC and to gradually phase out the mortgage interest deduction.

Suggested Citation

  • Boleslav Gulko, 1998. "Housing Finance: Past, Present, Future," Yale School of Management Working Papers ysm60, Yale School of Management.
  • Handle: RePEc:ysm:somwrk:ysm60

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand


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