Brian made a comment in a post below which agreed with the idea that the government’s promotion of “affordable housing” (especially, subprime loans) was an important factor in the housing boom, housing bust and the current financial meltdown.

So, how much success did promoting affordable housing and subprime loans have on increasing the rate of home ownership in the United States?

Source: Wikipedia

Let’s say the “natural” rate of home ownership in the United States is about 64%.

By lowering the minimum standards for getting a mortgage the United States was able to raise the home ownership rate 5 percentage points to 69% in 2004. (That will likely be a record for the United States that will never be broken.)

Unfortunately, that extra money chasing homes caused home prices to skyrocket which ended up making American housing extremely UNaffordable, far less affordable than before the changes to the affordable housing programs in the 1990’s.

Since the home ownership peak in 2004, the minimum standards needed to get a mortgage have been raised substantially and home ownership is no doubt down substantially.

A temporary 5 percentage point gain in the rate of housing ownership in the United States is certainly not worth undermining the U.S. financial system.

The way the United States housing market is set up, we would probably need to have large government housing subsidies to ever get the rate of home ownership permanently above the mid-60 percent range.