Fannie Mae and Freddie Mac weren’t the key villains in the financial crisis that some conservatives have made them out to be, but they have been involved in a fair amount of housing policy villainy over the years. One slice of that is that any program designed to subsidize homeownership is likely to promote suburban over urban patterns of residential development. But a particular issue with our framework has been that the residential portions of mixed-use structures were generally ineligible for Federal Housing Administration backing.
Until last week, that is, when the rule was changed.
The need to have rules like this, of course, is one reason to think it might be better for the federal government to get out of the targeted homeownership subsidy business in the first place. But as long as we’re going to be in that business, it’s much better for the government not to be exclusively promoting one particular type of neighborhood. Multifamily structures with housing over retail are part of almost any classic city all around the world, and it was bizarre to have a decades-long federal policy of specifically steering people away from building new ones.