Wisdom: Hazlitt on Housing

Here is a perfect description of our housing crisis. The only thing missing is a reference to “liar loans.” The author should be forgiven for the absence of this minor detail because the quote is over sixty years old. Given the character and integrity of Henry Hazlitt, it was probably impossible for him to foresee a moral and ethical deterioration in our government and country sufficient to allow/encourage these types of loans.

Government-guaranteed home mortgages, especially when a negligible down payment or no down payment whatever is required, inevitably mean more bad loans than otherwise. They force the general taxpayer to subsidize the bad risks and to defray the losses. They encourage people to “buy” houses that they cannot really afford. They tend eventually to bring about an oversupply of houses as compared with other things. They temporarily overstimulate building, raise the cost of building for everybody (including the buyers of the homes with the guaranteed mortgages), and may mislead the building industry into an eventually costly overexpansion. In brief, in they long run they do not increase overall national production but encourage malinvestment.

Chapter VI “Credit Diverts Production” in Henry Hazlitt’s Economics in One Lesson, published in 1946

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