Here Comes Kamala’s Mortgage Forgiveness

Her plan to make housing more ‘affordable’ via subsidies will raise prices and create moral hazard.

Kamala Harris on Friday floated a panoply of government subsidies to make housing more “affordable.” Sound familiar? It’s the same playbook Democrats have used for student loans.

The plan goes as follows: Subsidize Americans to take out bigger mortgages. If they can’t repay them, no worries—Ms. Harris will simply wave the payments away. The Biden administration is already doing this on the sly, which is a major reason housing prices have grown at more than twice the overall inflation rate since the start of the pandemic.

About 70% of single-family mortgages are guaranteed by federal agencies or government-sponsored enterprises such as Fannie Mae and Freddie Mac, which are regulated by the Federal Housing Finance Agency. Ms. Harris wouldn’t need Congress to subsidize home buyers. The Obama and Biden administrations have done so merely by easing credit standards and reducing costs to borrowers for government-backed mortgages.

The Federal Housing Administration—which insures homes for lower-income and first-time buyers with down payments as low as 3.5%—cut mortgage premiums in 2015 and 2023. This increased buyers’ purchasing power by a combined 10.5%, according to the American Enterprise Institute’s Ed Pinto. It also pushed up home prices.

The feds have also enabled riskier buyers to qualify for bigger mortgages. The Consumer Financial Protection Bureau in 2013 effectively barred lenders from issuing mortgages to those whose total debt payments would exceed 43% of income. Yet the CFPB rule exempted government-backed mortgages.

As home prices rose, lenders issued mortgages to buyers with increasingly more debt. About 70% of recent Federal Housing Administration loans and 40% of mortgages backed by Fannie and Freddie have debt ratios that the bureau considers risky. That’s up from 30% and 16%, respectively, in 2012, according to an analysis by Mr. Pinto.

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