Homeownership and The American Culture
 Mom, Apple Pie and Mortgages.
[W]hat is the long-term justification for putting taxpayers on the line to subsidize homeownership? Is this nothing more than a sacred cow in American society — a political necessity because so many voters own homes and are mindful of their resale value?
Shiller argues that home ownership is part of the American culture, and that the reason for subsidizing housing is the "preservation of a sense of national identity".
[T]he best answer isn’t found in traditional economics but rather in American culture: a long-standing feeling that owning homes in healthy communities is connected to individual liberties that embody our national identity.
Shiller adds on renting:
[We] should rethink the idea of renting, which could be a viable option for many more Americans and needn’t endanger the traditional values of individual liberty and good citizenship.
This is an interesting debate. There are probably advantages to society of a fairly high homeownership rate (as opposed to tax advantages to the individual) - perhaps homeownership creates a stronger bond to the community (more community involvement, awareness of crime, and more), and homeowners tend to keep up their properties (unless they have negative equity!). Shiller argues for other psychological benefits that are harder to quantify.

There are negatives too; as an example, homeownership reduces geographic mobility, especially right now, and that makes it harder for some homeowners to move for employment reasons.

And of course withdrawing all of the subsidies for housing would lead to plummeting house prices. So any unwinding of the housing subsidies, like government subsidized mortgage rates, would probably have to be reduced gradually. This is an interesting discussion as we decide what to do with Fannie and Freddie.