> FM does not guarantee most mortgages,
What? Of course Fannie and Freddie guarantee the MBS they issue. Which is an implicitly a guarantee from the US government. Otherwise they'd trade at much wider credit spreads, which would in turn lead to higher rates for home buyers. You don't have to take my word for it, here's the New York Fed's own words:
For agency MBS, the GSEs and Ginnie Mae promise full and timely payment of principal and interest, a guarantee that is either explicitly or implicitly backed by the federal government[1]
> You want to tax homeowners as if they paid themselves rent?
Alice, who has a 20% income tax rate, owns a house and rents it to Bob for $25k/year. Bob also has a 20% income tax rate, owns an identical house and rents it to Alice for $25k/year.
In total the government collects $10k/year in tax revenue from Alice and Bob from their rental income. Now let's say Alice and Bob swap houses and move back into their owner-occupied properties. This is an economically identical situation (remember the houses are identical). Both still own one home. Both are still consuming housing that's worth $25k/yr to them. Yet the government collects no tax revenue. Exempting the implicit value of rent is a subsidy favoring owner occupied housing.
> imputed rental value (which is likely not even legal)
The IRS already taxes tons of benefits based on the imputed income, even if no cash changes hand. For example, if your employer provides you life insurance, you have to pay income tax on the actuarial value of the policy even if you don't die during the coverage period.[2]
> then you will increase the cost of home ownership,
Not if the supply of housing is completely inelastic. Any increase in housing taxes will result in a commensurate fall in the sticker price that matches the tax increase. Economists have known this since Henry George.
[1]https://www.newyorkfed.org/medialibrary/media/research/staff...
[2]https://www.duq.edu/assets/Documents/benefits/_pdf/Imputed%2...
