How in the hell is housing buying subsidized?
There are at least five major ways that "housing buying" is subsidized by government policy right now.
1. Home Mortgage Interest Deduction. This is a big one. A big fat sop to the "middle class" that knocks every home owner down a couple brackets of the income tax schedule. This one is so significant it drives "over" borrowing. The subsidy is paid in the form of interest on government debt accumulated by forgoing huge amounts of income tax revenue.
2. GSE backed loans. First time buyers and some subsequent purchases use GSE backed financing. That keeps down payments very low and interest rates low because the government backed GSEs are really carrying the risk. The subsidy gets paid in the form of bailouts when lenders fold.
3. Capital gains exemption; most sales of primary residences are exempt from capital gains taxes on money earned selling a home; that makes residential property very liquid. Without this people would move far less often due to the pain of capital gains taxes, and would therefore contribute less net demand. The subsidy is paid in the form of interest on government debt accumulated by forgoing this tax revenue.
4. Cheap money. The Fed, on behalf the the government, has been keeping our fake bubble economy propped up in part with near-zero interest rates since the debt bubble popped last decade. That's why anyone with a pulse can get a 30-year fixed at just over 4%. The subsidy is paid in the form of inflation.
5. Section 8 subsidizes $17 billion worth of purchases (not just rent) per year. Since all housing stock, rental or otherwise, is really part of the supply then one should also count Section 8 rental subsidy as well (another $20 billion per year.)
There are many, many lesser subsides as well (veterans programs, state subsidies, etc.), and I may have overlooked some other big ones.
Our real-estate bubble is public policy. You show me some part of the system where prices are spiraling up and I'll show you tax breaks and subsidies funding the buyers; health care and education are only the two other most obvious examples.