Nearly all governments intervene in housing finance markets, primarily for social and political reasons. The availability of debt finance for housing is a critical component in housing affordability and the efficient operation of a housing system. Housing is one of the largest investments in an economy, often the most significant part of a household budget, and a key barometer of social well-being. When societies urbanize and real incomes increase, housing expectations and standards also increase. But standard housing is expensive relative to household incomes or investor resources, and the degree of access to long and medium-term financing to pay for a house over time is especially important unless the state assumes that responsibility or pays for the housing asset directly. The lack of an efficient system of housing finance that includes existing houses impedes low- and moderate-income housing markets in particular. Without access to debt finance, whether long or medium-term, households have to finance their homes from savings or family support. They must build their homes over long periods or settle for a lower quality structure, often extra-legal, which often translates to inadequate access to clean water, sanitation and community services.

In addition, the absence of ready buyers means that households will not be able to sell their homes at prices that permit them to recover their investments. This inability to sell hinders their mobility and has a negative effect on the quality of urban neighborhoods and hence the fiscal situation of cities, which limits service provision in low-income areas. This creates a vicious cycle in many countries that perpetuate informal settlements and overcrowding. As a consequence, providing access to medium-term, fairly priced debt is both privately and politically urgent. As such, housing finance is often more prone to government intervention than other types of finance.