The reason people go into debt to buy houses is because everyone is using debt to buy houses, thus driving the prices up.
If mortgages were capped at 5-year terms, the price of houses would be a lot lower, which would be great for society - for the same reason that having cheaper electricity is great for society.
And even if you could lower prices, how would you compensate the current homeowners for destroying the value of their largest asset?
This won't happen - because:
1. Up until the 80s, houses used to cost closer to three years of wages, as opposed to ten. Yet, there was no shortage of people and pension funds in the 80s.
2. Individuals borrowing mountains of money for their first home get tax advantages, compared to institutional investors. It's individuals pulling the price of houses up, not institutions.
> And even if you could lower prices, how would you compensate the current homeowners for destroying the value of their largest asset?
The same way we compensate people who bought pets.com stock in 1999, the same way that we compensate 22 year olds who amassed $200,000 of debt, and an English Literary History degree, and the same way that we compensate someone who invested into a coal plant, when utility solar starts selling electricity for 2 cents/KWH.
Unfortunately our culture and multiple industries strongly push people towards bad debt.
It's sad that most cultures understood the danger and fragility that debt brings, and yet we've all somehow how forgotten it. We even have terms like "good debt".