Over enough observations, the odds of it never hitting becomes exponentially less likely.

At 300 ball pulls, the odds that not a single black ball is pulled is less than 5% At 500 ball pulls, the odds are less than 0.7% At 1000 ball pulls, the odds are 0.004%

And at every single one of those pulls, the nice person subsidized you with what is known as expected value. It might not have hit, but the fact that they were willing to take the hit if it did has se value to it.

You might not get in a car crash every day, might not even get in one in a decade. But having coverage to cover the damages from accidents had value in terms of car insurance

There are too many incentives for investment managers to buy up housing and close to zero regulations against them.

These managers amassing mass blocks of housing collect all sorts of management fees to help investors who want the attractive yields of real estate ownership without dealing in the day to day aspects of being a landlord. By centralizing all of the operational aspects of being a landlord, they’ve created an investable asset class with high returns and a huge underlying industry able to support a ton of investment.

Now, everyone from pensions to insurance to individual investors get to have the upside of owning houses without the pesky downsides of chasing tenants for rent or evicting them.

Lets say you have a game where someone draws a random ball out of a bag of 100 balls. If it is white, you get $1. If it is the single Black ball in the bag, you have to pay that person $200. You wouldn’t want to play this game as it doesn’t benefit you much, and over the long run you actually lose money.

Well, someone comes along and says “Hey! I noticed you don’t want to play this game. What if every time someone draws the black ball, I pay it for you for free! So all you do is collect $1 every time its drawn with no risk to you?”

Of course, you love free money so you say yes.

20 new people draw a ball and they’re all white, so the nice person offering to pay if you lose hasn’t actually paid anything yet.

Does that mean the nice person hasn’t given you anything of value?

The nice person assumed the ~10% risk that one of the people would draw a black ball, and at $200 a ball that means they subsidized you $20 roughly.

This is in essence what’s happening here. Taxpayers are bearing the credit risk of these loans without the benefits.

The more detailed answer is that by being able to borrow money with the full backing of the taxable income of the United States, these loans have become seen as essentially “risk-free” and thus the borrowers do not have to pay credit risk. In the same way that someone who has great credit pays a lower rate than someone who’s just defaulted from a couple loans, having a government sponsored wrapper around your loan essentially makes your rate comparable to that which the US government itself borrows at. This is quite unfair, because hey, I would also like to borrow at SOFR MINUS a spread. Why can’t you offer me a 30Y loan at the Current 30y Treasury rate of 3.56%? Why do I have to pay 7%?