>There would also be no incentive to be a landlord, so the units would get converted to condos, no more would be built and anyone who can't afford a down payment is homeless.

You missed the second half of this sentence, which is the downside of the tradeoff. >Then don't tax payments on principal or interest.

Mortgage payments are already tax deductible, and one of the biggest perks for owning a home.

>Having individuals negotiate rates with a bank is a much better situation than facing price fixed rents.

Renters are a Group that are already unprofitable to lend to, so banks would reject most and hike rates higher for the rest.

Your proposal only makes sense if landlords provide no service, but this isnt true. Just like how a bank makes a % interest for taking risk and providing capital that owners wont, landlords do the same thing. Landlords get paid a profit to take on risk and long term liability (to the bank), and again provide capital.

In short, banks loan cash to landlords because they are more credit worthy and take on liability. They in tern loan a home to renters, who have worse credit and much less liability.

It is all about paying a premium for others to take financial risk.