The only reason I feel uncomfortable with the government owning homes is that, historically, the government either ends up giving land away well below its value or they violate contractual obligations when they discover they can make more money. Indian treaties come to mind here.
The devil is in the details too. Some mortage contracts almost always permit the lien holder to make periodic inspections or appraisals of the property, with proper notification. If the government acts as the lien holder a careful review of the terms of contract are in order. If one uses Big Bank Corp to buy the property from the gov't, then BBC's mortage contract controls the terms.
Remember, if a private mortage company finances the property, they have loaned you the money to buy it from the owner (in this case the gov't). The property is yours, but with a lien on it in the form of a property mortage.
BillCA in CA (Unfortunately)