The second part of the solution is to convert all property taxes into Land Value Taxes, so that idle and vacant land is taxed at exactly the same rate as land containing well maintained houses. Local governments would no longer get higher payouts for zoning for high end housing, they would only get higher payouts if they raised the net desirability of all land within the borders of their city as a whole.

The land value tax would also free up vacant, idle and underutilized land for actual use and improvement, by making land unattractive as an asset for investment or speculation. This would greatly increase the competitiveness of the housing market, because if it is no longer profitable to hold onto a vacant building, a parking lot, or a strip mall in a high demand area after the carrying cost applied by the land value tax, the vacant lot might be split up and sold to smaller owner-operators, the parking lot might be replaced by several smaller town houses, and the strip mall might be replaced by a mixed used development with additional housing units builtin above the shops, increasing average quantity of housing units per city block or per area unit measure.

> How willing are banks to issue loans at the lower end?

Focusing on banks and subsidizing loans is what is fueling this problem. The solution is not to make loans easier to get, it is to drastically lower the price of land and increase the efficiency at which land is used. When the price for land is cheaper and closer to a market price rather than a monopoly price, far fewer people will have to bother with loans or mortgages in the first place. Lower end housing can be made substantially more affordable even if all mortgage assistance schemes are eliminated.

And what about old people that have owned their own house for decades? If the local economy goes up, increasing the land value tax, they either leave or go bankrupt. And the kicker is that their investment into their home is now worth a lot less.

Poor people don’t benefit from the mortgage interest deduction. With todays low interest rate, you have to have a mortgage of over $300,000 to have more than the $120000 standard deduction in interest.

With the median household income being $60,000 a year, it would be nearly impossible to come up with a scenario where many would itemize deductions after mortgage interest, state taxes and property taxes.

The mortgage interest deduction overwhelmingly benefits households earning over $100,000 per year. Only one in five tax filers take the mortgage interest deduction, the extreme majority are in that $100k+ income bracket.

The substantially increased standard deduction is far more important than the MID for the middle class. Cutting the MID tax break for the top 1/3 of earners, is what will help pay for raising the standard deduction that is a huge benefit to the bottom 2/3 of earners.

https://www.cnbc.com/2017/08/31/that-beloved-mortgage-deduct...

"Mortgage Interest Deduction Saves Middle Class Taxpayers All Of $51/Month"

"Most of the MID 2012 tax benefits went to people making six figures or more. Households earning over $100,000 in 2012 claimed 77.3 percent of the total MID tax savings, essentially the same as in 2010. And just looking at those making $200,000 or more, we found the very top earners claimed 34.6 percent of the total MID benefits and saved $5,021 on average for 2012."

https://www.forbes.com/sites/realspin/2013/12/18/mortgage-in...

You do have a point, but there seems to be another side as well.

My point about the banks was, we can't expect low end houses to be built if they can't be sold (because banks are less likely to finance them.) I'm not suggesting artficial support. I'm curious to know if the void in this segment in housing is fed by a void in bank support.

I would think that other states have similar programs.

1- http://www.agriculture.pa.gov/Encourage/farmland/clean/Pages...

> "That sums it up."

i'm sure one of a bunch of secondary reasons is that construction cost is high (while also sub-linear relative to sales price), so it's more profitable to build larger homes, as the quote alludes to and you pinpoint here. (regulatory distortions, e.g., mortgage interest deduction and zoning laws, are other secondary issues exacerbating the problem, which i'd suggest have more direct culpability than higher construction cost.)

and the other side of that circular argument (or vicious/virtuous cycle, if you prefer) is that construction cost is high because sales prices are high, and general contractors see an opportunity to take more of the profit pie. combine that with construction labor being tight, and you get a seller's market (for contractors). thus leading developers to seek out more profitable, higher-end homes to overcome the higher construction cost.

but because development costs (e.g., construction cost and cost to acquire) are relatively predictable parts of real estate development, i don't buy the argument that it's the driver of the shift to higher-priced homes. my back-of-the-napkin intuition tells me that develoeprs are simply taking bigger risks, probably because money is cheap and plentiful. so they're going after the big fish and ignoring the small fry, especially since tight housing markets mean that higher prices are more likely to get choked down the throats of buyers who have no better alternatives. that seems much more likely as the "#1 reason why it's so hard to find an affordable home", rather than construction costs.

http://cityobservatory.org/urban-myth-busting-new-rental-hou...

[1] http://cityobservatory.org/what-filtering-can-and-cant-do/

As for cities, yes. They like the house pricing go up. It helps with school budgets, particularly. Then it goes into positive feedback loop with better schools raising house prices, too.

For cities like seattle, it's not hard to see houses in different price bands (single tech earner, couple tech earner) and so on. Hard to find a solution, unless the big employers diversify their locations.