To the crowd at large: I would love to learn more about what exactly changed during this time period to change peoples’ incentives on such a massive scale. Was there some change in law/regulations to make housing a “safer” investment for people, besides just tanking the interest rates for other types of investments like is all over the news these days? Links or hints would be very appreciated :)
If that’s true, then affordable housing pushes that address individual incentives also need to address incentives around “social equity.”
The problem is that whenever you build a new park, a new store, provide jobs, you have a positive externality in your neighborhood that is not captured solely by yourself. When someone who owns a parking lot and does nothing to earn that value gets richer, he goes out and buys more parking lots. He's taking your positive externalities.
We've already figured out the fundamental solution. Henry George worked all of this out 100 years ago.
If property taxes were raised to 100% annually of the cost of the home, the price of the house would instantly drop to somewhere near the annual rent cost. "Buying" the house would end up being close to a security deposit. It goes without saying though, that 100% annually is not a good number. It would disincentivize building, which is something we really need right now.
The right number is a Land Value Tax such that the cost of the property equals the cost of the building. So if you have two properties, one in downtown SF, and one in the middle of Montana, and each are the exact same house, but the Montana house sells for $200k and the SF house sells for $1M, really it's the land in SF selling for $800k. So that SF market price should move to $200k. To do so we need to tax the property at increasing rates(per sqft of land) until they match. When we tax enough, the new price will reach its improvement value.
In the short term this will have devastating effects on the Net Worth of individuals who took out loans or otherwise bet their income on owning a home, so I advocate for a one time tax credit(that for exceptional cases like the elderly would be transferable for straight cash upon sale of the property) equivalent to the drop in market value of the home. So in the SF case, they would get a $800k tax credit.
Once this system is in place being a NIMBY will no longer be a profitable stance, and will instead cost that area money in taxes. As it will no longer be a perverse incentive, the population will mostly switch to becoming YIMBY's, and advocate for better Zoning rules and to ease up on silly restrictions. The tax money can be spent on high value improvements to the area that will boost everyone's quality of life, and if none are found, can be simply given back equally to all.
Once this system in place and the tax credits have been used up, we can even go further and get rid of income taxes, sales taxes, corporate taxes, and capital gains taxes. The value of the land tax will be enough to replace all of them(by removing them, the land values will rise, which means the land taxes will rise). All from a tax that because land is at a fixed supply, is completely non-distortionary and results in no dead weight loss.
Housing can either be an investment or affordable long-term, it can not be both.
1. Yes, if you want more affordable housing, you need to make it much easier to build homes.
2. The root cause of current housing crises, though, is that once any individual buys a home in an area, they immediately then have a strong economic incentive to make building new homes as difficult as possible (assuming they already live in a built-up area).
So the question is how you fix number 2, because in virtually any area home owners will have outsized political power. So the article talks about this somewhat at the end: removing local control over housing policy and giving more of that power to the state, which I agree is one way to address the issue.
But I still think the fundamental problem that needs more attention is how do you adjust (or nullify) incentives so that existing homeowners are prevented from making the house permitting process more difficult for everyone else.