Re:How to make housing more affordable
by yellowapple on Sunday September 26, 2021 @06:12AM
(#28659697)
The proposal here - eliminate restrictions on building housing - is a good one, but only addresses half of the problem. The other half of the problem is highlighted here:
> Many people believe that the main reason housing is expensive in coastal California is that land is so scarce. As the saying goes, “They’re not making any more land.” That view is plausible. It’s also incorrect.
Turns out this take is itself incorrect. Land is scarce (more precisely, it has inelastic supply), and the reasoning for deeming the scarcity argument to be "incorrect" - that land permitted for building sells for a higher price than land not permitted for building - only demonstrates that some land is being artificially suppressed in value due to zoning restrictions, and says nothing about land scarcity's actual contribution to housing costs. It doesn't take a top-notch economist to figure out that if two identical houses on identically-sized plots in SF and Bakersfield go for $1m and $250k, respectively, the only remaining variable there is the demand for that land relative to its supply.
For this reason, the other half of the solution is to pair that eradication of zoning restrictions with a reworked property tax structure that incentivizes denser construction and penalizes hoarding empty/underdeveloped land (or otherwise treating land as a speculative asset).
Such a concept happens to have a name: a land value tax.
Replacing traditional property taxes with LVT (and, ideally, replacing other taxes like income and sales taxes with LVT, too, but non-land property taxes are the relevant one in this context) and loosening zoning restrictions both complement one another and together disincentivize the land-speculation-driven NIMBYism that dominates the current housing cost spiral in places like California.
> Many people believe that the main reason housing is expensive in coastal California is that land is so scarce. As the saying goes, “They’re not making any more land.” That view is plausible. It’s also incorrect.
Turns out this take is itself incorrect. Land is scarce (more precisely, it has inelastic supply), and the reasoning for deeming the scarcity argument to be "incorrect" - that land permitted for building sells for a higher price than land not permitted for building - only demonstrates that some land is being artificially suppressed in value due to zoning restrictions, and says nothing about land scarcity's actual contribution to housing costs. It doesn't take a top-notch economist to figure out that if two identical houses on identically-sized plots in SF and Bakersfield go for $1m and $250k, respectively, the only remaining variable there is the demand for that land relative to its supply.
For this reason, the other half of the solution is to pair that eradication of zoning restrictions with a reworked property tax structure that incentivizes denser construction and penalizes hoarding empty/underdeveloped land (or otherwise treating land as a speculative asset).
Such a concept happens to have a name: a land value tax.
Replacing traditional property taxes with LVT (and, ideally, replacing other taxes like income and sales taxes with LVT, too, but non-land property taxes are the relevant one in this context) and loosening zoning restrictions both complement one another and together disincentivize the land-speculation-driven NIMBYism that dominates the current housing cost spiral in places like California.