|
The first part of the solution is to completely eliminate mortgage subsidies and mortgage interest deductions. These do not increase the supply of housing, they only subsidize demand for more expensive houses and increase indebtedness, and increase the flow of capital into non-productive areas of the economy such as mortgage lending and mortgage backed assets. 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.