[redahs]

The boom and bust cycle has been driven primarily by land speculation since classical antiquity. The ability of banks to use their credit creation powers to fuel real estate bubbles through mortgage lending can be halted using a frequently reassessed land value tax and land value increment tax. In the early 1900s Germany completely eliminated land speculation in the colony of Kiautschou using a 6% annual tax on assessed unimproved value of land, of what lots would sell for if cleared of improvements, and a 33% land value increment tax on increases in assessed land value. This allowed the colony to develop rapidly and continuously without any period of recession while running a budget surplus.

[tareqak]

What's stopping people from doing that?

[DuskStar]

I imagine that would be because it takes land prices and shoots them through the floor. This is rather unpopular among people who own land, which in the US is a large portion of the population.

[tinus_hn]

Also if you do that the prices of houses go down so if people can’t pay their mortgage and the house is foreclosed on the bank doesn’t get their money, which can easily go out of control and cause a crisis.