| "but over time these policies tend to settle in a place where thing are more affordable." I seriously doubt that to be true in a low supply situation. In the Netherlands, the government reduced real estate transfer tax from 8% to 2%, and sometimes even 0%. This should make houses more affordable to newcomers. Another well intended measure was for older people to share their wealth to their children via early inheritance, tax free. The market simply adds this discount and extra start capital to the price "room". In a situation of perpetual scarcity, the price will rise to the maximum people can afford/borrow. And with "people", I mean only the buyers. It doesn't matter if 90% of the population is priced out of the market if the richest 10% is still enough people to buy up all supply. This last bit is most worrisome, because it means that even the nuclear instrument of increasing interest rates is unlikely to resolve the issue. The interest cannot be jacked up much because that would bankrupt the middle class. A minor tweak will be no issue at all for the richest 10%, so the price will not come down. Increasing supply in a dense and popular area isn't a structural solution. Not only does it meet a lot of resistance, new demand will forever continue to outpace the constraint of delivering new supply. Which is why I believe in reorganizing demand. These dense areas are dense because it gives people access to jobs and education. If we reorganize that into a more sane distributed way, we truly address the problem. |