[nuschk]

Well, economists often suggest a better way than just let the rich take over: directly subsidize people, not flats. So, if you want a neighborhood to not just attract bankers but also families with kids, pay the families for living there! The idea is to pay them only while they live there - independently of which accommodation they choose - and stop the payments when they move away. This way, the market isn't distorted, people don't get "sticky" in their ability to move to other apartments, and the whole setup is much more fair, as it's pretty easy to control who gets which benefits.

The downside, of course, is that the cost of such payments is far more transparent to the public. Many economists would argue that it's in fact much cheaper, as you it's more efficient. Still, today's subsidies are well hidden and almost never show up in household budgets. And thus it's hard to get to a system of direct payment.

[exelius]

Yeah, such a solution is difficult -- and costly -- to implement. For the reasons you mentioned, government tends to choose subsidization options where money isn't explicitly exchanged: i.e. rather than paying the landlord the difference between controlled and uncontrolled, they just tell him certain units are controlled and he has to deal with it.

A solution such as the one you described also makes it difficult to distinguish between who to subsidize and who not to subsidize. How do you make sure you're not giving big payments to people who don't really need the money and just want the house? What's the difference between a family making $90k/yr and wanting to live in a $5k/mo apartment and a family making $500k/yr and wanting to live in a $25k/mo apartment off central park west? Neither can afford the rent in the area, but where do you draw the line?

[evanpw]

The subsidy shouldn't depend on the apartment, but it should depend on the renters. So you can explicitly set an income limit to exclude the $500k/yr family, but even if you don't, they don't get a bigger subsidy just because they want a more expensive apartment.

[mseebach]

Housing shortages aren't substantially caused by people making >$500k, people making a lot of money just have an easier time dealing with a shortage.

All other things being equal, giving everybody a subsidy just bumps the rent by the same amount.

The biggest problem with the subsidy idea is deciding who gets it - and it can't be anywhere near everybody.

[mseebach]

> people don't get "sticky"

People would get VERY sticky against moving away from a subsidised area, even if it might actually suit them better, and they could afford it - leading to sub-par allocation of resources.

Also, there's the question of how/when/if to pull back the subsidy. If you do it according to income, you create a very high marginal tax rate at the beginning of the pay scale - that's toxic to work and traps people in poverty. If you do it when the children are grown, you're suddenly kicking people of of family houses they've lived in for decades (see "Bedroom tax" in the UK). If you don't, then what started as a family neighbourhood becomes a neighbourhood of middle-agers living in large apartments - while their kids struggle to find a decent place to live.

Incentives are HARD.