Hence why my proposal (land value taxes) incentivizes them to do so by taxing people based on how much land they use (and how desirable that land is) and returning it equally to everyone. Live in a smaller place like a condo? Benefit to you. Want to live in a detached house with a big yard in a desirable area? Pay everyone else for the privledge. Have 5 people in your 4 bedroom home? Excellent. Have 2 people in your 5 bedroom home? Pay everyone else for the privledge.
How can the answer be anything other than increasing the supply of housing (or decreasing the demand i.e. the population)?
This is the key, and the simple answer is that it’s not that simple.
There are multiple factors to demand for housing, it’s not just “X million people need a house”
The price of housing reflects ALL of the factors of demand, and one of those factors currently is causing all of the problems. The factor that’s at fault is that buying a house will make you money (or at least not lose you money) in the long run.
Think about it for a second. If you’re looking to buy somewhere to live, and you know that despite it costing a lot, you won’t lose money on it and will get that money back later for retirement, how much are you willing to spend? Compare that to how much you’d be willing to spend if you knew that you would lose money every month.
This isn’t hard to actually understand, take a simple tax idea (it’s not realistic, it would crash the economy to do it all at once)
The government comes along and says “there’s a 100% tax on any increase in the value of the land (not including the building) when you sell it” on top of the monthly/yearly property tax amounts you’re already paying.
What would happen to housing prices for most places? They would instantly drop, and a lot in some places.
Did we change the supply? No
Did we change the demand? There’s still X million people that need a home, so we didn’t change that factor in any way
Did the price change? Yes
Why? Because people were willing to spend more money on a home than they got in value from simply living there, because they were valuing it as an investment in addition to the living space. Now any home buyer coming along won’t be able to realize that value, so they’re not going to be willing to spend as much money. It hits investors even harder than regular people, that appreciation over time was a huge amount of their profit.
TL;DR;
If something is an investment, the prices will continue to climb up until it’s no longer profitable. If you want home prices to go down and be priced only based on their usefulness as accommodation, you have to make them not an investment.
Hence why my proposal (land value taxes) incentivizes them to do so by taxing people based on how much land they use (and how desirable that land is) and returning it equally to everyone. Live in a smaller place like a condo? Benefit to you. Want to live in a detached house with a big yard in a desirable area? Pay everyone else for the privledge. Have 5 people in your 4 bedroom home? Excellent. Have 2 people in your 5 bedroom home? Pay everyone else for the privledge.
This is the key, and the simple answer is that it’s not that simple.
There are multiple factors to demand for housing, it’s not just “X million people need a house”
The price of housing reflects ALL of the factors of demand, and one of those factors currently is causing all of the problems. The factor that’s at fault is that buying a house will make you money (or at least not lose you money) in the long run.
Think about it for a second. If you’re looking to buy somewhere to live, and you know that despite it costing a lot, you won’t lose money on it and will get that money back later for retirement, how much are you willing to spend? Compare that to how much you’d be willing to spend if you knew that you would lose money every month.
This isn’t hard to actually understand, take a simple tax idea (it’s not realistic, it would crash the economy to do it all at once)
The government comes along and says “there’s a 100% tax on any increase in the value of the land (not including the building) when you sell it” on top of the monthly/yearly property tax amounts you’re already paying.
What would happen to housing prices for most places? They would instantly drop, and a lot in some places.
Did we change the supply? No Did we change the demand? There’s still X million people that need a home, so we didn’t change that factor in any way Did the price change? Yes
Why? Because people were willing to spend more money on a home than they got in value from simply living there, because they were valuing it as an investment in addition to the living space. Now any home buyer coming along won’t be able to realize that value, so they’re not going to be willing to spend as much money. It hits investors even harder than regular people, that appreciation over time was a huge amount of their profit.
TL;DR; If something is an investment, the prices will continue to climb up until it’s no longer profitable. If you want home prices to go down and be priced only based on their usefulness as accommodation, you have to make them not an investment.