Can a City Housing Crisis Ever Be Solved?

Yes, a city housing crisis can be solved, but it would require a radical transformation of society that challenges the existing economic and political structures. The status quo, which increasingly prices people out of necessities, is deeply entrenched, supported by vested interests who benefit from the current system.

Understanding the Housing Crisis

The root causes of the housing crisis are multifaceted. While a lack of housing certainly plays a part, it is not the sole factor. There are millions of empty houses that could alleviate the situation. According to research, there are over 15 million empty houses in the USA alone, yet there are still 500,000 homeless people. Each homeless individual could be provided with a home and there would still be over 14.5 million empty houses left.

Housing Speculation and Buying to Let

The primary cause of the housing crisis, however, is a combination of housing speculation and buying to let. Housing speculation involves purchasing houses with the intent of profiting from them either by selling them at a higher price or by holding them for future sale, thus driving up prices. Buying to let refers to purchasing properties to rent out to tenants, which also drives up the cost of housing.

As an investor buys a house in a city, whether for speculation or rental, it slightly increases the overall price of homes in that city. This is a result of more money being injected into the real estate market, out-bidding potential residents who wish to purchase their first homes. The value of houses tends to increase over time, unlike other commodities such as laptops and cars, even if their quality decreases. Limited land within cities means that supply cannot increase, while demand often increases due to population growth, immigration, and the tendency of people to move to urban areas in search of employment.

Tackling the Housing Crisis

To address the housing crisis, we need to tackle both sides of the equation: increasing supply and decreasing demand. Here are some measures that could be implemented:

Increase Supply

Implement Land Value Taxes within urban regions: A Land Value Tax (LVT) would make it financially unattractive for homeowners to leave their properties unoccupied for long periods. For example, if an owner in the Bay Area had 60,000 unoccupied homes, the LVT could disincentivize this practice, as homeowners would be charged a percentage of the value of their land as taxes. Make Land Value Taxes progressive: Starting with a low threshold, property taxes could increase as the land value exceeds certain thresholds, making owning large amounts of land economically uninteresting. Apply a higher fixed LVT to businesses: A fixed LVT like 3 or 4 for businesses owning residential real estate would discourage investment in existing housing. Apply higher LVT to foreign investors: Non-residents would face even higher LVTs to discourage foreign investment in urban housing. Made businesses and foreign investors LVT exempt for 10 years: This would encourage these entities to build new units, thus increasing supply.

Decrease Demand

Give incentives for first-time homebuyers: Offering 0 or very low mortgage rates to first-time buyers would make housing more accessible to those who need it most. Decrease regulations regarding house construction: Reducing bureaucratic hurdles for new construction projects would help increase supply more efficiently.

Evaluation

Land Value Tax is the cornerstone of Georgism, with some economists arguing it is the least worst tax. These measures aim to make it harder for businesses to invest in existing housing while making it easier for individuals and businesses to build new units and for first-time buyers to afford homes.

Challenging the Status Quo

Implementing these solutions goes against the interests of the elite, who derive much of their power from owning the places they live. Therefore, it is not surprising that discussing these issues and proposing such measures can face significant resistance, including censorship. However, it is crucial to have an open and honest debate about these issues to bring about meaningful change.