The solution to the housing crisis is extremely simple
The solution to the housing crisis is extremely simple. It’s easily solved, and the soundness of this solution is agreed upon by economists across the political spectrum.
The solution doesn’t even involve any new departments or programs: It merely requires simple modification of already-existing rules.
Unfortunately, this solution is never discussed in the media, and we are all forced to engage in the charade of discussing fake solutions instead.
The real solution is a 100% tax on land. The core of the housing price problem is that people who own land make money off it. That landlording has a long history doesn’t make it any less unjust and exploitative for those who don’t happen to own any land: after all, nobody made land. As Proudhon said in “What is Property?” in 1840:
Who is entitled to the rent of the land? The producer of the land, without doubt. Who made the land? God. Then, proprietor, retire!
Income from land is thus completely unearned and thus any income gained from land ownership should be completely taxed at 100%.
No profit from land ownership means no price bubbles, because there’s no incentive (in fact, a powerful financial disincentive) to idly hold onto land.
At the same time as eliminating unfairness and price bubbles, you’d get better use of land, and thus more vibrant and liveable cities! Owners of valuable land would be forced to make maximum use of land with higher density rentals in order to make sufficient rental income to pay the land tax. That would mean more vibrant inner city neighbourhoods with less sprawl.
It’s worth noting that more tax on land doesn’t mean higher housing costs! For those living in enormous houses in very expensive neighbourhoods, it certainly will: but that’s by design. But shifting the tax burden onto rich folks like this, means that the average person pays less. Rural land and average suburban land would be taxed at low rates because that land is comparatively cheap (and no longer subject to price bubbles).
Housing costs could be tackled further using the enormous pool of new money that such a tax would raise. The tax revenue could be used to fund income tax cuts for low income earners, or a universal basic income.
Sounds great, right? Unfortunately, we can’t do this, because the idle rich and economically fragile middle class property owners might lose out. Property values would drop, and stay low forever, and that’s unacceptable to the politically dominant minority that have gambled on prices staying inflated and on their ability to extort renters being allowed to continue indefinitely.
So while the implementation required to fix all this is easy, it’s politically impossible.
Real talk: It won’t happen. The rich don’t like it, so we’re not allowed it. But let’s stop pretending it doesn’t exist.