Blurts & Spasms

Thanks for the A2A.

A couple of thoughts on a combination of factors that could help increase residential housing affordability:

Increase density for all new construction. Increasing supply won’t help unless that supply is concentrated in desirable areas. Expanding into suburbs without mass transit, job availability, services, etc. just makes the problem worse. So instead all new construction could be higher density (town homes, condos, etc.) with provision for local services and mass transit hubs as a requisite part of the mix.

Get rid of Realtors. Realtors add zero value to residential real estate transactions - they do not work for the seller or the buyer, only themselves, and their commissions add substantial additional cost to transactions. Instead, we could easily institute non-profit “listing clearinghouses” with fixed transactional costs of just a few thousand dollars and a much more detailed inventory system where each listing includes results from pre-sale inspections, crime stats for neighborhoods, comparison calculations (price per square foot) for neighborhood, local zoning, ownership history, build quality, previous permits, demographics, etc.

Outlaw speculation, and limit ratio of income properties to owner-occupied properties (new and existing). Institute severe penalties for “flippers” and use the clearinghouse database just referenced to track and expose anyone trying to game the system. At the same time, increase pressure on buy-and-hold (usually rental) properties by sharply controlling supply; there could even be a sunset on existing rental properties, where they must be converted to owned properties within a window of time.

A Land Value Tax would also help here.

Eliminate mortgage brokers and for-profit lending institutions, and vary the mortgage rate based on the type/value of property. The U.S. and Canadian credit union systems works well as a non-profit lending model. The additional consideration would be changing the interest rate on different types of realty. For example, a modest single-family home in a high-density area would be X%, and a McMansion on a huge chunk of suburban property could be 2X%.

Expand policies that assist first-time and low-income homebuyers (FHA, MCC, etc.)

Get developers out of politics. Developers routinely try to influence all levels of government to their favor - from town councils to state legislators to federal agencies. This usually results in higher profits for the developer - and, consequently, higher real estate costs to consumers.

Of course, it should be noted that you’ve restricted the focus of your question to solutions within “a market economy” as facilitated by “government.” A more sensible long-term solution IMO would be to remove both the market economy and government from the mix, and have housing (and land) allocated to common pool resource management schemas like those documented by Elinor Ostrom. It is, after all, the tyranny of private property itself that ultimately creates the majority of people that will always be too poor to participate in the housing market at all.

My 2 cents.