Housing Affordability Crisis Overview

• Affordable housing = defining challenge of this generation globally
• Home prices grown much faster than wages
• Young people struggle years to save down payment, decades for mortgage repayments
• Homes considered biggest asset; real estate market dips can crash global economy
• 65% US home ownership rate (Census Bureau data)
• 87% Americans worried about housing costs (KO Institute study)
• Overlap: people want affordable housing but not their own homes to lose value

Current Policy Failures

• Politicians performatively make problem worse due to conflicting interests
• Biden Administration proposals:
  • $10,000 tax credits for families selling to owner-occupants
  • $5,000 tax credits for first-time buyers (mortgage rate offset)
  • $25,000 bonus for first-generation home buyers
• $40,000 extra bonuses/grants just make housing $40,000 more expensive
• Similar failures in Australia, Canada
• Policies giving more purchasing power only benefit existing owners

Housing Price Reduction Challenges

• Lowering prices can cause major problems
• Rapid price collapse creates underwater mortgages (debt > house value)
• Destabilizes financial system, makes lending risky
• People walk away from homes, causing knock-on effects
• First-time buyers hurt most (smallest equity buffer)
• Long-term owners with small/no mortgages unaffected
• 2008 example: prices halved in some areas, home ownership still fell significantly

Current Housing Market Reality

• Young adults (25-34) living with parents peaked 2020, remains near historic highs
• Chart showing ownership spike was mostly young people moving back with parents
• Home ownership rate measures percentage in owner-occupied homes, not actual ownership
• Financial challenges make independent living difficult/impossible for many

Solution 1: Land Value Tax

• Tax property owners on land value only, not buildings/improvements
• Annual percentage of land value (like income tax percentage)
• Progressive structure example:
  • Family home ($500,000 lot): 1% = $5,000/year
  • Wealthy landlord (50 homes, $25M collective): 4% = $1M/year
• Created by economist Henry George in "Progress and Poverty"
• Georgism movement: could be country's only tax if managed well

Land Value Tax Benefits

• Forces landowners to maximize returns or sell to someone who can
• Empty lot pays same tax as 50-unit apartment building next door
• Motivates development or sale of vacant land
• Discourages land holding purely for capital appreciation
• Makes sitting on empty real estate less profitable
• Could offset income taxes, giving workers more disposable income

Three Ways to Rebalance House Prices vs Wages

1. Reduce income taxes (alternative government revenue source)
2. Make real estate less attractive buy-and-hold investment
3. Encourage business investment over real estate speculation

• Can be implemented slowly to avoid overnight price collapse
• Political challenge: people don't like taxes, big landowners lobby against it

Solution 2: Build More Houses

• Zoning, nimbyism, HOAs, confusing codes, lack of skilled tradesmen create building obstacles
• America building fewer houses today than 1970s despite nearly doubled population
• Building houses provides jobs, increases supply of essential commodity
• Urban sprawl problem: houses hour from city center with no transport/amenities
• Medium density housing needed for people wanting decent places to live
• People support new construction nationally but oppose it locally
• Home equity = most households' most significant asset (Census Bureau)
• China example: built more houses than any country in 20 years, still unaffordable
• China's ghost cities: thousands of developments, millions of empty apartments

Solution 3: De-financialize Real Estate

• Companies turning family homes into financial assets traded like stocks/bonds/options
• Investors purchased >25% of affordable homes last quarter (all-time high - Redfin data)
• Large corporate investors own <2% total housing stock but doubled from <1% pre-COVID
• Real estate too attractive as financial asset due to high rents + government won't let prices fall
• Market become "too big to fail"

De-financialization Options

• Outright ban on corporate ownership of family homes
• Reign in lending to property investors using real estate for leveraged speculation
• Financial system problem: 5:1 leverage for business = bank rejection, 50:1 leverage for home = firms compete for business

Solution 4: Fix Tax Code

• Current real estate-specific government perks act like "negative land tax"
• Perks include: 1031 exchanges, reduced capital gains, opportunity zones, negative gearing, pass-through deferments, deductions, tax credits, home buyer plans, government-backed mortgages, home office writeoffs
• These incentives favor hoarding land over productive investment
• Should be entirely scrapped to level playing field