Rather than the government encouraging home-buying it should encourage home-building! The problem with the government encouraging home-buying is it drives up the cost of housing therefore benefiting banks the most.
In Monopoly™ if the person who lands on a property decides not to buy it then the property is auctioned off (that is if you are playing the game right, Margaret!). The highest bidder then gets the property, but what if bidders had the ability to borrow from the bank?
The price would skyrocket, especially if you are playing with other aggressive players, and in no time everyone in the game would be massively indebted to the bank. The game that never ends would actually never end! And the true winner would be the bank!
This is what happens in the real world. Multiple people want the same property and they start relying on the bank’s willingness to lend money to then bid against each other therefore driving up the amount of money they’ll have to owe the bank.
In the 1990s Republicans and Democrats wanted to increase home buying because it was seen as the foundation of the American Dream, which led banks to give risky loans to people who weren’t likely to be able to afford it, which wasn’t a big deal for the banks because they could pass the risk onto the government via Fannie Mae and Freddie Mac.
Giving poor people more loans whether for housing or education may sound like a good idea, but if anything it helps to trap them in debt in addition to their poverty. The advantages a poor person gets from being able to take out a loan is largely nulled by the fact that wealthier people could take out an even bigger loan if they are both competing for the same limited resource.
If we wish to improve the quality of life for the poor and the middle class then the goal of government should be to drive down the cost of housing!
The reason why this isn’t their current goal is because voters are predominately homeowners and homeowners don’t want to see a decrease in their property values, especially the wealthiest property owners/campaign contributors.
In 21st century America a small studio apartment should cost next to nothing. A computer, for example, is far more complex and costly to make than a studio apartment so why is the computer so much cheaper?
The price of a studio is so high not because of the cost of production, but because of the land it sits on!
Therefore the KEY to decreasing the cost of housing is to decrease the cost of land.
To decrease the cost of land the government should STOP…
STOP encouraging risky loans.
STOP offering tax breaks to vacant land owners.
STOP micromanaging land use in urban areas, which can make housing development a massively red-taped risky investment.
The government should…
Increase property taxes on large property owners so rich people are less incentivized to hoard land and empty mansions as a financial instrument.
Create a Bureau of Tiny Houses (B.O.T.H.). BOTH would be tasked with buying large tracts of land throughout the United States and offering contracts to tiny house developers to produce X amount of high quality units per month. The land would then be turned into different communities for these tiny houses to rest on. The homeowner would rent the land. You might think… “But who would want to own a tiny house and rent land in the middle of nowhere?” The retiree population as well as the number of people working from home is growing. Location matters less and less and as we ponder the future of automated vehicles people will be more and more comfortable living even further from the city center.
Start a National Skyscraper Initiative. The federal government should give $500 million to each U.S. State ($25 billion total) to build a new residential skyscraper. Funds could be raised through a bond. The construction deadline could be 4 years at which point the President could kickoff a “skyscraper tour”, which would definitely be a ratings booster! In our social media age it would also boost tourism because people love taking selfies in front of landmarks.
Think tiny. Dream big.
I had a little fun imagining those last two suggestions, but altogether these 6 measures would undoubtedly lower the cost of housing and therefore improve the quality of life for the poor and the middle class.
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