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Expensive real estate is a deliberate policy of the government. Local government zoning laws keep the supply tight. And low interest rates and easy credit ena
by bokonist 14y ago
Expensive real estate is a deliberate policy of the government. Local government zoning laws keep the supply tight. And low interest rates and easy credit enable people to take out huge loans to bid up the prices of real estate.
To get cheap housing, the government would just need to repeal zoning laws and limit all the size of all home mortgages from any government subsidized institution (FDIC insured banks, etc.) to a maximum of 3X median income with a 25% down payment. That would get housing prices down very fast.
The government keeps housing expensive, because older home owners are one of the most powerful voting blocks. Your average 60 year old homeowner is much more likely to vote than your 25 year old apartment dweller. Furthermore, the homeowner is going to be irate and vote against any politician who enacts policies that make their home price go down, while the 25 year old is not really paying attention.
You're committing the "deus ex machina" fallacy where by you seem to assume that the government has the incentives and institutional ability to effectively manage public housing and keep the cost of housing down. The actual experienced history of government housing in the U.S. has been positively atrocious. And in terms of cost, government housing generally costs about twice as much to build as the equivalent private sector housing.
The really hard problems are: how do you wrest political power away from middle-aged home owners? How in general do you make government work for the general interest as a whole rather than work for powerful factional interests (such as homeowners, construction unions, etc.)
- philwelch 14y agoLet's not use FDIC as a crowbar to micromanage consumer banking, please. There are so many better dials for the government to turn than resorting to that.
- bokonist 14y ago"Let [us] not use FDIC as a crowbar" Who's "us"? I don't work for or have any power over the government or FDIC.
- nostrademons 14y agoYou're making an argument. He's saying that your argument has the unfortunate consequence of using the FDIC as a tool to micromanage consumer banking.
- philwelch 14y agoYou're not a citizen?
- bokonist 14y agoI am a U.S. citizen. But that does not mean I use the words "us" or "we" when discussing the actions of a government bureaucracy. I'm sure I have a few shares of Microsoft in some mutual fund, but that does not mean I use the word "we" when discussing the actions of Microsoft.
- philwelch 14y agoInstead of parsing my imprecise usage of the word "let's", can you address my actual point?
- bokonist 14y agoI find that most people who use the word "we" or "us" when talking about government actions are not being imprecise. Rather they have internalized the civics class myth that ordinary citizens have a large amount of agency over government. I like to poke at this delusion when I can. I'm not exactly sure why you think the FDIC should not micromanage the mortgage market. My guess is because the FDIC is government bureaucracy, and our government is so dysfunctional these days, that you think any attempt to manage mortgage markets would just make things more screwed up. And you are probably correct. Although I would say the cat's a little out of the bag with regards to preventing government bureaucracies from messing around with mortgage markets.... But my main point was not to make an "ought" argument, but to demonstrate to michaelchurch that if he wanted a particular "ought" outcome (lower housing prices) there are easier ways than to have the government buy 60% of all real estate. If you have even easier ways, that require even less government micromanagement, I'd be intrigued to hear them. In any scenario in which Michael or I actually have enough power to direct the FDIC or government to carry out our madcap plans, the political situation would be so different that many current arguments against FDIC intervention would be obsolete. There might be new arguments against FDIC intervention, that would depend on the specifics of the changed political situation.
- michaelochurch 14y agoWry reply: one thing that might help is the fact that not many Generation X (and Millennial) people are going to be cozy homeowners in their 50s and 60s... What you say is so right that it's painful. Expensive real estate is a classic generational ripoff. These people had it easy but didn't save money, so they made up for it by rigging house prices with the post-1965 crowd paying a monstrous bill.
- Retric 14y agoAdd to that the home mortgage tax deduction which doubled the price of a new home.