Oct. 30th, 2008

firesion: (Default)
People are now trying to find a way to fix the housing market so that it does not continue to drag down the rest of the economy. I currently can find two 10,000sft lots in the same area that are not selling at the same basic price. The difference in the price seems to be that the lot with the house on it is worth less then the lot with no house. Economics says this will only happen if their are other factors affecting the value. In this case those factors are all the laws surrounding house purchasing and valuation VS the ones for empty land. Any attempt to bail out the home owner is going to miss the mark as it requires an amount of logic that can not be litigated with the average american. Basically, if you try to help people you are inevitably failing to help people who have already lost their homes.

To fix the problem the government should take out the home builders. The US government has the authority to take personal property. They need to shut off the supply of houses and land. This one act would force the price of houses to stabilize better then any other available option. Cities generally control land development. They are very bad at it because residential housing brings in more taxes then commercial development. Thus most cities grown in a way that would make any residential planer cry. The government could help regulate this process in a way that would restrict the rights of cities to be bribed by easy tax money. Some cities would need to be rezoned and there would be a few exceptions for projects that are already in progress. However, cutting the supply can be done quickly, has a great environmental effect, and would allow for a recovery of house prices without pricing out anyone from buying a home. If you look at cities that have very tight land use policies it is apparent that the pricing of homes in those places is much more stable then places that allow sprawl for the sake of taxes alone.

My plan would not help people in bad mortgages directly and thus would be fair to all people in the market. It would take about a year to see a strong effect as that is the current housing backlog. This would allow housing to have a smooth recovery instead of the knee jerk reaction that will happen with any home owner bailout. It also allows the government to fix some issues with development that are simply to costly to the tax payer and at the same time "protect" the environment.


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January 2009

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