When we buy a car, the value immediately drops once we drive it. It continues to lose value over time. The same is true of computers. The same is true of just about all consumer goods that wear out. The only things that don't lose value are the things that don't degrade, like precious metals. So what is the deal with housing? Why has the cost of housing gone up faster than inflation? Houses degrade with time. A home built 30 years ago, without maintenance, is far less valuable than a home built brand new, so what's the deal?
The issue is land. Land becomes more scarce over time and thus increases in value. As it goes up, the owner now controls more wealth despite doing absolutely nothing to increase the wealth of society. What was worth $50,000 years ago can be worth $500,000 now simply because the land has become more valuable. Continued unimpeded, this leads to the problem we have today, where young people are delaying family formation and are spending more on housing costs than previous generations. This is terrible for society, as our young people remain mired in debt and land owners reap all of the benefits. It's not a good thing that a home costs about 10 years of income whereas in the past it was less than 7 years of income. How do we fix this?
My argument is the following:
1. Increase property taxes greatly on non-primary residences.
2. Eliminate property taxes entirely on primary residences.
3. Eliminate exemptions such as depreciation and maintenance that are currently used as subsidies for landlords.
4. Tax rental income above the rates of normal income.
This way, we establish real property ownership as a good thing. We favor family home ownership in the desire that all families will be able to live on property that they own. We also discourage speculation on land and viewing land as a means of production and generator of wealth. It is neither of these things, and experience has shown that this process, if continued unabated, will lead to only fewer and fewer people owning land and owning most of a country's wealth.
This proposal is entirely reasonable, fair to home owners, and punitive only to those who are getting wealthy through no work of their own. It will lead to a more prosperous, fairer society where people can mature, grow old, and do the real important work in life, which is to start their families and settle down.
