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Is COVID-19 spending fueling speculative vacancies?

Housing as a human right has become a rallying cry across the United States and in many countries, especially in cities. More and more people are perplexed as to why housing is out of reach for all but the wealthy. Why have the needs of millions of regular people, not to mention the unhoused or poorly housed, remained unmet? Let’s drill down.

First, is the existing housing stock fully utilized? Are there condos, apartments and houses left vacant for some reason?

Second, why isn’t sufficient, right-sized and affordable housing being built to match demand?

Third, are the trillions of dollars of Covid 19 support “good” money or “bad” money?

Fourth, no matter how much housing is built, why don’t housing prices ever go down?

Let’s look at each of these four problems and try to draw some conclusions.

  1. Speculative vacancy research in Australia shows that in addition to the 2% normal turnover vacancy rate, about 3% of apartments, condos and houses are vacant. This can only be because the owners are profiting so handsomely by speculating on rising land prices that they don’t bother renting out or selling their properties. To them, renting out their properties is an irritant. A land value tax would remove this incentive, so speculators would be forced to rent out or sell these empty units to people waiting for affordable housing. Housing is a right, speculative profits are not.
  2. Since there is no shortage of lumber, glass, hammers, nails and construction workers, a housing shortage makes no sense. Materials and workers are widely available, so it is clear that zoning restrictions and the high and escalating cost of land are the problem. The remedy lies in zoning that allows for walkable neighbourhoods plus a land value tax which would replace the upfront price of land with a monthly land tax. LVT means no mortgage or interest payments for the land portion of your property. Your dream house wouldn’t have a nightmare mortgage.
  3. The U.S. government has borrowed $2.3 trillion to support households, employers, financial markets, and state and local governments. Much of this was good money supporting people and businesses impacted by Covid, but the lion’s share was bad money that inflated real estate and other assets. A rental value tax is needed to cycle these dollars out of speculative real estate and into municipal infrastructure and services, schools and hospitals.
  4. New houses, even on the edge of town, are immediately beyond the price range of most people because the development land has been monopolized, usually for decades in advance, by speculators. Rezoning these farm fields to development means massive speculative profits for developers. A land value tax would strip off these unearned windfalls, lowering the cost of the new housing to the construction price plus a monthly land value tax, which would then be used to finance municipal services for everyone.

In summary, the key to speculative vacancies, housing shortages, and affordable housing is land. Land belongs equally to all citizens, so the rise in community land value should not be stolen by speculators, but should accrue to the community. Far too much of the COVID 19 support money has leaked into the pockets of speculators. Citizens should claim their rightful share.

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