This quote comes from Arnold Kling, right? It’s also the subject of my latest column for Bloomberg. Here is part one:
Unfortunately, the US was already setting a bad example for the British. Recent plans from the Biden administration have sought an approach very similar to housing policy, namely demand subsidies. Earlier this year, Biden called for $10,000 in tax credits for Americans who buy first-time homes and those who sell them. That in turn will increase the demand for housing and increase prices, and thus a large amount of subsidies will be taken by current homeowners.
The Biden plan may raise housing prices in the meantime. If Americans were to expect the government to repeatedly act to raise housing prices, housing would appear to be a safe investment. So there will be another reason for the increase in demand.
Like Sunak’s, Biden’s plan also calls for more construction, namely two million affordable or renovated homes. The problem is that in the US, most barriers to innovation come at the city, state and county levels. The Biden plan talks about tax credits for affordable homes, and there are efforts by local governments to allow more construction. But again, the federal government is better at handing out money than cajoling America’s divided political system into loosening the building code. So if this plan were to go ahead, the likely result – as in the UK – would be a demand for subsidies and a blockage of supply, leading to higher house prices.
Lessons our governments still need to learn…
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