Gavin R. Putland,  BE PhD

Friday, August 07, 2015 (Comment)

Housing: The mother of all economic issues

Political conservatives love to preach about economic efficiency — that is, maximizing production. But they can't have efficiency without affordable housing. The employer-employee relationship, which brings together capital and labour at a particular location, is the basic productive relationship in the modern economy. But that relationship cannot form unless the employee can afford to pay for housing within commuting distance of the job, plus the cost of commuting, out of wages that the employer can afford to pay out of the revenue of the business.

Political progressives love to preach about economic equity. But they can't have it without affordable housing. To make our way in the modern economy, we need space in which to live, and space in which to work. But we are born into a world in which all the suitable space is owned by some of the population. Thus the price of access to space is the chief mechanism by which the “haves” milk the “have-nots”. Whatever the “have-nots” gain through higher wages or higher welfare payments or lower taxes will be competed away in rents and prices of housing, unless something is done about the intensity of that competition.

Affordability of housing is therefore the key to both economic efficiency and economic equity. That's not your average “single issue”!

To maximize affordability of housing, we must maximize the supply of habitable space in habitable locations. That means maximizing the incentives for land owners to build accommodation on well-located land, and to seek tenants or buyers for existing accommodation. That in turn means reforming the tax system so that land owners who build accommodation and keep it occupied pay less tax than those who don't.

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