That phrasing comes from Arnold Kling, right? It is also the topic of my latest Bloomberg column. Here is one bit:
Unfortunately, the US already was setting a bad example for the British. Recent plans from the Biden administration called for a broadly similar approach to housing policy, namely subsidizing demand. Earlier this year, Biden called for $10,000 tax credits for Americans buying starter homes and for those selling them. That too will boost the demand for housing and raise prices, and thus much of the value of the subsidy will be captured by current homeowners.
The Biden plan could increase home prices further yet. If Americans come to expect that the government will act repeatedly to prop up home prices, housing will appear to be a safer investment. Thus there will be yet another reason for demand to rise.
Like Sunak’s, Biden’s plan also calls for more construction, namely two million new or renovated affordable homes. The problem is that in the US, most of the obstacles to new construction come at the city, county and state levels. The Biden plan mentions tax credits for cheaper homes, and there are efforts to jawbone local governments to allow more building. But again, the federal government is better at handing out cash than inducing America’s decentralized political system to deregulate construction. So if this plan were to move forward, the likely outcome — as in the UK — would be subsidized demand and stifled supply, leading to higher home prices.
Lessons our governments still need to learn…
