Home > Miscellaneous Musings > The real libertarian solution to the home ownership dilemma

The real libertarian solution to the home ownership dilemma

In today’s SMH, Tim Colebach tries – and fails – to find solutions to the problem of declining home ownership.

Flood and Baker see three ways to tackle the problem. As the libertarians argue, we could end zoning, and allow people to build anything, anywhere: but any government that did so would not be re-elected. And the huge price rises in Melbourne despite ample zoned land shows that’s not the problem.

A second option is to limit finance, as China has. With reports that banks are now offering close to 100 per cent of loan valuations again, one serious option is to bring back the old 80/20 rule, requiring borrowers to put up 20 per cent of the property’s value as a deposit. But, as Flood and Baker note, in the short term that would hurt the groups you want to help.

They argue instead for a range of targeted solutions. Some would require tax reform and a lot of political courage: taxing the capital gains on owner-occupied homes, and quarantining negative gearing by preventing owners using rental losses to reduce tax, except for new housing projects.

Other proposals include programs to build more affordable housing, and to tackle the rapid fall in home ownership among lower-income over-45s.

The weakness of their paper is that it looks for demographic reasons for the fall in home ownership, when it is clearly the result of competition from housing investors.

The real libertarian solution to the problem of home ownership is remarkably simple.  Deregulate the banks, abolish the RBA and let interest rates rise to their natural level.  House prices would tank, rental yields would spike up to compensate for the higher interest rates, housing speculators would go to the wall, and residential property would no longer be seen as the new gold-digger’s Nirvana.  You wouldn’t need to impose the 80/20 rule.  That would be imposed by the cautious banks themselves.  This wouldn’t ‘hurt’ the people you’re trying to help because house prices would fall much further than the rise in the interest rate.  Why?  Because it would make housing less attractive to speculators.

You don’t need changes to the tax code, or re-zoning, or new speculative housing developments to solve the problem.  What you need is a free market in money production and distribution.  Allowing workers to be paid in gold and silver and abolishing legal tender laws would also be a great move to kill off inflation in house prices once and for all.

But no mainstream media outlet would ever breathe a word of this in public.  Because they’re owned by the banks.

Categories: Miscellaneous Musings
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