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Is your Dream of a House Affordable? PDF Print E-mail
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Sunday, 28 March 2010 10:54


We all need a place to live in. But this place is more than just a practical commodity. It holds an important place in your future life dreams, plans and goals. Do you feel your dreams are getting scattered by the cruel face of reality: a life full of paying high rents and mortgages?

Why is housing so unaffordable? Read the explanation here.

Why is housing so unaffordable? The answer.

Houses are unaffordable, because there are speculative land bubbles. Speculators and land bankers are making unearned profits by capturing rising land values, through buying and selling. They are holding empty blocks of land and unused buildings to ransom, to push the prices up even more. Much like ticket scalping, but with the land we all need to live and work on. When these bubbles burst we get recessions and people loose their jobs and homes. Rising land prices transfer money from poor to rich and from young to old. This is not justified.

There is a solution: raise a tax on the site value of land (this value is solely dependant on the location of the land, not on its improvements). Landlords cannot shift the tax onto tenants. (Why?Taxes are never shifted directly, because all prices are set by the market (supply and demand). When governments tax goods and services, this increases the production cost which decreases the supply and increases the price for the consumer, who will bear most of the taxes. But the supply in land cannot decrease. In other words, landlords are already charging as much as they can!) Landlords will still be able to earn profits from actual development, which is what they should be doing. Is it fair that landlords cash in because your house is close to a school, a train station or shopping area? Indeed not.

The tax would force people who do not really use the land, to sell. Selling prices would drop dramatically, which means you have a smaller mortgage to pay, and less interest! There would be no more speculative land bubbles, and a more stable economy.

The government could use this extra revenue to decrease taxes on income, business and trade, stimulating the economy and creating more work. And whenever the government invests in infrastructure, schools, hospitals and so on they re-capture the rising land values through the tax system, instead of handing it out to the land-owners.

If governments would put the common interest above the interest of the privileged, your dreams might just become reality.

Last Updated on Wednesday, 15 April 2015 11:17
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