Doug has brought to my attention the February 2007 issue of Sojourners Magazine, and a short article about “affordable housing”in high income cities such as
A “transitional gains trap” occurs because it is relatively easy for the government to forcibly transfer something of value from a currently rich person to a currently poor person, but it is relatively difficult to continue that benefit to the next generation of the poor. The classic example of this is rent control. Rent control succeeds mostly in helping one part of one generation of poor people (those people in the first generation who are lucky enough to get rent-controlled apartments). However, when that generation, let’s call them Mr. and Mrs. Smith, grows old, becomes middle class, and retires to
The 600-pound elephant problem with the forced affordable housing programs is what to do when the original “poor” purchaser is no longer poor and/or decides to move. Either you’ve got a classic transitional gains trap where that affordable housing is no longer affordable, or you have to create a government bureaucracy to manage not only the original housing developers but also the original and subsequent purchasers of the “affordable” houses. The problems are similar to those programs in which (mostly Northeast and
However, one other suggestion by Ms. Shook really struck me as innovative. Having lived in
One final note. Ms. Shook correctly discusses the large, implicit tax code subsidy to home ownership. I would make two additional comments on her argument. First, removing a part of a person’s income from the tax base is neither economically nor morally equivalent to mandating that a private property owner has to provide housing geared to the political preferences of the local government, unless you believe that the government has prior claim on all of our income and all of our property. Secondly, part, but not all, of the tax subsidies to home ownership are scaled back when a taxpayer’s income becomes large enough to be subject to the alternative minimum tax. So the tax treatment of home expenses is truly a middle-class program. It’s my guess that the opposition to eliminating these middle class tax programs has been one of the biggest obstacles to enacting a no-deductions flat tax.
*The title is a famous quote from the movie "Mr. Blandings Builds His Dream House." Apparently, long commutes were a problem even for executives in the 1940s. (Thanks to IMDB.)