How the Government Can Make Housing Affordable

Oct 30, 2023 | Finconomics 101, No Bull Economics

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Uncle Sam has been busy writing checks for pet projects around the world with borrowed money while Americans struggle to afford mortgage and rent payments that have spiraled out of control. We have a simple fix.

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The Fed tells us mortgage rates must be 8% as part of its plan to fight inflation. Landlords, trying to keep up with inflation, are raising rents. The consumer can’t keep up.

Here is a new plan to help struggling Americans with the most basic need, affordable housing. The government should enact an extra tax break for people paying over 4% on their mortgages so that their after-tax interest costs are more manageable. This could be restricted to houses purchased under $600,000 and for households with incomes under $200,000.

In the same way, the government could provide a tax break for renters who are paying more than x% of their income on housing. This break could also be means tested.

This would reignite demand for new home construction, a huge and important industry. Next, the home furnishing industry would get a boost, and so on. You get it, this plan will solve a basic human need while also driving economic growth. How does Uncle Sam pay for it? Well, we can think of more than a few pet projects to reallocate at least some funding from.

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