Focus on affordability

I am concerned that simply injecting more money into the system will continue to drive prices up rather than lower them. Cutting government fees alone won’t solve the problem other market participants will quickly absorb the savings, keeping prices high. Given the significant disparities in income and wealth, we need policies that are fundamentally fairer. One approach could be limiting individuals or couples to owning only one property (i.e. at a time. Existing multi-property owners wouldn’t be forced to sell, but if they do sell, they would be restricted from purchasing additional properties for the Bay Area this would be the 9 or 12 County region). People understandably want to live in desirable neighborhoods, but if investors shifted their focus to improving other communities, they could help make those areas attractive as well—raising quality of life and broadening housing options for everyone.

On the HOA side, current rules limit investments to CDs and Treasuries, largely due to past mistakes. I would support allowing HOAs to invest in municipal bonds (specifically general-obligation bonds tied to housing and infrastructure). This would provide tax-exempt interest income—something HOAs currently lack. While dues and fees are tax-exempt, interest earned on reserves is not, and HOAs hit their highest tax rate very quickly. This discourages adequate reserve funding, contributing to large special assessments and making condo ownership riskier.

A potentially unpopular but effective reform would be phasing out the 30-year mortgage and moving to a 20-year term, which would put downward pressure on prices. We could also let people “be their own bank” too often I hear about discrimination in lending. By prefunding (based on what someone is reasonably expected to earn as an average worker over their working, but also to grow the first 18-22 years while one is acquiring skills) allowing Social Security to offer down-payment loans. Social Security worked well for earlier generations but needs updates to reflect modern realities. It inadvertently perpetuates inequality because benefits are tied to income and life expectancy, and because unused contributions don’t transfer across generations. We could extend survivor benefits for children to age 25 (aligning with the Affordable Care Act) and allow families to inherit the difference between lifetime contributions plus earnings, minus benefits paid. Social Security funds should also be allowed to invest in broad index funds. Instead of imposing a wealth tax, we should focus on helping more people build wealth in the first place.

Finally, when we declare a “housing crisis” or “emergency,” federal involvement should have real force. If developers fail to act on approved housing projects, the National Guard should be authorized to build them 24/7, with costs billed back to the developer and secured against the property.

Lots of good thoughts and ideas. I lover the op-ed in yesterday's paper from Lisa Gauthier on what's happening to rent availability prices etc. in Vienna Austria. I imagine we could get lots of good ideas from how things are done in other parts of the world. I don't think we have to set about reinventing every wheel. We just need open minds and a little less arrogance all around.

Thanks, Mr. Mays, for your column today highlighting potential solutions to housing affordability. A few issues to comment on (although folks much more attuned to the issue have written hundreds, if not thousands, of articles on problems with our housing market)…

The price to develop housing, affordable or not, is not affordable due to tacked on fees and assessments and whatever else local governments attempt to extort from developers. Costs ultimately paid for by buyers. Let’s find ways to lower tacked on fees and assessments. And we have government mandates that want developers to include solar roofing, EV chargers (whether folks have an EV or not), no gas appliances, or anything, low-flow showerheads, waterless toilets, etc. Let’s find ways to remove these silly “green” mandates that add costs to develop. Costs ultimately paid for by buyers.

There are numerous folks within our country who are not legally in the country. Let’s work to remove those folks from housing so folks in our country legally can access those units. There are homeowners that would like to downsize but why would they if their mortgage rates are 3% or lower? Implement portable mortgages so these folks can downsize and aren’t penalized with higher mortgage rates. There are folks who won’t sell because they’re penalized with capital gains taxes. Allow folks to sell their homes without paying a capital gains tax. Or increase the exclusion limit to $2 million over their baseline.

But will any of these solutions, including the ones you’ve listed, work? I’d say follow the money. Which means Democrats won’t do much to lower the costs of building or allow homeowners to move without penalty. They want/need the money. And increased housing costs help them, due to property taxes based on purchase prices (the higher the better). I could be wrong but history shows I won’t be. I’d say we’d see more affordability progress under the Trump administration than in California. And that’s assuming California doesn’t sue Trump for the umpteenth time because “orange man bad.” After all, if Trump is for it, Democrats will be against it.

Some good ideas here, Jon. The avg age for a first-time homebuyer today is 40 y/o. The avg for a repeat buyer is 62. Housing affordability is around the corner but will take time. Experts predict 2026-2036 that 13-15 million homes will become available as the Boomers pass away. Combined with low immigration and even lower birth rates, supply and demand will shift significantly in the favor of affordability. It will be a slow process. Raising the limits on capital gains for older homeowners could help today with downsizing and opening up inventory to first-time buyers. Important point is using incentives over handouts.