Sunday, November 11, 2018
A housing jubilee and lottery to solve affordability
People fuss over housing being expensive without ever really thinking about what their ideal world would be. My ideal world is one where everyone has the benefits of outright homeownership—few ongoing housing costs with tenure security.
One way to get those desirable social outcomes is for everyone to own their own home outright. This can be done with the stroke of a pen. Simply convert all the current residential rental leases to land titles, transferring homes from landlords to tenants, then write-off all the existing housing debt (or shift it to the central bank’s balance sheet and adjust the interest to zero).
After this housing jubilee, all homeowners will become debt-free and all tenants will become debt-free owners.
Any other vacant and under-construction homes would be nationalised and given away in a lottery to anyone who missed out by not being a tenant at the time of the switch. Holiday rental housing stock can be exempt from the Jubilee if evidence is provided that the home has been used for holiday letting in the past year.
The whole jubilee could be enacted by Christmas and our housing affordability problems would vanish.
To maintain the affordability benefits of the jubilee the government can periodically give away homes to anyone who does not have one to allow for changes to population, household formation, and age distribution. It can also redo the jubilee every couple of decades.
A public agency can build new homes at a bunch of different locations across all the major cities and towns, just like a private developer. Or it can purchase them from developers, get them through inclusionary zoning, use homes that end up at the public trustee, or get homes into the system in a variety of other ways. But instead of selling them they are given away.
My preference for how to do this in practice is a housing lottery. Anyone who wants a house and doesn’t have one would go through a screening process, then if found eligible, would get a ticket for a lottery for a new home in their preferred location. Every Saturday night, to great fanfare, the lottery would be drawn. Perhaps as many as 1,000 homes per week could be drawn nationally, broken down into regional sub-lotteries of local housing to qualifying local lottery entrants. Ideally, there could be statistical targets on the number of homes needed for the system so that the typical entrant, for example, is expected to win the lottery within a year of first entering.
The total cost of producing 50,000 new homes a year is about $15 billion. This could be funded ten times over by simply tightening up existing tax loopholes and existing giveaways.
Alternatively, and perhaps more practically, those homes transferred for free in the jubilee can be lifetime leases rather than perpetual freehold titles. This means that when people in these homes die or move to old-age care, the house re-enters the system to be given to someone else. If their children don’t have a home, which is unlikely, since they would have themselves been eligible for a free home, they can inherit the lease for their lifetime. Otherwise, the house re-enters the system to be given to someone else. There can also be controls on sub-letting or selling free homes back into the private market.
Alongside this system, the private market can continue to function as people sell and repurchase as they choose, though if they do sell they can then enter the lottery if they choose.
You might think this is radical. But in fact we do exactly this in healthcare.
We spend over $100 billion per year to provide health and hospital care for free to anyone who needs it, no questions asked. Politicians quite often even brag about how much they are going to spend on the health system. Imagine if they also wanted to brag about how many new homes they built to give away!
In healthcare though we have a system of medical professionals who decide on health needs, rather than a ‘medical procedure lottery’ which would be totally inappropriate. I personally think a lottery adds excitement to the whole process. It also adds fairness, as the homes won’t ever be exactly equal in terms of locational and quality attributes, so if luck determines who gets the slightly better homes, then so be it.
The only role for bureaucratic assessments will be to ensure eligibility to enter the housing lottery in a certain location. We could foster a system of professional ‘housing general practitioners’ who assess whether the person entering the lottery is eligible (they don’t already own property) and their need based on age, family size, and location preferences.
This is absolutely doable. If we can spend $50 billion on submarines we can do this. If we can spend $100 billion per year on free healthcare, we can do this. If can give away $30 billion per in superannuation tax discounts for the richest households, we can do this.
If this idea is too radical for you, perhaps consider whether you actually want affordable housing for all.