So, I discussed my housing plan previously, but given I just spent the last few weeks revamping it, I wanted to sketch out some details of where I'm at with it.
The basic premise
So, the idea is what I now call "universal basic housing." The idea is to build a lot of small apartments and microhomes in order to increase the supply of housing, thus alleviating the current housing shortage, creating a surplus of low income housing where the market fails to even address housing for those people, and to make the wealthy landowners pay for it with a land value tax.
The exact nature of the homes is to be debated, but the premise is small and basic. I know Christian Fernandez who did a guest article when this blog was new emphasized microhomes. These are good for one or two people, but families will likely need larger accommodations. The average microhome is around $67,000 and fits probably 1-2 people. You can build larger ones for more, but they might cost more. How much is debatable. I've seen homes with multiple bedrooms for $30k on amazon but then I've seen tiny 10x10 foot cubes for $60,000 and likely only fit one. So costs are variable.
It should also be noted that microhomes are cheap not just because of their small size but also the fact that they use prefabricated parts that can be manufactured and constructed quickly. However, this won't work in larger cities where density is key and we'll likely need apartment high rises. Based on some googling, the typical price of an apartment built by HUD is around $232,000. That seems very expensive, but housing is expensive, and even microhomes are a lot more expensive than when Christian did his article like 10 years ago. He was thinking $30,000 for a home, and now it's $67,000, and possibly more.
But yeah, we build tons of these houses and apartments all over the country, in dense urban areas they might be high rises, in smaller cities, maybe rowhomes, in more suburban and rural areas I could see communities of microhomes. We charge rent aimed at the basic income level of income. So if 1 person makes $1,333 a month on basic income, we might charge $450 for rent for a small home for 1. From there, maybe $150 more for each additional person, or $300 for each additional 2 people or something. After all, it might vary. A model that fits 1 might also fit 2 with the right specifications, a model aimed at 4 might fit 3, a model aimed at 6 might fit 5, etc. So yeah, maybe 1-2 people, $450, 3-4 people, $750, 5-6 people, $1050, etc. These homes exist on a rent to own basis. You might pay rent every month, but if you live in a home for 10 years, it's yours and you won't have to pay, although you might still have property taxes, utilities, etc. However, you must actually live in the home to be eligible for it, as we don't want landlords or house flippers to get a hold of them, and if you sell it, the new owners must also live in the home or sell it back to the state.
The LVT
Again, we pay for it with an LVT. However, normal home owners are exempt from it, just like in my original article, it's primarily aimed at landlords and other for profit entities. Homeowners may be subjected to taxes if they own an excessive amount of land, but that would basically be, take the median home value, and make that the threshold for LAND value. So the median home value is around $400,000, with land being 25-33% of one's home value, so homes are exempt up to $1.2-1.6 million or so. That should exclude most homeowners from this tax.
As for how much it will draw. Well, from what I can tell, the total private land value is around $21 trillion, although that's from 2015 and by now it's likely higher. Around 60% of the land is owned by for profit entities, so that gives us a tax base of $12.6 trillion. 5% is the rental value of land and probably the maximum tax I'd find acceptable, and that brings in $630 billion a year. However, we might only tax 1-2% instead to be less aggressive, and that would bring in $126 billion, or $252 billion respectively. Let's go with the 2% estimate here.
Putting it all together
So, how many units of housing can we build? Well, with $252 billion, we can build either 1.1 million normal HUD housing units, or around 3.8 million microhomes a year. Of course, if the microhomes are aimed at families and larger, they might cost more than your typical unit, which seems aimed at 1-2 people and are popular among retirees. Let's assume 1.5x the cost, or $100,000 on average for microhomes. If we spend $232,000 per unit on half of the units, and $100,000 on the other half, we will get $166,000 per housing unit on average. This is about 1.5 million homes per year. Over ten years, that's 15 million homes. Assuming each home serves 2.5 people on average, or the average household size in the US, that's 37.5 million people housed by this program in ten years.
And that's not even including the fact that people will be paying rent toward these homes or buying them outright, which might offset some of the costs. If a single person pays $450 a month on rent over ten years, that's $54,000. At 2.5 people per housing unit on average, let's assume $600 is the average rental price. That's $72,000. So if the average unit is $166,000, yeah, the government is selling them at a loss, that's affordable housing for you. However, it would recoup about 40% of the costs, which means we'd have an additional $100 billion per year to play around with. A lot of this money could go to maintenance and things like that while under the rental period, but whatever is left could allow us to build even more homes. So the numbers might work out even better than they do on paper.
Conclusion
All in all, the idea is sound. We build tons of homes, charge rent akin to a basic income amount of income for them, and flood the housing market full of them. If demand is too high since the prices are so low (as much of the cost of these units is subsidized by LVT), then we can initially restrict the units to low income people. However, I would like to open up this program to EVERYONE in the long term. I believe it could provide a path to affordable housing and even home ownership for many. And let's face it, these homes won't be too attractive. They'll be small and relatively basic. Again, most of them seem to work best for 1-2 people, although larger units will be available for families. Hence why I tend to believe that they'll be more expensive than projected. I'm kind of assuming the worst case scenario in terms of housing costs here. Still, the point is, not everyone will want to live in them. They're small, there isnt a lot of space. Various family members will likely drive each other nuts in such close proximity of each other. Relative privacy from each other will be limited (think what it's like to be in a hotel room with your family on vacation). So there are drawbacks. But at the same time, that's how we ensure everyone can have affordable housing. The smaller the units, the cheaper they'll be. The current issue with housing is affordability. To make affordable housing, we make small basic incomes and flood the market for them. This minimizes per unit cost and ensures we house as many people as cost effectively as possible. And yeah, there's tradeoffs. But that's my public option for housing.
If one doesn't like it, there's still the private market, where you can pay $1500-2000 a month these days for a basic apartment or home. It's crazy what people have to pay for housing. But again, that's the other side of the coin. Housing is a commodity in the private market, not a human right, and the homes are luxurious, but expensive. You guys want affordable housing or not? That's my pitch for achieving it. There's gonna be drawbacks. Pick your poison. $450 a month to live in the equivalent of a hotel room or trailer (or $750ish for a family option), or $1500+ to live somewhere fancier. Again, the government would literally be selling the things at a loss. So...yeah. It's an idea at least.
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