Discussing housing policy in left-wing spaces I often run into an argument which is, essentially "building more units doesn't help with the housing shortage because so many will be bought by speculators with no intention of living there." This view, however, implies there's an excellent opportunity to get a ton of housing built at the expense of these speculators, enough to bring down the cost of housing and transfer enormous wealth from speculators to everyone else.
Here's a recent example, Nathan Robinson writing in Current Affairs:
There is no necessary economic reason why increasing the total number of housing units in a city helps make housing more affordable for poor residents. Consider the pencil towers. Let's say that in order to build one, an early 20th century building full of lower-middle class residents was purchased, the residents evicted, the building flattened. There were 30 single-family units in the old building. Our new pencil tower is 100 floors high and has 100 units. All of our pencil tower's units are full of state-of-the-art appliances and high-end fixtures, and cost $2,000,000 each. They are swiftly bought up, 20 by rich people who live in the city, 30 by rich people lured to the city by its new pencil tower, and 50 by rich people who have no intention of living in the city but think pencil tower condos are an asset worth owning in a swiftly-gentrifying city.
While I don't think this hypothetical is realistic, especially in its proportions, I want to dig deeper into its implications. Let's say we build this tower of 100 units, funded by rich people. Then we let developers keep building, and get dozens or hundreds of towers like this, each one with 3x the units there were before, and all at no expense to the public. At some point, these "rich people who have no intention of living in the city" will realize that their investment units aren't so special after all, and the bubble will pop. Costs will fall dramatically, since there will be far more "luxury" units than people who can afford luxury prices.
What about the people who were living in the buildings before they get rebuilt 3x bigger? Unfortunately, we are already losing cheap housing quickly. Developers buy old cheap housing, gut it, and turn it into fancy condos, all without increasing capacity. Building taller is much more profitable, however, so if we let developers build towers they'd do that instead.
Speculators who buy housing with no intention of living in it are betting that we will continue to keep the supply of new housing highly constrained and that housing prices will continue to climb. Let's prove them wrong and take their money.
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"Make more" space? I'm pretty sure that violates general relativity or something like that.
You can make more steel and concrete, of course, and I don't think we'll run out of the raw materials for those, but we might find ourselves under water sooner if we keep cranking them out at too high a rate.
I suppose you could pay parents to make more labor for you. It's been done in the past, but I think the approach has gone out of favor these days. The lead time is pretty long, too, and the labor you get will itself need housing, so you need to make even more of it.
Also, presumably the prices of all of the above have to go up before there's a market signal to make more of them, so the price of anything else that relies on those inputs also has to rise, distorting market feedback on demand for those other items.
Seriously, money doesn't actually create anything, and there are actually finite physical resources in the world. Any political or economic system that causes physical resources to be allocated to producing physical things that don't physically benefit anybody seems like a system with a serious problem.
All you can extract from speculators is the money, not the physical stuff. The money launderers, if they exist in significant numbers, are going to be like super-speculators who provide even more money... but still no physical stuff. So they increase the misallocation. And how do you get the money from them, anyway? I mean, aren't they already naturally subsidizing construction by buying up units? Obviously they're still not solving the problem by themselves, because there are still people without housing. What's the intervention that would put more of their money toward housing, and who would be in a position to make that intervention?
One of the big knocks people always used to give against communism was that central planning would produce too many boots and not enough chewing gum, or set unreasonable quotas that forced farmers to damage the long-term productivity of the land, or whatever. Maybe that's not absolutely intrinsic to central planning, but it seems to apply to any plan to use this speculative phenomenon, no matter how you do it.
It seems to me that you really, truly only want to build housing (or anything else) if it's going to actually get used. Obviously if you truly don't have enough units for everybody to be housed even at 100 percent occupancy, then you need to build more. But you don't want either existing or newly built units sitting vacant at any higher rate than you can avoid, no matter how much money moves around as a result.
Without having researched it in enough detail to be sure, the vacancy tax idea seems like a good first step, certainly better than anything that would create more vacant units.