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Dorchester Center, MA 02124
LA Times: Los Angeles limits ‘mansionization,’ downtown hotel conversions Reason: In Soviet Los Angeles, Housing Affordables You! LA’s City Council voted unanimously to treat the symptoms of the City’s gentrification problem by restricting property owner’s right to improve their property. Did anyone ask the council what would be the long-term effects of restricting the supply of upscale housing? As supply is restricted, eventually what was once considered middle class housing will be needed to meet the needs of the wealthy. With less stock for the middle class to afford, they will move downscale as well and gentrify the most affordable areas. Then, when the affordable housing is gobbled up, the City Council will probably enforce even greater restrictions. It won’t be long before upper-middle-class people will be living in tiny studios just like New York and everyone else is priced out. So, the solution is to do the opposite of what the council did. Remove restrictions on property and allow developers to build densely to meet the needs of the market. Some single family neighborhoods would gradually be redeveloped as multifamily, allowing the city to meet the housing needs of more people. Otherwise, gentrification will sweep over LA faster than ever and affordable market-rate housing will be a thing of the past.
In general, I am opposed to just about any tax increase. However, the mortgage interest deduction is one of my least favorite tax breaks. First of all, it’s a regressive tax deduction that transfers wealth from renters and businesses to homeowners. Second, it causes home prices to rise relative to the value of similar rentals, causing conversions of rental properties to condos and other imbalances. Thus, many markets have had a net loss of rental housing stock. As a result of this imbalance of demand related to ownership incentives, developers have less incentive to build for long-term holding since it is more profitable selling condos instead of rentals. Because condo developers will not be responsible for maintenance over the life-cycle of the property, they tend to care less about durability and energy-efficiency than construction cost. In the long run, the homeowner pays the added costs of the higher-maintenance, less-efficient home. Repealing the deduction will be an uphill battle. Homeowners are a reliable voting block, so pandering to them usually pays off for politicians. Repealing the deduction would probably drive home values down further, so it will probably have to be tabled until the credit markets recover. For more in-depth economic insight, read John Tammy’s article: Repeal Housing’s Mortgage-Interest Deduction
Wall Street Journal Blog: Are McMansions Making Some Americans Unhappy?