This comment was made at Macrobusiness (link may be locked – but there is a free trial available)
The worst land banking offender is the govt.
Ever since the model of outsourcing government expenditure to the household balance sheet was adopted in the mid 1990s, governments have worked hard to:
1. Keep the housing hold debt carrying capacity nice and fat by restricting supply – and if desperate importing demand from foreign buyers.
2. Come up with more inventive ways of extracting from household wallets as much of the debt taken on as possible.
From the neo-liberal perspective it is an awesome model.
1. Household take on large amounts of debt which generates nice trailing commissions for the banks who create the debt / money supply.
2. The government is not required to take on debt and can take a large bite of the householders debt in the form of levies like stamp duty etc.
3. Generous donors to the parties – developers, infrastructure engineers (light rail, water, freeways etc) – take a bite by gold plating infrastructure with fat margins – gold plating that planners insist must be installed before any new land is safe for habitation.
The developers are certainly part of the milche cow milking but the model has been constructed by politicians on both sides of the aisle who were sucked in by neo-liberal mantras about smaller government and letting the ‘free market’ deliver outcomes.
The brilliance of the system is that the average household is getting absolutely sucked dry – both parties working, massive debt, tiny houses etc – far more than they ever were under the era of so called big government.
Ironically, in order to construct the systems of regulations that are required to make the milking machine work effectively requires even bigger and more intrusive government.
But authoritarianism (even the type wrapped in focus group messaging) is like that.
1. Reduce restrictions on land use so the supply constraint is minimised.
2. Minimise development standard to minimums and let developers decide if they want to gold plate as a selling point.
3. Facilitate the repayment of development costs by direct levies on the properties improved by the development costs over a 20-30 years – MUD bonds or the govt pays and recovers.
4. Remove the banks power to endogenously create money and borrow from off shore parties to support mortgages on existing property.
Demand and supply addressed plus a large dose of salt poured over the leeches currently feeding off the household balance sheet.