Create Affordable Housing
The Problem
The valuation
of existing houses has become greater than their "underlying value".
That is the asset class of housing is inflated with respect to other
assets and with respect to debt.
A Solution
Create
a new money called Home dollars in which all dwelling buying, selling,
renovating, extending, and new construction of dwellings is conducted.
Home
dollars are created by people who wish to trade in dwellings and they
create them by depositing regular money into a special central home
dollars bank account. Home dollars earn no interest. Rent is also paid
in home dollars. The interest is used to cover the transaction costs of
the system.
Home dollars can be used to
purchase new houses. They can also be used to finance the building of
new dwellings. Home dollars are freelyexchangeable and can be sold for real dollars.
The
"trick" is that home dollars can only be converted back to real dollars
if they are used to construct new dwellings or to increase the dwelling
space (extensions). That is increase the amount of housing stock in the
market.
The system will be simple to
introduce - because house sales are well recorded. It will be easy to
police because people who want to build new houses will join
voluntarily and will beexpelled if they disobey the rules.
People
who are genuinely wishing to trade houses are not disadvantaged as they
can use their home dollars to pay for a new dwelling. The only people
who will be disadvantaged are those who wish to take their money out of
the housing asset class and they will be disadvantaged to the extent to
the difference between the exchange rate between home dollars and real
dollars. However they can build a new dwelling and not be disadvantaged.
Over
time the price of home dollars will be discounted to the extent that
dwellings are now inflated. As more dwellings are produced the
difference between home dollars and real dollars will become near zero
in which case home dollars can be abandoned until the next time an
asset bubble appears. The threat of reintroducing Home Dollars will
stop the housing bubble ever appearing again.
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Why do economists object to the system?
The
arguments are two. First is that putting a restriction on the free flow
of money stops money moving to the most "efficient" area of
expenditure. As this is mainly consumption and as it is mainly to the
people who create debt I would argue that this is a good thing for
society. We want money in houses to remain in houses to extend the
housing stock and we do not want the inflated value of houses to be
spent on other things. That is, the purpose of the money is to fund new
housing and make housing affordable. If it achieves that objective then
it is the "best use of the money" for society as a whole even though it
may not be the most "efficient".
The
second argument is that it would be too costly. This system could be
operated on the interest generated from home money accounts and with a
little bit of advertising and with transaction costs of say 1% for
transfers of funds. This is not too costly and a whole lot less than
other schemes.
