TW: This goes in the category of something that will NEVER happen, but probably should. Housing and real estate are supported by so many government subsidies. Many forget about the old capital gains rules whereby real estate gains were treated like other capital gains. Why should they be treated differently? Why for that matter should mortgage interest be deductible? The Canadians make do without it as does many other nations.
The other point is how decisions taken many years ago fester and then create implications far down the road. I have posted about pension decisions made during the 1990's coming back to haunt us. The 1990's were the real Goldilocks economy. There was a very real peace dividend related to the collapse of the U.S.S.R. and the favorable demographics of the baby boomers were at their peak. Many policies made back then are not sounding so useful now (Glass-Steagall was ended then as well).
From Ezra Klein at WaPo:
"...Bill Clinton might have left office before the worst of the financial sector's excesses. But he wasn't blameless in hyping the housing bubble:
In 1997 Congress made the first $500,000 of capital gains on the sale of a home tax-free for a married couple and $250,000 tax-free for a single person. This gave real estate a distinct advantage over other capital investments and distorted investment decisions from that time on. I'm sure you could find a graph that would show the beginnings of the housing bubble in 1997. I'm not blaming the entire crisis on this tax change or on the Clinton Administration but it definitely constituted a significant Governmental puff into the housing bubble.
This wasn't only Clinton, of course. Ceaselessly pushing homeownership has been a bipartisan preoccupation in America. For readers who want a fuller picture of this, I'd recommend Alyssa Katz's forthcoming book, Our Lot: How Real Estate Came to Own Us..."
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