Disaster. Don’t even think about it. The problem is the free market has been tampered with. End the intervention. Short answer.
Here’s what I suggest: End the FED, stop printing money, end Fannie/Freddie, end the income tax. No more artificial dollar demand towards housing, no more economic depression. Young couples will work 2-3 years, save 50% of their income and pay CASH for the house. Heck, people will be able to live on 1 income again. Babyboom Ron Paul Style.
Your proposal would only increase price inflation and distort incentives further.
I don’t know the situation in the US very well but it’s probably the same as in parts of Europe.
Yes, the market has been tampered with but who’s to blame? The list of culprits is a mile long: central banks keeping interests artificially low, self proclaimed “investment gurus” bragging about “the brick” ALWAYS being a winning investment (for the State perhaps, since you can hide gold coins but not an apartment block), large construction firms (again warped and bloated beyond recognition by intervention) always looking for work and hence “advising” councils to turn agricultural areas into residential areas, local councils trying to make a quick buck over urbanization duties and property taxes… and it goes on and on.
I live in an area which was hit very hard by the building craze of the Naughties, but I’ve seen it start from far away. My family owned a property on the Lake Garda, a house on top of a hill overlooking the whole southern part, bought by my grandfather back when it wasn’t a tourist mecca yet. Starting from the early '80s the landscape started to change: big construction cranes became the norm and whole spates of “vacation homes” started to appear. We sold that property back in 2008 but the landscape was barely recognizable from the days of my youth. Reading the morning papers I am shocked (but not surprised) to learn that local councils are handing out even more permits to build even more “vacation houses”. This in spite of a collapse in sales: not only budgets are tighter, but people are rightly questioning why they should leave the chaos of the city to get into the chaos of an area which has become overcrowded and lost almost all of its past charm.
While I would have been VERY happy with a building ban (since our property would have been worth even more; I am selfless as always) that is not the answer. Councils would have found a way around it or would have lobbied effectively to have the ban lifted: they spend like drunken sailors on shore leave and they are always deep in debt. Construction firms would have whined and moaned they were being ruined by this ban and forced to fire people. How long would a ban last in this situation?
The solution is the same as always: roll back the State and its cohorts of parasites.
Why would you even assume the government had the right to?
