The Other Thing That Contributes to Rising Housing Prices

In D.C. (not Wor-Shing-Tun, but the District), there has been some coverage of the Urban Institute’s recent study on D.C. housing prices and rents. Here’s the key figure:

singlefamilyhomepricesDC2013

For those unfamiliar with D.C., Ward 2 contains Dupont Circle and Georgetown, while Ward 3 contains is also very wealthy.

Much of technobratacy echoes Sarah Palin as to the solution to this problem: build, baby, build! It’s worth noting that the number of rental and owned units has increased from 2005-2012. But what the above figure tells us is that prices are also rising because there are people who afford to pay these prices. That is, this is also driven by income inequality: to charge $3,000/month for a one-bedroom apartment in Ward 2 means someone can afford to pay that amount. While this is driven by the one percent (and the 0.1 and 0.001 percents), it’s also driven by the top tenth as well. If you want to lower prices, a great way to do that is tax incomes at the upper levels: increase the marginal income tax rate, remove the Social Security tax cap, and treat dividends as regular income. If you lower after tax incomes–that is reduce inequality–that will lower prices, especially at the high end.

It’s not just a supply problem.

Aside: I’m sure prices would drop if D.C. had a twenty percent vacancy rate. But then it would be Detroit. Excess housing stock can be a curse…

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1 Response to The Other Thing That Contributes to Rising Housing Prices

  1. starskeptics says:

    Would Technobratcy work better? Technobratacy seems a bit awkward…

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