Capitalist solutions for “Commie Girl” and the housing shortage

Frank Mickadeit brings up the new project of “Commie Girl,” Rebecca Schoenkopf, formerly of the O.C. Weekly: affordable housing.

I can sympathize. My friends and I mostly live in apartments and grouse about the high rents all the time. We even talk about leaving O.C. for someplace cheaper. Rebecca herself writes:

I would rather not move to Palmdale, thank you. No, I will not accept your offer of an adjustable rate/stated-income loan.

Don’t worry about me: I will continue to pay more than $2000 a month in rent for a reasonably nice home in dirty, smoggy, traffic-choked Anaheim, and I will have my delight in your downfall to keep me warm at night.

But let me provide a little capitalist perspective on all this:

1. Return to the gold standard. The main cause of our housing problems is the lack of stable money. I won’t make your eyes glaze over here, but check what I’ve written. Gold, not that paper stuff, is the only real money. Not having a gold standard means inflation. With gold prices having doubled the past 5 years, is it surprising housing prices zoomed so high?

2. Cut taxes. California’s tax structure encourages high housing prices. That’s because we have the country’s highest top income tax rate (10.3%), top capital gains tax rate (9.3%), and one of the highest sales tax rates (7.25%, plus local add-ons).

By contrast, Proposition 13 makes California property taxes among the lowest in America. That means the best tax dodge in the state is investing in real estate. Federal tax laws also encourage real estate investment (the first $500,000 in profit from the sale of a home is tax-free for a couple; Clinton signed that into law in 2000 and it is a major spark of the boom in prices).

The solution is not to repeal Prop. 13, but to cut or repeal the other taxes. The cap gains tax is the worst: it kills more income (by reducing economic activity) than it brings in. The income tax could be cut to a revenue-neutral flat rate of 5.5% (as Arthur Laffer proposed a decade ago before he left the state last year because of its high taxes). Cutting other taxes would move investment money out of housing, without increasing housing taxes.

3. Eliminate zoning, as in Houston. Let people build what they want, where they want. The free market will determine the best location, and price, for whatever is built. The resulting efficiency will reduce housing prices.

4. End ridiculous “environmental” restraints on growth. High-class Republicans are as apt to want to protect the “wilderness” next to their mansions as are Democrats who want to protect the “wilderness” environment. The resulting one-two punch to property rights — and development — reduces the housing supply, increasing prices. The environment can be protected by private parties buying, on the free market, what they want and preserving it.

5. Control immigration. It’s hard enough providing housing for citizens, let alone illegal foreigners who come here and rip off our welfare system, paid for by our high taxes. As the late Milton Friedman said, you can’t have both a welfare state and open immigration. You also can’t have reasonable housing prices and open immigration.