Affordable Housing Policy: Not Identifiable with Orthodox Economic Analysis

Abstract

Orthodox economic analysis cannot identify how to provide affordable housing on a sustainable basis because it: (i) Considers the nature of property rights as a given rather than as a policy variable; (ii) Neglects taking into account variations in the values of assets and liabilities; (iii) Neglects or omits how government investment in urban infrastructure creates private profits for land owners; (iv) Does not identify Surplus Profits; (v) Fails to recognize how surplus profits and windfall gains can cross subsidize housing and commercial investors to democratise the wealth of cites. Duplex property rights are described that separate the value of buildings from the values created in their land by neighbouring infrastructure investment. This allows uplift in land values created by infrastructure expenditure to be used to make all neighbourhood sites self-financing to halve the cost of urban housing and eliminate the cost of land for commercial developments. The resulting increase in economic efficiency improves equity by providing eight ways to distribute wealth to citizens without government taxes or welfare. The paper recommends that approval for public infrastructure expenditure and/or development be made conditional upon adopting duplex ownership of urban realty.

Keywords: Affordability, Development, Housing, Infrastructure, Land, Property rights, Public policy, Self-financing, Urban

JEL Classification: B59, D02, D31, G38, H54, R2, R5