http://neveryetmelted.com/2009/05/09/obsessive-housing-disorder/ The essential American soul is hard, isolate, stoic, and a killer. It has never yet melted. -- D.H. Lawrence Fri, 25 May 2012 12:39:53 +0000 hourly 1 http://wordpress.org/?v=3.3 http://neveryetmelted.com/2009/05/09/obsessive-housing-disorder/comment-page-1/#comment-138727 Scott D Sat, 09 May 2009 15:41:33 +0000 http://neveryetmelted.com/?p=5762#comment-138727 The bizarre subsidy of one type of asset over another has relatively little to do with social engineering and a lot to do with the interest groups who benefit from the subsidies. Follow the money. The biggest group is existing homeowners who see big advantages to owning a scarce asset that will appreciate capital gains tax free and against which they can take tax deductible loans. Then there are, of course, the transactors -- realtors, builders, bankers. In fact, just about everybody except those trying to buy a first home see an advantage. The hidden drawback is that in doing so we are steering resources away from more economically productive uses. Imagine the extreme of an economy where all capital flowed into real estate. Bubble, bubble . . . trouble. The bizarre subsidy of one type of asset over another has relatively little to do with social engineering and a lot to do with the interest groups who benefit from the subsidies. Follow the money. The biggest group is existing homeowners who see big advantages to owning a scarce asset that will appreciate capital gains tax free and against which they can take tax deductible loans. Then there are, of course, the transactors—realtors, builders, bankers. In fact, just about everybody except those trying to buy a first home see an advantage. The hidden drawback is that in doing so we are steering resources away from more economically productive uses. Imagine the extreme of an economy where all capital flowed into real estate. Bubble, bubble . . . trouble.

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