“In America, housing policy rests on two mutually exclusive goals: we want our principal investment vehicle to be home equity, and for the value of our homes to rise indefinitely and astronomically. But then, we also want the cost of houses to be more affordable. For some reason, nobody seems to consider that we can’t have houses worth more and also cost less. We don’t have a quantum housing market. What we have is supply and demand, and it applies to housing whether we like it or not.
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Starting in the 20th century, politicians decided everyone ought to own a house. A man who owns a house has a stake in his community and is less likely to flush alligators down the toilet or contract communism. That idea kicked into high gear during the Great Depression, when the New Deal created federal subsidies, loans, and tax incentives to help people buy homes.
Today, our tax structure continues to encourage homeownership as a national investment strategy. You can deduct the interest on up to $750,000 of mortgage debt from your federal taxes. And you can deduct much of your local and state property taxes from your federal income taxes. First-time homebuyer credits exist. And because the federal government backs 30-year mortgages as a guarantor, banks are less concerned about risk and charge lower interest.
Add it all up, and Washington subsidizes homeownership to the tune of around $150 billion per year.
On top of all that, when you sell your subsidized home, the first $250,000 of profit—or $500,000 if you’re married—is exempt from capital gains taxes.
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Renters get none of these benefits. No subsidies on the way in, no exemptions on the way out.
So it makes perfect sense to get a mortgage and build equity. But once you have that equity, you will want to protect it. If someone builds an apartment complex across the street, your property value may go down. Cheaper housing near your house means your house is worth less.
That’s why America’s 90,000 local jurisdictions fight to ensure cheap housing never threatens existing home values. “Not in my backyard” (NYMBY) advocates make it illegal to create inexpensive housing through minimum lot sizes, single-family zoning, height restrictions, historic preservation rules, outright bans on apartments, and density limits.
And because of supply and demand, restricting new housing keeps prices high. Build more homes in a city, and prices fall. Even when zoning boards aren’t deliberately conspiring to restrict supply, that is exactly the effect.
So American housing policy literally cannot achieve its stated goals. You cannot have housing serve as the nation’s primary wealth-building tool and also expect affordable housing for everyone.
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Japan has far less regulations and subsidies around housing, and therefore builds more housing and keeps housing affordable.
https://reason.com/2025/12/05/what-america-can-learn-from-japanese-housing