Edmund Conway rocks!

Writing in The Torygraph (of all places):

The problem is that, however chimerical the recovery, we have not yet absorbed the more fundamental message. Housing bubbles are bad news – yes, even when prices rise rather than fall. In bad times, there are families that suffer the pain and indignity of losing their homes, and households that see their finances crippled, perhaps permanently, by the whims of the market.

But an overheated property market is also a ferociously disruptive force in most families' lives: it prompts them to buy homes that are bigger than they really need, and buy them sooner than they probably should, and leaves them vulnerable to a fall in prices. Also, bubbles distribute wealth (or at least perceived wealth) at random. Someone buying their first home in 2002 would have seen its value leap by more than 40 per cent over the next two years; anyone doing so in 2007 would have seen the price drop by around 25 per cent in the same period...

The solution is twofold: first, to ensure that banks never allow their customers to take on debt that could cripple them. This is where the Bank of England comes in. In the past, it has had a single target – to control inflation...

Second, the Government must reshape the tax system so that it does not favour home ownership. This may mean experimenting with a land tax, whereby families pay annual taxes based on the value of their home and land; it may mean imposing capital gains tax on first homes. Both steps would help prevent another bubble, although they would have unpredictable side effects.

Capital gains tax would make things worse, of course, as it would discourage people from trading down, hence make it more expensive to trade up, i.e. leading to misallocation of resources (the entirely predictable, and undesirable, side effects). As to land value tax, that's the whole point - LVT supporters have been thinking through the consequences for over two centuries (starting with Adam Smith, AFAIAA), and they are entirely intended, to wit, dampening bubbles and busts; ensuring efficient allocation of resources; and aligning interest of sellers, buyers and 'the state'.

Now, somebody say something like 'what about low-income people being priced out of their own homes?', which we did to death last week.