Can We Learn From China?

Houses are for living, not for speculation.

We should learn from China. Between 2005 and 2010 Chinese property values tripled. The underlying engine for this was local governments reliance on "land use" leases. To get property ready for development, the CCP created investment funds and sold them to foreign interests. In China, the government owns all the land. Since local governments received regular cash distributions, they became dependent on increasing land and lease value. There was a gold rush of sorts to get invested in China's massive housing and commercial land development.

By 2020, Chinese Communist Party (CCP) General Secretary Xi Jinping declared, "houses are for living, not for speculation." That scared investors, and the economy began to stumble.

We could extrapolate a very similar situation in California. Our government runs on taxes. Increasing land value increases tax revenue. Governor Newsom has spoken about the need to explore more ways to extract revenue from property owners, sales transactions and reassessments. The incentives are bassackwards. Our government has no interest in lowering real estate valuations.

Voters must make their voices heard. We want property values to at least stabilize, if not decline. Do we want a complete collapse of property value? Of course not, but we have to find ways to keep Californians from walking away, from being locked out of the homeowner experience.

Xi Jinping was right.

Right now the tail is wagging the dog. Property ownership has become an investment vehicle dominated by corporate interests. As money managers continue to show strong investment growth, the individual investor (homebuyer) can no longer compete.

I would argue that the American Dream was fundamentally supported by the opportunity to own your own domicile. For 250 years it has incentivized hard work, building communities and stabilizing neighborhoods. That is worth protecting for the next generation.

Or maybe not? Should each generation be concerned with the conditions they leave behind? Please leave a comment…