In a recent post in the NYT, Madelaine Ngo discusses Trump’s plan to open federal lands for housing, fulfilling a campaign pledge to address the nation’s growing housing shortage. Housing is one of the few issues that enjoy bipartisan support. Both Mr. Trump and the Democrats agree that America is facing an unprecedented housing crisis and that markets forces alone without government action may not bring an immediate solution. 

Despite potential challenges, the proposal has the merit of identifying the key factor driving the affordability crisis, that is land prices. Many studies have shown that housing price appreciation in the past decades has more to do with the cost of land than anything else. This trend may be more visible in the United States, but it is noticeable in almost any of the advanced economies that have embraced financialization.

However, the policy of simply opening federal lands for building more housing is not going to be a panacea. It must be bundled together with affordability clauses indexed on median wages. Building more units without such clauses could end up attracting more capital looking for investment opportunities, ultimately putting rents or homeownership out of reach for the local population. Adding such clauses would stream the rise in land values back to the community as predicted by Henry George and cause housing prices to evolve in lockstep with median wages.