Tuesday, October 27

What kinds of homes are we buying?

The Senate appears to have agreed to extend the federal tax credit for first-time homebuyers. It's not very surprising that federal stimulus programs have taken the form of providing money to buy homes and cars, the two essential components of the conventional American Dream. What is surprising, to me at least, is that there has been no discussion about what kinds of houses we would like to be promoting as a nation through the subsidies.

One of the stated purposes of the Cash for Clunkers program over the summer was to encourage the purchase of more energy efficient vehicles. An independent report last month concluded that costs of the program exceeded benefits by about $1.4 billion, or $2600 per car, and many people wouldn't have minded a free bike or transit pass thrown in for good measure. Nevertheless, at least a cursory attempt to encourage the consumption of cars that are more within our national interest was made. As far as I can tell, the same reasoning is not even on the table for home purchases.

Could we not ask for a certain degree of energy-efficiency in home purchases? This would have to be measured in objective terms, but it could cover both the costs of heating and cooling the space and the locational efficiency of traveling between the home and other activity centers. I understand that some economists don't like meddling with the "purity" of subsidies to achieve desired outcomes, as if these forms of government intervention were not already interfering with the market. That doesn't make sense to me. If we're pitching in for these homes, we should have some say in how they function.

4 comments:

Dave Reid said...

Great point. Sure extend the benefits but add some green criteria like the cash for clunkers program..

Eric Orozco said...

We're "jump-starting" the same clunker. I have given up trying to reason with ppl.

Politicos, methinks, suffer the bankers' disease. They incentivize risk. Instead of incentivizing innovation. The last bubble to pop, I guess, is campaign financing.

Bottom line, our energy resources, food resources and land resources have not kept up with our lifestyle choices. That is why the compost heap hit the fan and will continue to hit the fan. And instead of investing in innovation with these resources, Wall Street, Main Street, and K Street have been busy with other things these past 10 years.

Instead of keeping up with the Joneses, let's think bigger. Let's think like Franklin, Jefferson, Thoreau, and that kind of stuff that made us America. The American Dream is the thing in this country that should always keep transforming. We used to dream about going to the moon. Where did that kind of dreaming go?

I try not to become jaded, but it is hard sometimes.

Sid Burgess said...

I don't like the idea of doing anything like the cash for clunkers program, but IF we are going to, perhaps the solution is to offer mulitiple ways to get the credit. Have 5 ways you can earn a $2500 credit and let people choose which way best suits their life. I bet you would have a much better cost effectivness.

LH said...

Daniel, my firm is trying to marshal some support to study green certs vs. energy use vs. house prices. What is relatively knowable (if we can get enough orgs to give us the data) are some interesting relationships:

* To what extent do energy-efficient homes command a premium in the marketplace (under the notion that rational homebuyers are accounting for the lower ongoing operating cost of owning that particular home, vs. a less efficient one)

* To what extent do green certs reflect a house's actual energy efficiency (i.e. how much are green certs an accurate proxy for actual energy efficiency)

* To what extent do green certs command a premium in the marketplace, over and above the energy efficiency piece (i.e. after you account for the operating cost reduction associated with energy efficiency, do green certified homes because people are willing to pay extra for the label)

Armed with some quantitative answers to these and other questions, I think you can set up some useful public policy to educate consumers and incentivize good behavior. Sadly, I fear there are folks who are afraid that the answers to these questions aren't going to look good for them. Hopefully, there'll be enough open-mindedness to get something like this going; right now we're all just kind of guessing, and we'd all benefit from knowing a little more.