An interesting puzzle for an economist. If you were to design a financial asset to achieve what housing did for Singapore -- give citizens a stake in society, an incentive to keep things peaceful and stable -- without the NIMBY downsides, how would you do that?
For bonus points, make it so the new asset's value correlates quite strongly with overall prosperity and flourishing. The correlation should be so strong that merely by making this asset a large component of the legislator pension fund, the financial interest of the legislators becomes strongly aligned with the interests of the polity.
Housing is illiquid and can't be moved between jurisdictions. Your new asset should perhaps share these properties.
Off the top of my head, maybe instead of housing, green cards (permanent residency cards) could be a tradeable and transferable asset. If the price of green cards goes up in value, that indicates that lots of rich people want to move to your city, which probably means it is a nice place to live. But what if rich people want to move there simply because it is a tax haven? To address this issue, every green card could also generate a stream of dividend payments from the city tax revenues. So by holding the green card you are a sort of "citizen-shareholder" of the city.
To prevent short-term speculative trading (if that's problematic), you could make it so green cards can only be bought and sold at an annual auction which is highly regulated. You could also tax hoarders of green cards.
A possible downside of this scheme is that citizen-shareholders might want to needlessly restrict immigration in order to keep green cards scarce and maintain their value. Similar to artificial housing scarcity. Would this be a big issue in practice? Corporations sometimes issue stock even though it dilutes existing shareholders. Many people want to live in NYC despite the fact that it has over 8 million residents.
There is probably some clever way to reduce the incentive of green card holders to keep green cards scarce. For example, green cards could be printed with serial numbers starting from 0, 1, 2, 3, etc. The fewer digits in the serial number, the greater the fraction of city tax revenues that the citizen-shareholder gets. So old residents of the city have an incentive to see the city expand, thus expanding the municipal tax base and increasing their passive income.
Anyways, besides being fun to think about, I imagine this might have interesting implications:
* For charter cities, creating the right incentives for city investment and growth
* Land value taxes which under ordinary circumstances would disenfranchise homeowners. The same bill that passes the LVT could also hand out shares in "Singapore Inc" to every current homeowner, where the share pays out a dividend based on LVT revenues, designed so their net assets stay roughly constant and their portfolio is no longer as exposed to fluctuations in neighborhood property values? (Although to be fair, being exposed to fluctuation in neighborhood property values might actually be a *good* thing, if it helps you persuade your kids to avoid spray painting graffiti and stuff)
Given Singapore’s low fertility rate the demand for housing shouldn’t be outpacing supply.
So what you’ve got essentially is that Singapore is brining in immigrants faster than it can build housing, and that’s in a country that is pretty good at building housing.
Older Singaporeans want to sell to foreigners for a lot of money, but the countries young can’t outbid those foreigners. So they don’t start their own families.
If we assume Singapore is already maxing its construction capacity, the only solution are to slow down the rate of immigration or have heavy government subsidies for young families.
Singapore’s approach to healthcare, education, housing, corruption, and crime all rank near the top of virtually every index that measures such things.
I’ve featured ideas from Singapore so often at R&P, I am beginning to wonder if Singapore is just a freak occurrence and its success is not truly replicable.
Singapore is a city-state, geographically small, perhaps easier to govern. It is also a former British colony that was bestowed with a balance of West/East culture and political traditions.
>Ultimately, Chua argues, the PAP’s loyalties lie with the HDB homeowners who form the foundation of their voting base, rather than with younger, new entrants. It simply cannot allow housing prices to fall significantly.
Fall relative to what? If prices went back to 2020 levels, homeowners would be no worse off.
Suppose prices increased for one week, and then politicians announced a new upzoning, which causes prices to fall back to the initial level (via anticipation effect). Would that trigger a backlash? If not, how long does the price increase need to be sustained for a backlash to kick in?
An interesting puzzle for an economist. If you were to design a financial asset to achieve what housing did for Singapore -- give citizens a stake in society, an incentive to keep things peaceful and stable -- without the NIMBY downsides, how would you do that?
For bonus points, make it so the new asset's value correlates quite strongly with overall prosperity and flourishing. The correlation should be so strong that merely by making this asset a large component of the legislator pension fund, the financial interest of the legislators becomes strongly aligned with the interests of the polity.
Housing is illiquid and can't be moved between jurisdictions. Your new asset should perhaps share these properties.
Off the top of my head, maybe instead of housing, green cards (permanent residency cards) could be a tradeable and transferable asset. If the price of green cards goes up in value, that indicates that lots of rich people want to move to your city, which probably means it is a nice place to live. But what if rich people want to move there simply because it is a tax haven? To address this issue, every green card could also generate a stream of dividend payments from the city tax revenues. So by holding the green card you are a sort of "citizen-shareholder" of the city.
To prevent short-term speculative trading (if that's problematic), you could make it so green cards can only be bought and sold at an annual auction which is highly regulated. You could also tax hoarders of green cards.
A possible downside of this scheme is that citizen-shareholders might want to needlessly restrict immigration in order to keep green cards scarce and maintain their value. Similar to artificial housing scarcity. Would this be a big issue in practice? Corporations sometimes issue stock even though it dilutes existing shareholders. Many people want to live in NYC despite the fact that it has over 8 million residents.
There is probably some clever way to reduce the incentive of green card holders to keep green cards scarce. For example, green cards could be printed with serial numbers starting from 0, 1, 2, 3, etc. The fewer digits in the serial number, the greater the fraction of city tax revenues that the citizen-shareholder gets. So old residents of the city have an incentive to see the city expand, thus expanding the municipal tax base and increasing their passive income.
Anyways, besides being fun to think about, I imagine this might have interesting implications:
* For charter cities, creating the right incentives for city investment and growth
* Land value taxes which under ordinary circumstances would disenfranchise homeowners. The same bill that passes the LVT could also hand out shares in "Singapore Inc" to every current homeowner, where the share pays out a dividend based on LVT revenues, designed so their net assets stay roughly constant and their portfolio is no longer as exposed to fluctuations in neighborhood property values? (Although to be fair, being exposed to fluctuation in neighborhood property values might actually be a *good* thing, if it helps you persuade your kids to avoid spray painting graffiti and stuff)
Given Singapore’s low fertility rate the demand for housing shouldn’t be outpacing supply.
So what you’ve got essentially is that Singapore is brining in immigrants faster than it can build housing, and that’s in a country that is pretty good at building housing.
Older Singaporeans want to sell to foreigners for a lot of money, but the countries young can’t outbid those foreigners. So they don’t start their own families.
If we assume Singapore is already maxing its construction capacity, the only solution are to slow down the rate of immigration or have heavy government subsidies for young families.
Nice write-up. Thanks for this.
Singapore’s approach to healthcare, education, housing, corruption, and crime all rank near the top of virtually every index that measures such things.
I’ve featured ideas from Singapore so often at R&P, I am beginning to wonder if Singapore is just a freak occurrence and its success is not truly replicable.
Singapore is a city-state, geographically small, perhaps easier to govern. It is also a former British colony that was bestowed with a balance of West/East culture and political traditions.
Not many places can say the same.
>Ultimately, Chua argues, the PAP’s loyalties lie with the HDB homeowners who form the foundation of their voting base, rather than with younger, new entrants. It simply cannot allow housing prices to fall significantly.
Fall relative to what? If prices went back to 2020 levels, homeowners would be no worse off.
My guess is that the political backlash would be immense—that would be an asset price collapse on the order of ~50%.
Suppose prices increased for one week, and then politicians announced a new upzoning, which causes prices to fall back to the initial level (via anticipation effect). Would that trigger a backlash? If not, how long does the price increase need to be sustained for a backlash to kick in?