Nicole Gelinas makes the case for National Review Online readers that state and local governments can take significant steps to help housing markets recover:
[W]hen you buy a house, you’re not just committing to a mortgage. You are also promising to pay the future property taxes on that house. What drives those local property taxes are the future costs of paying state and local workers and retirees, particularly retirees’ pensions and health care. These costs are going in one direction: up.
Unless state and local governments take steps now to reduce future costs, or unless they plan on suddenly repudiating their promises to their public-sector work forces one day, every dollar in unfunded pension and health-care costs is up to a dollar less in the future value of a house. …
… Moreover, if local governments can’t pay their bills through property taxes, they’ll try to get the money from taxpayers by some other route, likely state income taxes. In the past few days, New York governor Andrew Cuomo has seemed to be backing away from a pledge to allow a “temporary” income-tax surcharge on six- and seven-figure earners to expire.
Higher state income taxes similarly mean less discretionary income for taxpayers — and thus less money available to spend on housing. Less money in a future taxpayer’s pocket means less money for today’s homeowner when he wants to sell his house tomorrow.
Washington can continue to take extraordinary measures to prop home prices up. But forces at the state and local level are pulling prices down.