&quot;The solution? Dissolve land-use regulation, pay residents to allow developers to build new structures, and distort the market in favor of the renters by levying a land-value tax.&quot;<p>Small nitpick.<p>Land markets are generally distorted by default: improvements in the immediate area generate &#x27;privately captured positive externalities&#x27; for land-owners in the form of increased unimproved land-value: in other words, pure economic rents that are capitalised into increased private land values. Taxes (like LVTs) that transfer some of this value from private to public hands reduce this distortion: they actually enhance allocative efficiency.<p>It&#x27;s a fascinating dynamic, and IMHO this uncorrected distortion is a major driver of boom-bust cycles in the macro-economy. Mark my words: the economic depression that will occur in the next 5 years will be started by bubbles popping in residential property markets (China&#x27;s first, most likely). Consequently, we&#x27;ll be looking at financial system collapse when this is transmitted to banks via insolvent residential property speculators (to whom they&#x27;ve loaned significant amounts of money).<p>This ain&#x27;t going to be pretty.