The United States has an extreme shortage of starter homes. Real estate developers have essentially abandoned the market for starter homes, preferring to build more expensive, more profitable homes instead.
This is an area where tax policy can be used to “guide” developers in a new direction, in the form of providing a tax break on the income they generate from new construction, provided that those homes are sold at affordable prices.
Historically, home prices have hovered around 4-5 times median household income, whereas today they are priced at nearly 7 times median household income, despite the jump in borrowing costs that due to interest rate increases. For an couple earning $100,000 per year, this means that a house home that would normally fetch $450,000 now costs $700,000.
https://www.longtermtrends.net/home-price-median-annual-income-ratio
https://www.visualcapitalist.com/median-house-prices-vs-income-us
What is proposed is a set of tax incentives and penalties meant to encourage the development and sale of more affordable housing. For instance:
| Homeprice / median income | Change in Federal Tax Rate |
| 2-3 times median | -60% |
| 3-4 times median | -30% |
| 4-5 times median income | no change |
| 5-6 times median income | +30% |
| 6+ times median income | +60% |
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