It’s normal to have some vacant homes for sale as part of the
market process that matches buyers with sellers. On average during the 1990s,
for example, the home vacancy rate was about 1.5 percent, according to the
Census Bureau. By 2008, the figure had risen to 2.9 percent. And by the second
quarter of this year, the vacancy rate had come down only slightly, to about 2.5
percent. With this much supply still available, it’s no wonder that prices are
still depressed.

Excess Empty Homes

The percentage-point difference between the latest vacancy rate
(2.5 percent) and a more normal historical rate (1.5 percent) amounts to an
excess inventory of almost 1 million vacant homes. (Estimates based on other
methodologies are roughly in that range.) If the government does nothing, that
extra inventory will be slowly worked off, as the economy gradually recovers and
more households are formed. The question is whether the government can do
anything to accelerate that process, to support home prices and, ultimately, to
promote a stronger economic recovery.

A more realistic approach would be to try to get the vacant
houses rented out, rather than sold to owner- occupants. And one way to do that
— proposed by real- estate practitioners (such as Kyle Jividen of Alamo
Appraisal Group in San Antonio) and economists (such as William Wheaton of the
Massachusetts Institute of Technology and Gleb Nechayev of the research firm
CBRE Econometric Advisors) — is to provide an immediate tax write-off to
investors who buy vacant houses and rent them out.

One way to bolster demand would be to change our immigration
laws to make it easier for foreigners to move here and buy homes. That might be
a good idea, but it has no chance of being enacted soon. Former Federal Reserve
Chairman Alan Greenspan……MORE