The cost of housing in California and Hawaii has gotten so high that it purchasing is beyond the means of many people. To counteract these increased costs, the state governments are both looking to enact legislation that will help supplement housing costs for the poor in these states.

As a person who dislikes government intervention in economic affairs, I will assume that these initiatives will both pass and be detrimental. Instead of the real estate marketplace self regulating first losing the lower wage workers and then forming a base and climate that will allow lower income housing, the government will subsidize the housing prices in regions and create an artificial base on housing prices.

This tends to squeeze the middle class as the poor will receive the subsidies to pay for housing and the rich will be the property owners and benefit from the higher income that is subsidized by the taxpayers. As the middle class are the tax payers and also will be facing higher housing costs that are artificially created by the government, they are the big losers.

Of course, the marketplace is working here, and the middle class will flee states that impose such unfair taxes and encourage high housing costs and flee the regions. This creates the dichotomy of a state that has the extremely wealthy and a large section of the poor, with a disappearing and disenchanted middle class.

So when you look at the politicians looking to throw money at a problem, remember that they are creating a much bigger problem down the road.

• Gov. Arnold Schwarzenegger has signed a bill that will put on the November ballot a plan to raise $2.85 billion to pay for affordable homes, emergency shelters and residential infrastructure in California.
• Gov. Linda Lingle has signed several bills aimed at easing Hawaii’s housing crunch, in which most homes cost more than prospective buyers can afford.

Related posts:

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2. High End Housing The Weak Spot in Housing Market
3. How High Tax States Drive Out The Rich
4. Case Shiller January 200 Report Shows Declines in Housing Speeding Up
5. Watching the Making Home Affordable Program Fail