In land-rich countries like Canada, the primary cause of soaring housing costs is not a lack of land, labor, or materials. Instead, government-imposed costs—including taxes, development fees, and slow, bureaucratic permitting processes—make up the vast majority of the price of a new home.

Cities like NYC are flipping from a 'race to the bottom' on taxes to attract business to a 'race to the top.' They are imposing higher taxes, like the 'pied-à-terre' fee, on wealthy out-of-towners and tourists who lack local voting power to oppose the new levies.

A proposed wealth tax in California triggered a significant flight of capital and high-net-worth individuals, even without becoming law. The key factor was the failure of politicians to uniformly condemn the proposal, which was perceived as a threat to fundamental property rights, signaling a hostile business climate.

Housing scarcity is a bottom-up cycle where homeowners' financial incentive is to protect their property value (NIMBYism). They then vote for politicians who enact restrictive building policies, turning personal financial interests into systemic regulatory bottlenecks.

Threatening to confiscate wealth from the most mobile people incentivizes them to leave. This capital flight has already begun in response to the proposal, proving such policies ultimately reduce the state's long-term tax revenue by driving away the very people they aim to tax.

For cities needing revenue, a tax on luxury second homes (pied-à-terres) is a strategically sound option. It targets the wealthiest demographic, who are least likely to relocate due to the tax, and offers the secondary benefit of potentially increasing the available housing stock.

Homeowners and local governments block new development, creating artificial scarcity that drives up prices, similar to how luxury brands like LVMH restrict supply to increase value. This "LVMH-ing" of housing makes it unaffordable for younger generations and limits economic mobility.

A single high-end buyer like Ken Griffin, willing to overpay for a penthouse, can make an entire development project financially viable. Tax policies that deter these buyers risk halting new construction and reducing overall housing supply for everyone.

The proposed tax on non-primary residences targets buyers who can easily purchase elsewhere. This could trigger a massive drop in demand for high-end properties, negatively impacting the entire New York real estate market, not just the wealthy.