Massive federal budget deficits and declining personal saving flows portend an acute private-sector capital shortage over the balance of the 1980s decade. Housing is the sector of the economy most likely to bear the brunt of this shortage. Quantifying that shortage and suggesting preventive policy changes are the primary purposes of his paper. The recent, conservative estimates of household formations and housing production requirements of the MIT-Harvard Joint Center for Urban Studies form the basis for estimates of the net capital requirements for homing during 1984 through 1989. These estimates are compared with estimates of net capital supply for housing to reveal a capital shortage that will preclude the achievement of the housing production requirements without further change in economic policy. The paper concludes with specific recommendations for policy change, including proposals for deficit reduction and a broad-based tax incentive for saving Copyright 1984 Western Economic Association International.
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