As I predicted last year, Democratic presidential candidates have set their sights on the housing market and unaffordable rents. Leaving aside how they are almost a decade late to the rent-is-too-damn-high party, most of the policies they proposed will simply add problems without addressing its roots.
The biggest issue is that declaring something a right doesn’t suddenly change basic economics and supply and demand. Thomas Sowell pointed out, for example, that the government could declare it a right that everybody has beachfront property. But that doesn’t change the amount of beachfront property that is available.
To grant people this right the government would likely set up some commission for determining how people will get their right to beachfront property. Then they would set up mandates that everybody sign up for it. That still doesn’t create enough beachfront property to satisfy everybody’s right. The government will have to set up panels to determine who needs it most. Since they are intervening in the free market they will set up price controls that determine, rather unscientifically, what the land is worth and likely give subsidies to those that can’t afford it. Since government doesn’t have any money unless it first takes it, they will have to increase taxes.
Most people would say that this system sounds quite burdensome and ridiculous. But that is what Americans already have in the housing market. They never come out and say a burned-out shack will cost a million dollars. They make arguments that claim they are protecting the environment, the quality of neighborhoods, and making sure that utilities match development. On its own all of these policies sound okay, but they artificially restrict supply in a time of increasing demand which creates the unaffordable crisis.
Politicians then rush in to save the day by government fiat. Presidential candidate Cory Booker should receive some credit for stressing the need to change zoning laws that allow higher density housing and apartments, as that will take away some of the artificial restrictions on supply. But most of the policies are typical big government liberal policies that include declaring this a right, imposing extra taxes, more spending, and tighter government control to counteract supposedly racist policies.
Meaningful reform would lower the price of housing to the point that nobody needs a mandate, subsidies, pontificating politicians, government programs, or price controls in order to buy it. When consumers feel the true cost of a product they look closely at the relative costs and benefits associated with their purchase and become much more discerning. For cable providers, they compare the overall price with the number of channels provided by cable, Dish, or Direct TV, along with the length of contract, included bonuses such as free premium channels or Netflix, number of DVRs, and then make a savvy decision that maximizes the value of their purchase. In order to compete, the channel providers fall over themselves trying to provide the best value at the lowest price.
Consumers are that picky over their TV and phones, but in matters of housing they often look for help from the government without considering how governments created the problem in the first place. Because they don’t feel the cost of their purchases, the market factors are distorted to the point that landlords can charge excessive amounts of money for limited supply, and have little incentive to fix the properties because of the waiting list, while still receiving housing subsidies or grants from the government for low-income housing.
This will only become worse if housing is seen as a right. But instead of instituting free-market reforms, most politicians offer the same noble rhetoric that hides an incredibly expensive and increasingly bankrupt system that doesn’t end up helping all that much.