Rethinking Conservative Housing Policy
Conservatives should consider how to make housing more affordable.
As the Republican Party potentially descends into two years of political infighting, it’s worth asking what might unite conservatives in the meantime. Housing may be an issue that could create some common ground.
Housing is becoming more expensive across the country, burdening both renters and homebuyers. To address housing inflation, policymakers should rely on three principles that are bedrock for many conservatives: supply, freedom, and opportunity.
Increasing housing supply is the most obvious and essential element of solving housing inflation. The influential libertarian economist Milton Friedman warned that inflation is the result of too much money chasing too few goods. Friedman said that supply is a big player in the inflation saga, but as I’ve said before, restrictive housing regulations have the same effect as if local governments started printing money. When cities choke housing supply, and housing prices rise as a result, local governments respond by pouring more money into the housing market via subsidies.
Once barriers to increased production are broken, some amount of subsidies will still be needed for lower-income homebuyers. Instead of building expensive new units, the answer is to make use of the second principle—freedom—and simply give people cash.
I’ve outlined in the past how this might work; it could be as simple as requiring a quarterly filing from people who are struggling to pay rent. But for that and other potential reforms to be successful, government will have to be streamlined.
In today’s America, getting any sort of subsidy involves navigating a gauntlet of bureaucracy. About a year ago, for example, Congress allocated $25 billion in pandemic-related rent relief. Instead of this money being rapidly dispatched to families who lost all their income through no fault of their own, much of it was lost in a morass of state and local argle-bargle. Conservatives should reduce unnecessary barriers to accessing aid.
The third emphasis of conservative housing policy should be opportunity. When housing is more abundant, people have more choices—and when people have more choices, they often make choices progressives don’t like. In housing, the best example of this attitude is progressive opposition to “gentrification.” When black people move into white neighborhoods, progressives call it “integration,” and support it. When white people move into black neighborhoods, they call it “gentrification,” and oppose it. Libertarian-minded conservatives should accept that if housing is abundant, neighborhoods will change.
Allowing free choice also makes housing markets more efficient. In his seminal essay “The Problem of Knowledge in Society”, Fredrich Von Hayek posits a world where policymakers “possess all the relevant information” and “command complete knowledge” of supply, prices, and disutility. He convincingly argues that such a world doesn’t, and can’t, exist. Instead, he says,
The knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.
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Order does not emerge in a market by government fiat but spontaneously through the actions of individuals. When the government puts its finger on the scales, the result is inefficient allocation of resources, and more pain for poor people. Price controls are the best example in the housing-market context. While surging rental prices often precipitate calls for rent control, the consensus among economists is that all price controls create more inflation, which disproportionately burdens poorer families.
Allowing housing markets to reach equilibrium will yield the most efficient economic results, specifically competitive pricing and expanded opportunity, both of which result in more freedom of movement and choice for poor people. Solving housing inflation doesn’t require more money, but it does require allowing the market to produce more housing. Republicans concerned about housing costs ought to listen to Ronald Reagan’s televised announcement of his successful 1980 candidacy for president. In a key section of his speech, he warned about the damages of rampant inflation and taxation. His words could easily apply to the country’s housing crisis, which has been perpetuated by all levels of government on the populace.
“The people have not created this disaster in our economy; the federal government has. It has overspent, overestimated, and over regulated. It has failed to deliver services within the revenues it should be allowed to raise from taxes,” Reagan said. “You and I pay the taxes imposed on business every time we go to the store. Only people pay taxes, and it is political demagoguery or economic illiteracy to try and tell us otherwise.”