On The Cost Of Housing
I saw on social media today Yet Another Handwringing Op-Ed on how housing is very expensive and how this is screwing over the millennials.
These posts always frustrate me. They always follow the same format:
- Housing costs are really high relative to historical prices
- Millennials are now fucked
- Why is this happening?
- Grasping at straws attempt to explain this using authors favourite pet policy issue; OR
- Tortured attempt to lay all blame on singular object level event
- High-visibility-low-impact solution that does not address root cause
Guys, what would you say if I told you that the reason why housing is so expensive now is trivial and obvious? Would you believe me? Here, let’s try:
The reason housing is so expensive is because we’ve spent the last 50 years aggressively and intentionally pursuing policies designed to make housing more expensive.
It’s that simple. Like, politicians openly brag about doing this. It is the single biggest political issue in most city governments.
I’m not trying to be clever. I’m not spinning something in a way that supports my story. I’m not saying “we did this” in the same way, say, church people say “The state brags about murder” because of abortion or whatever.
The single biggest issue I can think of in city politics, generally, is when existing residents demand policy to “maintain or increase property values”. THIS LITERALLY MEANS MAKING HOUSING MORE EXPENSIVE. That is all that means. If a piece of property costs $100,000, and you propose policies that increase its property value to $200,000, you have literally and by definition doubled the cost of housing.
In US & Canada, policies to “increase property values” have been aggressively pushed. Hell, people love this so much that it’s used to dubiously justify all sorts of things with only tangential relationship to property values at all. We’ve been doing this ever since we started viewing homeownership as an investment.
We stimulate investment demand in homes, through subsidized loans and tax incentives. Demand goes up, price goes up. Then we have people sinking a large majority of their life savings into that property. Nobody wants to risk their life savings, so a social expectation that this number always goes up, never goes down sets in. Then, given that homeowners comprise a majority of the electorate, they have the political clout to push for policies that continue this trend.
We’ve spent the last 50 years aggressively pushing for property values to rise, promoting political policies that support this while torpedoing ones with the opposite effect. And now we’re confused that property prices are too high? Come on. What did you think would happen?