Today, the Housing and Urban Development (HUD) Secretary, Ben Carson, announced a plan to address the high costs and barriers for housing. He did not propose to extend more rent control and regulations, but to reduce those controls and eliminate regulations. Finally, someone is addressing these issues in a manner that is more likely to work. It’s been quite a while since someone addressed this situation without the answers being all ‘more government’.
Zoning regulations, rent controls that keep the market from making housing available, and a host of other government intrusions in the economy have historically placed housing out of reach for those that need it most.
HUD secretaries have traditionally proposed more government housing projects and encouraged greater government offers for bailouts to those that are overextended. They’ve guaranteed loans that should not have taken place, thus driving up interest rates for everyone. Market manipulations lead to either higher prices (rent and interest rates) or shortages, or often both.
By building more public housing, property values of private housing have to compete and become devalued, offering less incentive for private investors to create new housing. Local laws dictating rent controls and zoning problems have also diminished the value of housing units that discourage private developers from bringing more housing options to market.
Ben Carson plans to offer incentives to remove red tape in state and local governments by tying federal money to relaxing local rules and regulations. While I’m not a fan of using federal money to meddle in local affairs, in this case it actually offers an incentive to create freer marketplaces. It’s a new way of addressing the problems, especially in large metropolitan areas that are desperate for new housing, like Los Angeles and San Francisco that are in a real crisis with homelessness overwhelming these cities.
Homelessness and housing shortages aren’t going to get fixed overnight, and Ben Carson’s plan (which has yet to be constructed in its entirety) isn’t likely to be a magic bullet to fix all. However, we already know that what has been done so far has failed miserably.
Rent is an incentive for people and business to offer up their space as housing to those who need it. It’s a natural incentive to developers to create more housing to meet the demands in the marketplace. Getting in the way of that and manipulating rent prices so that natural incentives disappear is always going to create housing shortages. Government interference in property ownership through lending regulations and incentives to make bad loans or to create artificial preferences are always going to result in situations that kill private property values and put home ownership more out of reach for many.
The answer to the housing crisis is, always has been, and always will be, a freer marketplace that incentivizes free trade and incentives to fill shortages. Regulations should never stand in the way of natural incentives to offer housing where it is desperately needed.