We are in the midst of a housing crisis. At least, most people would say that - and certainly people in my own hometown of Santa Cruz, California. Binyamin Appelbaum, who is the lead writer on economics and business for The New York Times' editorial board, wants to assure us that "Landlords Are Not The Problem."
They're not? Well, no; they're not "the" problem; let's admit it. While some affordable housing advocates would probably disagree - and would have some good points to make - there isn't, really, some greed-driven National League of Landlords whose sole purpose in life is to make sure that their rentals cost more than those needing housing can afford.
Still, look at the first few paragraphs of Appelbaum's recent column, and then think about the way he defines the issues (emphasis added):
President Trump relishes a handy scapegoat and, on Wednesday, he picked one to blame for the nation’s housing crisis: investors that are buying large numbers of single-family homes and operating them as rental properties.
Mr. Trump wrote on Truth Social that he was taking steps to prevent such purchases as part of a broader program to make homes affordable again. He said that “people live in homes, not corporations.” He said he’d provide more details in two weeks, when he visits Davos, a Swiss ski resort not known for its affordable housing.
But there’s no need to wait for the details. Landlords are not the cause of the nation’s housing crisis, and any plan that reduces investment in housing is only going to make matters worse.
Appelbaum says that the actual problem is easily understood as an issue of "supply and demand." According to Appelbaum, building more housing is the answer:
The problem is that the United States does not have enough housing. The hard part is building more. It is certainly easier, and perhaps better politics, to talk about barring investors, or imposing rent controls, or kicking immigrants out of the country, but none of that is going to do the trick. The way to make housing more affordable is to build more housing (emphasis added).
Again, it's hard to disagree with Appelbaum's statement. Clearly, building more housing, if that lowered the price, would help solve the problem. However, as I have revealed above, I live in Santa Cruz, California, which has tried to solve its affordable housing crisis by "building more" - and LOTS more has been built, and lots more is in the process of construction. Has the crisis been eliminated? Has the increase in "supply" lowered the price?
The short answer seems to be a very clear: "NO." Here's another question, and it's related: based on our local experience, has the "building more" solution even improved our situation? I believe that most local residents would say (or, more correctly, "admit") that the housing crisis in our community has not been improved by the very significant increase in housing "supply" that has been foisted upon the community by those who claim that "more housing" means more "affordable housing" - and that specifically includes the California State Legislature and our Governor, who have virtually eliminated local decision-making over land use. Has turning decisions about housing construction to those who want to build "more" led to more "affordable" housing? Nope! Hasn't been working in my hometown.
In fact, to refocus on Appelbaum's column, those investors who are buying large numbers of single-family homes and then operating them as rental properties, are, effectively, kicking out lower-income people to make housing available to higher-income people. In other words, they are, in fact, helping to cause our housing crisis, as our current president suggests. To remember something from my blog posting yesterday, this is a particularly anguishing example of how "private equity" impoverishes, rather than enhances, our overall economic situation.
Locally, our so-called "median income" is escalating rapidly. That is a feature of the "housing crisis" that everyone admits exists. As people with higher incomes become those who can afford to rent or buy, the "affordable housing" programs that tie housing assistance to "median income" become less and less effective to help lower income, working people.
To eliminate the crisis, we need to make housing "more affordable," and simply building more housing doesn't, in any direct way, have such a price-reducing impact. Maybe some economics course in high school or college told us that when supply is increased the price (inevitably) goes down, but even if that might be true "theoretically," this isn't what is happening in our "real world." What is happening is that the process hailed by Appelbaum is driving out those people who can only afford a housing payment that is 30% or less of the income they receive. And they don't make enoough in their local employment to pay the rent, or to purchase a home. "More" is not equal to "better," because "more" does not mean "more affordable."
"Landlords" are not the problem. That's what Appelbaum says. Ok. Let's agree. But let's also agree that it is "the system" that is the problem. Building more housing doesn't make housing more affordable unless the price is, somehow, "controlled." Why is that? Well, in Santa Cruz, there is a much greater demand for housing (it's a really nice place to live) than there are local folks who can afford the rents (or the purchase price of any new homes constructed). Our current president's plan, as sketched in by Appelbaum, actually would help reduce prices, which might actually help.
I think that there was a time (post World War II) when housing was seen as a place for families to live, and not as an "investment." That time has passed. It passed long ago, too. As I was growing up, in Palo Alto, California, my parents moved the family five times. They bought their first home, and then they always sold for more than they had paid, and then moved on to an even nicer place, and that was an "income strategy." My parents were very clear about that. Buying a home for its investment potential, not (only) for its value as a home, made perfect sense In fact, "investing" in a home was a "good" investment. Whatever the purchase price, the "selling" price, a few years later, was always more. That is still what's happening. "Housing" is a good "investment." Well, most working people aren't "investing" to produce income for themselves and their family, they're working for it. And working people are making less, and they can't keep up with the prices based on those who are investing to make a "profit," not those who are trying to find a nice place to live.
There are some ways our national government could do something about this. They could, for instance, mobilize federal funding to build housing, making it available at cost to individuals or families who live in the various local communities in which it is constructed, but with a resale price restriction would say that the "selling price," later on, could not exceed the "purchase price" plus any verified inflation since the date of the purchase. There would have to be some further complexities, undoubtedly, but that's the idea. That kind of housing would cease being an "investment," and be useful only as a place to live. Of course, to fund this kind of solution the federal government would have to raise taxes, but given that the government has been reducing taxes for the most affluent among us, including all of our "billionaires," there seems to be a pretty easy way to find the money to start this program.
The problem is NOT "landlords." I'm with Appelbaum on that. The problem is the "system" that has turned residential housing into an "investment," since that means, as a practical matter, that only the wealthy are able to afford housing. "Price control," in its various iterations, is needed. "More" does not mean "less expensive."
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