Democrats complain about the cost of everything, from health care to prescription drugs to fuel prices (when a Republican is president) to groceries to college tuition, never understanding, or simply not caring, that it’s their policies that drive up prices. So they of course think there’s nothing wrong with their ideas that will accelerate increases in housing costs.
Massachusetts Sen. Elizabeth Warren, who still has a chance to be the Democrats’ nominee, said a few weeks back that because scientists are scaring her about the climate, “by 2028, no new buildings, no new houses” would be built “without a zero-carbon footprint,” if she had her way.
Meanwhile, Vermont Sen. Bernie Sanders, favored to win the Iowa caucuses, tweeted earlier this month in response to an Economist story about the rising cost of housing:
According to Housing Wire, “median home prices in the fourth quarter of 2019 were classified as unaffordable for the average wage earner in 71% of the U.S. counties analyzed.” From the fourth quarter of 2018 to the fourth quarter of 2019, home prices rose 9%, says ATTOM Data Solutions, a property data aggregator. Housing in California, Hawaii, and several large metro areas under Democratic Party control is so unaffordable to so many that those places are in crisis.
Demanding stricter and wider rent-control laws is the conventional response from the political left. But rather than solve the problem, rent control will, in fact, make conditions worse.
Swedish economist Assar Lindbeck, a socialist but no Bernie Bro, said in the early 1970s that “in many cases rent control appears to be the most efficient technique presently known to destroy a city — except for bombing.”
Fellow Swedish economist Gunnar Myrdal, a Nobel Prize winner who held “an egalitarian” sympathy for socialism, noted more than 50 years ago that “rent control has in certain Western countries constituted, maybe, the worst example of poor planning by governments lacking courage and vision.”
Economic literature is filled with research that confirms what our common sense tells us: Government limits on rental rates kills the incentive to build more housing.
A study by California State University, Sacramento, and the Sacramento Regional Research Institute that looked at the effects of rent control in two cities over two decades is but one of many examples. Researchers found that under a rent-control regime, Santa Monica’s rental housing supply fell by more than 8.7%, and in Berkeley it dropped by almost 7.5%.
No one should be surprised by the findings. After all, who wants to invest in homebuilding if there are little or no profits to be earned?
Warren’s diktat for new homes and buildings would also suppress homebuilding. A law that just went into effect in California — where else? — that requires every new house, condominium, and low-rise apartment to have solar panels built on their roofs will add $14,000 to $16,000 for each unit, says Meritage Homes. As steep as that is, it’s a piddling sum compared to the costs it would take to develop structures with no carbon footprints. Making every construction project in the country far more expensive than it should be ensures that little to nothing will be built.
Then there are the trickle-down effects. The higher costs, James Lesser, president of Continental Economics and a Manhattan Institute fellow, writes in the New York Post, “would reduce economic growth and destroy jobs.”
Federal data crunchers tell us “the current pace of building is not enough to meet demand.”
“We estimate,” says a team of Freddie Mac economists and analysts, “that the current rate of demand is approximately 1.62 million housing units per year — 370,000 units more per year than the current rate of supply.”
The shortage will only grow worse should Democrats ever hold the White House and Congress at the same time. The president doesn’t have to be Sanders or Warren, just a member of the party that yearns for authoritarian power over the economy.
— Written by the I&I Editorial Board
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