Consolidation, Fewer Rules, And Direct Cash Will End The Housing Crisis

The last two posts laid out two basic points, that housing is a commodity not a right and that housing inflation, not greed, is the common enemy of people who have less money and those who want to provide housing for people under any business model. Housing is a consumer product, and if we want it to be affordable for people who go to work every day, no matter how much money they earn, we need to accept these basic facts. If we did, there are three steps we need to take, first, the consolidation of all federal programs, second, conditioning the receipt of those funds only for jurisdictions that abolish zoning and local restrictions on housing production, and third using subsidies primarily for cash payments and building for the lowest levels of income. Here’s three big steps we should take as a country.

I. Consolidate all federal housing programs

In writing my series on almost 20 federal housing programs that started back in February, I discovered that the federal government spends somewhere between $20 billion and $30 billion dollars on housing subsidies. This money gets pushed out through an accretion of complex formulas and regulations in the form of tax credits, vouchers, and a myriad of other programs and projects. I’ve described the money going out for housing as a broken fire hydrant, but instead of water, spewing cash all over the street and sidewalk. All that money is being scooped up by people with tin cups, jugs, wheelbarrows, and in some cases tanker trucks. The money reaches some individuals through a voucher but most is soaked up by governments and organizations.

Yes, some housing thirst is slaked, but very inefficiently and unevenly. The series gives many examples of the inefficiency in the system. The biggest problem is the fact that the existing business model of most housing organizations and advocacy groups is based on assembling capital to build and operate housing. This is driven mostly by ideology, not by economics. The idea is that the government is the best and most honest and accountable party to allocate housing to the poor. But the record speaks for itself: after decades of spending recklessly on housing all that money hasn’t created a state of affairs in which poor people can reliably count on housing no matter what else happens in their lives.

The fact that some people were housed through this profligate spending and none would have been had the money gusher not been flowing does not counter the argument that had all that money been spent more efficiently even more people would have been housed. More importantly, the reasons why price shocks and shifts happen isn’t because there isn’t enough money flowing, but because the country has handed housing policy to the functional equivalent of thousands of Harper Valley PTAs, local governments, that simply don’t have the capacity or discipline to stay out of the way of producers and consumers. If local governments regulated over the counter pain killers, a capsule of Tylenol would cost $300, and they’d declare a “crisis” and ask the federal government for money.

II. Condition federal subsidies on abolition of zoning and local land use regulation

Take the $30 billion in spending and put it in a vault at Fort Knox and let local governments know that they will get no housing money until they have fully repealed all their Euclidian zoning – all of it. I’m joking, but we need to see bedraggled folks near traffic lights and freeway exits holding cardboard signs saying, “Planner – out of work. Anything helps!” A major city will need people to process permits the same way the Department of Motor Vehicles processes your driver license; it isn’t a question of whether or when you’ll get it, you just have to show up and pay for it.

Land use regulation based on the Euclid decision, zoning, is a 20^th century solution to a 19^th century problem. We simply don’t need it and it is creating real human suffering. Short of repealing or conditioning the Tenth Amendment of the United States Constitution, states and local governments will rule over land use. But what the federal government can do is turn off the flow of cash. There are many things that fed the vast invasive species of weed that is land use regulation in the United States, including the massive subsidies given to people who borrow with government backing for single-family homes. But subsidizing “affordable” housing has afforded local governments the freedom to propose all sorts of rules, regulations, fines, fees, and taxes that limit housing production. It needs to end.

III. Subsidies should only be used for direct rental assistance

There is no reason why a person who works for a living in this country should have to wait in line for housing subsidies, period. I’ll keep this section efficient. If a person can demonstrate that they pay more than 30% of their gross monthly income on housing costs, they should get a direct deposit for the difference in their bank account. Will this practice make things worse? Maybe? Will it break the bank? We need to run the numbers. But I am willing to take the $30 billion we are spending every year and buy down the nations cost burden if for no other reason to turn off the shrieking fire alarm repeating “Housing crisis! Housing crisis! Housing crisis!” That thing is annoying. And I’m convinced just paying people’s rent makes more sense than more building, and it is compassionate.

Ending the “crisis”

I’m also convinced that if we took these steps, as unlikely as that may be, we’d see the vast majority of working people find housing they can afford where they want to live for as long as they want to live there. For those that run into trouble, there would be a true safety net, ensuring that if income declined or rent increased, they’d be able to keep living without worry where they live. Housing would proliferate and innovative solutions would appear in the market just like they do with every other commodity, and when prices rose people could find substitutes. Maybe you’ve followed me this far and agree but wonder, “What about the homeless?” We’ll cover that next.