I love Reason magazine; I've been a subscriber for roughly thirty years. I also love government-bashing, because it's almost always richly deserved.
However, a Joel Miller article from their July issue (recently put up on their website) just gets it wrong. The thesis is expressed in the title and subtitle:
The Politics of Sky-High House PricesI've heard authors often don't write the headlines for their articles, but this is a particularly poor start in two ways.
How government jacks up the price of owning your home.
First, and probably less important: it's not that owning your home is expensive. Buying a home is expensive, an important distinction. To Miller's credit, the article is clear about this.
Second, by pointing the finger squarely at "government", Miller manages to muddy a relatively clear process:
- In most communities, existing property owners tend to be a large
- Existing property owners might disagree about 42 other issues, but
they tend to be united in their support for maintaining (and, if
possible, increasing) their property values;
- In contrast, potential homebuyers tend to be a diffuse
and relatively politically powerless bunch;
- Hence, it's not surprising, and in fact it's pretty darn obvious, that government policies are going to tilt toward the interests of existing property owners, and hence drive up property values.
Now, to Miller's credit, he does point to this process, but it's buried pretty far down in the article:
With so much wealth created by government-exacerbated scarcity, the housing market has become increasingly politicized, to the detriment of the people who can least afford it. "A century of experience with regulation of various kinds has taught us that regulation typically favors the affluent and the organized over the less affluent and less organized," said American Enterprise Institute fellow Steven Hayward, testifying before the U.S. Senate Environment and Public Works Committee in 1999. "There are few groups less organized or represented than the people who would benefit from houses and jobs that do not yet exist. … I think we are being naïve if we fail to recognize that growth management schemes can easily become the machinery of negation by existing residents."At least Miller mentions it; but, really, this process needed to be the focus of his article, not simply squeezed in near the end. This is the thorny nub of the problem. And it's not likely to vanish, since government regulation in this area is extremely well-entrenched and viewed as legitimate.
Hayward provided an example of "negation by existing residents": Several months before his Senate testimony, homeowners in Fairfax, Virginia, protested at a county commission hearing that their prices were stagnant because the government was "allowing too many houses to be built." This tendency is especially problematic when you consider that planning commissions and other local government bodies tend to be dominated by the more powerful, established members of a community. New homebuyers, especially younger families, may be denied a house or forced to move further out principally because planners want to artificially enhance their own property values.
(Full disclosure: I'm a homeowner, although not as value-obsessed as some.)