One More Time: Even if Housing Was Free, We’d Still Need More

Once again The Stranger’s Charles Mudede is spinning a jargon rich but still fantastical tale to get to his point: decommodify housing. Or, in other words, make housing an entitlement. Or in one word, make housing free! Mudede’s opinion matters because, even though I totally disagree with him, he is one of the few people advancing an intellectual argument about housing. It’s a funhouse intellectual argument, but still, it has some principles underneath it. It also matters because Mayoral candidate Carey Moon apparently listens to Mudede. If she’s elected will Mudede’s socialist ideas end up informing policy? That’s concerning. Let’s take a look at the premise Mudede sets out, that the reasons for high prices are what he calls “speculation.”

Mudede’s tale is all about money having sex with money and making more money. Nobody makes money the “old fashioned way” as John Houseman used to say. I think, at it’s base, Mudede, like most people with socialist flavored beliefs, think that money is being made in real estate today without any work being done. That’s just not true.

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Talk to a builder who is building that project across the street. She found a parcel of land, hired an architect, went to a bank or other lender, shared a pro forma, and if she’s successful, she’ll get a loan or some sort of financing. Construction begins. Equipment is purchased. Jobs are created. Materials are purchased and delivered. Permitting gets going before that and then design review. Her ability to succeed (pay the bills, deliver the product to the market, and pay her self and have money for the next project) involves assumed risk quantified by the terms of the loan. And she has to meet the lenders time line and be sure that her product gets to market in time before prices change.

The sales price or rents she can charge is set by the market; what can people pay and what they are willing they pay. All of this takes 18 months or more. And it’s going on every day. It’s real construction, by real people, financed by other real people to sell housing to real people who need it. It’s hardly the “dark energy” of some galactic corporation using an algorithm to shift large sums of money around. It’s still the butcher, the baker, and the candlestick maker. It’s wholesale and retail. Mudede doesn’t like this because it also means price is old fashioned; it’s the quantitative indicator of supply and demand. That’s too “neo-classical” for Mudede, he needs something more avant-garde.

Even if we accepted the bogus premise that price is going up because of “speculation,” it just distracts from Mudede’s far more relevant and legitimate point that housing should be free, part of the public domain. Housing, he argues, out to be a right and a guarantee to all, passed down with no price at all.

This point doesn’t need some glitchstep view of economics. Just give everyone housing! However, we don’t do that with anything else. Our entitlement system in this country is anchored to work and taxes. We’ve never had something that we’re assured; one has to apply for social benefits. You may not like that, but it’s a huge cultural and political reality; we’ve never done it. And we can argue about whether we should or shouldn’t.

But here’s more reality. Even if housing was an entitlement from the government we’d still need more of it. While Mudede distracts with rhetorical fire dancers and tight rope walkers, that basic fact persists; if 1000 people want housing and you only have 100 units of housing you need more building.

Unless supply keeps up with demand, we’ll still have shortages and then the government will have to ration the housing. How would they decide who’s on a wait list? Who knows? I guess Cary Moon and Mudede and Sawant can dream up a system for making the wait list.

Or we can have the market do the rationing, creating higher prices and a financial incentive for private parties to meet demand with new and financed construction. It is unequal and sometimes unfair. But a system of rationing by criteria set up by central planners would be unfair too. But if our policy makers just took the brake off, we’d see prices respond and the wait list created by higher prices would dissipate. When we don’t make enough of something prices go up, a form of rationing by more impersonal forces. But these forces, as Milton Friedman are more rational and collaborative, and if we encourage them, produce better results.

This is the way it works. We either build more housing and lower prices, or we seize the housing market, make housing an entitlement. But even if we did, we’d still have to build more housing to end the wait list for the entitlement. I’m the first case, as Milton Friedman points out with his analogy of the pencil, thousands of people collaborating through self interest will solve the problem and distribute the product, housing. In the second case, Commissar Mudede and friends decide at the Bureau of Housing when you get your 500 square feet of housing and where.

Do we really need to waste time on this? Socialism always fails, because whether you’re living in North Korea or London, scarcity is scarcity; the solution to it is more. Mudede makes the election of Moon worrisome. This is a misdirection and a time waster. We know what to do: make more housing, of all kinds, in all parts of the city, for all levels of income. We can still have a side show and Mudede can run it and give away tickets for free. Let’s not play games with housing.

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