Liberals want to bring about a range of progressive goals for the poor and underprivileged, while Republican Tea Party types argue that, rather than trying to carve out larger slices of the pie for these groups, we would all be much better off relying on free markets to make the pie bigger for everyone. I want to suggest, provocatively, that both liberals and Tea Party enthusiasts are just paying lip service to their respective beliefs, and that given a concrete opportunity to achieve their goals, both groups would back off from the revolutionary changes that would be needed.
For the sake of brevity let’s restrict the argument to real estate. A truly free market in land i.e. one based exclusively on voluntary transactions, with no artificial restrictions in supply or demand, would go a long way to lowering the cost of housing. However, this would entail privatizing all the land owned by the U.S. government (another homestead act?), which currently represents 30 percent of the land area in the United States. In California the federal government owns almost 50 percent of the land.
A truly free market in housing would also eliminate government mandated zoning which protects the ‘haves’ at the expense of the ‘have-nots’. Here in San Francisco, the planners have decided to protect the ‘haves’ by the cessation of building, ensuring higher property values for existing homeowners and higher prices for everyone else. It’s a similar situation nationwide where there’s no shortage of affordable housing, just skyrocketing land costs because of zoning and land use restrictions. In Snob Zones, journalist Lisa Prevost describes the outrageous lengths to which town leaders and affluent residents will go to prohibit housing that might attract the “wrong” sort of people.
A truly free market would also dispense with federal or state mandated environmental impact laws which increase the costs of permits and utility hookups and impose fees for park, wetland and transportation mitigation expenses, all of which contribute to increasing the price of homes. Furthermore, a truly free market in real estate would also reject inclusionary zoning ordinances which mandate that developers sell a certain percentage of the homes they build at below-market prices to make them affordable to people with lower incomes. These ordinances typically add more than $100,000 to the price of the average home in the Bay Area, but subsequently prices have been found to rise again, as fewer homes are built because developers tend to abandon cities that impose such mandates.
Such radical measures would substantially increase the country’s supply of affordable housing but, does anyone imagine that, for example, wealthy and liberal Bay Area residents would voluntarily agree to abolish restrictive zoning and welcome affordable, multi-family dwellings into their neighborhoods? Similarly, does anyone imagine that members of the Tea-Party would support the sale of all federal lands, including military bases? Truly free markets work, but they are a revolutionary idea whose time has not yet come.
“After accounting for inflation, regulations are associated with a $200,000 (80 percent) increase in Seattle’s housing prices since 1989, while housing demand raised prices by $50,000. Cities with less stringent land-use regulations had significantly lower price increases due to regulation.” Theo S. Eicher