By Jack Ryan & John Tamny
In recent years housing has become the byword for “affordability crisis.” How about Wall Street as the solution? Some will scoff at the very notion of big financial institutions as the answer for greater home attainability, but the profit motive and big bonuses are precisely rooted in turning scarcity into abundance.
Take long-distance calling. Back in the 1970s, AT&T could claim a 100 percent monopoly such that a caller in Dallas got right to the point when the phone was answered in Fort Worth. Thankfully, intrepid capital made it possible for companies like MCI to enter a market sector thought to be impregnable, only for the price of long-distance calling to begin a long slide downward.
Investment by its very name is a look into the future, and for ways to put a more expensive past out to pasture. While MCI competed for and won a growing share of the long-distance market, big pools of capital began to migrate toward the replacement of traditional modes of communication.
Cellular phones and networks connecting them in particular emerged from the marriage of future-seeking capital with entrepreneurs unwilling to view the typical landline as the communications frontier. In the 1980s these brick-sized phones set consumers back $3,995 before even a single call was made.
Happily for consumers, Wall Street was yet again in the business of placing the word “former” next to luxuries. Many readers are old enough to have seen this up close as unsatisfied-with-the-status-quo entrepreneurs were matched with institutional-size investment bent on replacing bulky cellular phones and roaming charges of old with sleek supercomputers that fit into our pockets, and that have freed us to communicate globally at all times, and with as many people as we want.
Notable about this increasingly cheap state of commercial play, is that securities markets are attaching the highest valuations to the corporations most successful when it comes to pushing down the prices of everything. Apple is presently at or near the top of the corporate valuation heap for making commonplace in 2024 a device (the iPhone) that the very richest of the rich couldn’t have imagined when the 21st century dawned.
Which is the point about housing. Why should it be different from any other market good? If not, the answer is less in the way of policy solutions, and more institutional capital searching for a more affordable future.
Right now, the kinds of homes we desire and location of same are increasingly out of reach. In other words, a problem in search of capital. Big institutions like Blackstone are already in the process of becoming the biggest homeowners in the world. This exciting search for an opaque tomorrow has unfortunately attracted the attention of legislators on the state and national level eager to maintain the calcified housing present defined by individual ownership, and yes, nosebleed prices.
We say the better solution can be found in Blackstone co-founder Stephen Schwarzman’s “Don’t.Lose.Money” edict, which signals an intent to solve an affordability problem that policymakers have so far been unequal to. While the future is always unknowable, one historical truism about Wall Street is that it’s long rewarded those who produce accessibility at low costs. So why not let Wall Street try its hand at housing?
Republished from RealClear Markets
Jack Ryan is the founder and CEO of REX, a national real estate brokerage.
