Housing, Like Oil, Is Not As Simple As Pundits Want It To Be
“Please God, give me one more oil boom. This time I promise not to piss it away.” It was a popular bumper sticker in Texas in the 1980s.
It’s worth remembering as experts who’ve never built houses, and who’ve surely never borrowed the money necessary to build houses, tell us the solution to the alleged “housing crisis” is simple: Just build more houses. But for one problem, according to the pundits: governmental barriers to building.
Take AIER’s Julia Cartwright in the Washington Post. In an otherwise excellent piece revealing the foolishness of blaming private equity for elevated housing prices, Cartwright threw a bone to the simpletons who dominate the housing discussion with a line about how with supposedly expensive housing, “the real culprit is regulation. Minimum lot size requirements and single-family zoning mandates make it illegal to build densely in many of America’s most desirable cities. Long permitting timelines, costly materials and tariffs all exacerbate the problem.”
Oh well, and in a paraphrase of H.L. Mencken, you can never go broke writing what everyone else writes. Cartwright tells us the fix for housing is as simple as deregulation that will enable more building. The solution most certainly has an appealing quality to it, particularly right now as right and left claim the housing solution is as simple as more supply.
Still, what everyone believes in the pundit class is what should have readers skeptical. Barriers to housing construction as the cause of nosebleed housing?
Not asked enough is that if so, what happened in the 2000s? And in asking the question, it might be worth it for readers to travel back in time to the myriad books and studies produced by members of the free-market right in particular: they all said government meddling then (remember Fannie and Freddie, the Community Reinvestment Act, and all manner of other spurs to housing growth?) resulted in “overbuilding”?
The not-so-distant past raises an obvious question: was housing easy to erect in the 2000s, but “this time is different”? If the question reads as flippant, that’s because it is. The idea that building was easy then, but hard now, isn’t serious. What Cartwright fingers as “the culprit” of allegedly expensive housing today in an odd way implies that the 2000s didn’t happen.
Except that they did. And they’re a reminder that far more than excessive regulation at work, the biggest driver of an alleged insufficiency of supply is that home builders, like oil men, recognize just how risky it is to produce new supply.
All of which calls for an absence of fixes from a left that thinks government can do everything well, and a right that disagrees with the left while offering numerous government solutions to everything. Policy is always and everywhere excess.
What’s not excess is allowing the people in the proverbial arena to do as they wish. If so, rest assured that policy won’t get in their way one way or the other.
What will, however, is the reality that the present in commerce is a lousy predictor of the future. As the Texas bumper sticker from over 40 years ago hopefully reminds readers, the prices of today are frequently not the prices of tomorrow.
Home builders of some vintage know the above truth intimately, as do oil men. Policy experts ever eager to foist their ideas on price signals plainly do not as their simplistic solutions indicate.
Originally published on Real Clear Markets.