A hot-button issue for our local government, when thinking of the “homeless” crisis, and discussed by both primary presidential candidates, is the increasing cost of housing. Even after the November elections, the illusion that cheap housing is essential to American prosperity will perpetuate.
A higher cost of housing is evidence of a strong economy, high demand for new construction, and ample income from the working population — all good.
It is folly that local and county governments blame mental illness and drug addiction simply for being unhoused. Therefore the “remedy” to give folks a hotel room and fully subsidized accommodations as a cure is just delusional.
My contacts inside Los Angeles Mayor Karen Bass’s office estimate that as much as $1 billion of taxpayer monies have been spent by the city of L.A. since Bass took office on simply repairing the damage homeless persons have caused when hosted by city programs. This billion is not the cost of housing, just the cost of repairs resulting from unsuitable tenants.
Government programs that buy up properties to provide for free to the homeless population reduce the number of available units for rent and thus increase competition for those units remaining.
One way to locally reduce the cost of housing is to move the mentally ill, drug addicts, and those who will remain fully dependent on taxpayer funds into permanent treatment centers and free up those units for those who work.
This move would also reduce crime and enhance our quality of life but is likely cheaper than cycling nutcases through luxury hotel rooms.
Since our local government is already in the landlord business, why not use this opportunity to provide subsidized housing to those with steady, although lower income? Meanwhile, city and county agencies can turn a profit.
Another influence on the upward pressure of rent and house prices is computer software that essentially coordinates independent landlords into one price-fixing monolith.
RealPage, Yield Star, and other software applications offer landlords computational tools to include setting rental rates higher than what free markets would typically allow.
A ProPublica article entitled “Rent Going Up? One Company’s Algorithm Could Be Why” discusses “apartment rents had recently shot up by as much as 14.5%.”
The U.S. Justice Department along with attorneys general from several states filed a civil antitrust lawsuit in August against RealPage Inc. for its alleged unlawful scheme to reduce market competition by artificially increasing the cost of apartment rental rates.
Outlawing this practice would absolutely lower the cost of housing.
Another way to reduce the prevailing cost of housing is to diminish the availability of disposable income.
Less income by the working population means lower bidding for housing. Increasing the minimum wage, for example, increases the cost of everything, since more cash is available, and thus raises the cost of housing.
While a recession would help bring down the cost of housing, we don’t want a recession, and holding the minimum wage stable is a good idea.
Most influence on housing costs is a local, not national matter, but national leadership is appreciated where possible.
Vice President Kamala Harris has announced she will advocate “for the construction of 3 million new housing units in the next four years,” outlines actions for creating a fairer rental market, i.e. outlawing price fixing, and proposes “$25,000 in downpayment support for first-time homeowners.”
Offering downpayment assistance only raises downpayment bids for everyone, and this part of her proposal is a dumb idea. However, adding 3 million new housing units increases supply and would lower the cost of housing. Harris’ plan to disrupt monopolies and level the playing field between mega-landlords and renters would be quite effective as well.
Two out of three isn’t bad. Harris’s plan is viable and injects capital into the construction infrastructure.
Former President Donald Trump advocates relying on tax incentives to encourage investments by the rich, removing environmental precautions, and using federal lands for construction.
Trump stated he would lower the cost of housing “by making the economy better.”
In addition, Trump blames increased housing costs on immigrants — “The open borders policies have driven up the cost of housing …”
Building homes in distant federal lands, away from cities, is just impractical and fluff. Limited incomes typical of a new immigrant population actually apply downward pressure on the cost of rent as less income lowers the bid point.
And making the “economy better” literally means that there would be an increase in disposable income and thus prices would rise, not be reduced.
Trump’s proposal is 0 for 3. Par for him.
Jonathan Kraut directs a private investigations agency, is the CEO of a private security firm, is the CFO of an accredited acting conservatory, former college professor and dean, is a published author, and Democratic Party activist. His column reflects his own views and not necessarily those of The Signal or of other organizations.