The Bipartisan Plot to (Not) Build More Housing

Punishing Landlords Doesn’t Fix Punishing Rents

The hero we don’t deserve, the hero we desperately need?

The housing affordability crisis continues to rage across America, unsurprising since only a handful of municipalities have undertaken any reforms to liberalize the sclerotic land use rules that have strangled their supply of homes. While the solutions to the shortage are fairly straightford—read anything else I’ve written here—the politics of getting land-use reform done locally are much more complicated and laborious. You’ve got to change the minds of voters, win elections, and pass ordinances—and even then, reform often crashes against the shoals of an obdurate bureaucracy that seeks to water down or drown even the most widely supported reforms. Incremental change takes a lot of work.

On the other hand, it’s super easy to just announce a nationwide rent control policy.

As President Biden stumbles his way toward the November election, his latest policy proposal struck many of his pro-housing supporters as another blunder. In exchange for certain tax breaks, the proposal would cap annual rent increases at 5%—or is it $55?—on “corporate” landlords with 50 units or more. Landlords who forego the tax breaks would be free to continue raising rents as a tight market demands. 

As are those with fewer than 50 units. 

Or those landlording over new construction.

Or those whose units are undergoing “substantial” renovations and rehabilitations. 

Already bending under the weight of a lot of caveats, the policy would, if passed by Congress, still apply to some 20 million units. As Christian Britschgi of Reason puts it, rent control has a “well-documented history of killing new supply that could undermine all the progress local and state governments have made liberalizing land use regulations.” 

Even Paul Krugman agrees. The White House calls this policy a “bridge to rents stabilizing,” but it is more likely to be a bridge to nowhere.

A divided Congress is unlikely to pass such a dubious policy into law in an election year, so Biden’s proposal is likely dead on arrival, but this isn’t the first time the administration has floated a policy that would subvert the housing reform agenda. The president’s rent control flub also follows a misguided proposal to subsidize first-time homebuyers with a $10,000 tax credit. The former proposal would kill housing supply, while the latter would subsidize demand. 

Yes, there are only two steps in the recipe for “How to Exacerbate a Housing Shortage.”

Because land use policy is largely the province of state and local governments, the feds have few tools at their disposal to address the housing shortage directly. But they do have some levers they can push, and the White House did introduce some other policy proposals that were largely (predictably) ignored by the media. Which is too bad, because although this administration has been of two minds on housing, there are a couple good ideas in there. 

The White House has directed various federal agencies to review whether any of the 640 million acres of hallowed American soil they manage—28% of the country—could be repurposed for affordable housing. Already, the Bureau of Land Management is selling dozens of acres to local governments in Nevada for affordable housing and is considering doing so for hundreds of acres more. Meanwhile, the US Forest Service announced it will lease out some of its land for workforce housing. 

Among the other policy proposals, my favorite would allow the US Postal Service to explore redeveloping some of its 8,500 facilities for affordable housing. While it would be wonderful to see many a strip mall post office turned into more places for people to receive mail, a more nimble administration might simultaneously imagine a win-win way to financially shore up the eminently lovable but chronically loss-making Postal Service and its unfunded pension liabilities. Just an idea: the government could transfer postal assets to the various letter carrier unions, allowing them to reap the pecuniary rewards of real estate redevelopment while liberating taxpayers from the unending burden of subsidizing paper spam.  

But that would of course make the Postal Service corporate landlords…and, well, we don’t want anybody going postal when they find out about the president’s new rent control proposal.

If I’m picking on the president, that’s what political etiquette demands when his opponent is nearly assassinated, but for the sake of our new national-unity “Era of Good Vibes,” I will impartially point out that the right has also promoted asinine ideas about the housing situation. 

Enter vice presidential hopeful and hillbilly whisperer J.D. Vance, who brings his own slate of bad policy inclinations to the Republican ticket. As Britschgi notes, Vance has been a long-time critic of institutional investors like BlackRock, blaming them for crowding homebuyers out of the market. As I wrote in “Blaming the Bogeyman,” BlackRock and other institutional buyers often offer better options for home sellers, who, as 50% of the parties involved in home purchases, merit some consideration. But the homes investors buy don’t disappear; indeed, they often get fixed up and return as rentals, which makes occupying single-family homes a possibility for families who otherwise could not afford to buy one. More to the point, institutional investors own only about 1% of existing single-family homes nationwide, according to Parcl Labs.

Institutional investors are not the cause of the housing shortage, and scapegoating them won’t solve it. Only legalizing more housing will.

While I am loath to make any guesses as to the president’s current acuity, I’m sure he knows that rent control makes things worse—at the very least, Paul Krugman must have told him. And I know that Vance is smart enough to know that BlackRock is not to blame. After all, Vance somehow outwitted the woke mind virus to obtain a Yale law degree, and he even went on to pen an insightful analysis about grievance politics that I guess became his go-to how-to manual.

So why do two ostensibly smart men embrace two plainly stupid ideas?

See, it’s not enough to merely liberate undeveloped forest or postal lands for new affordable housing—you’ve got to attack greedy “corporate” landlords, too, even if your need for vengeance is ultimately self-defeating. Way to self-own the libs! 

Nor is it enough to fall back on time-honored principles favoring property rights and economic opportunity—there’s low-hanging forbidden fruit to pick from much-maligned hedge funds as you race through a hedge maze of moral contortions toward the vice presidency!

In our hyperpartisan moment, our national politicians seem incapable of approaching any issue on the merits—each side needs a mortal enemy. The evil ones are in our midst and must be defeated; this is the most important election of our lifetimes battle of all time!!! Ironically, as Russia menaces our European friends and allies, Vance and Biden have converged on the same foe—and it is American.

I get it; everybody hates corporate fat cats and evil landlords, even though the former produce half of all jobs in America and the latter almost all of the homes. But blame is easy and, well, naptime (or tee-time) is coming up at 4pm.

But this kind of intellectual laziness leads only to sloppy and punitive policies that will make housing affordability worse, not better. More broadly, the blame game gives downstream politicians and policymakers permission to absolve themselves of responsibility for solving a problem that is largely of their making—and within their control to solve locally.

Meanwhile, the loss of institutional investors would lead to fewer options for people struggling with housing affordability, while landlords would do what they always do when the government makes their business models illegal: they become slumlords. Neither would make anyone’s lives better nor build more homes, and none of it would be necessary.

Maybe it's the cultural heroin talking, but if we are truly entering an Era of Good Vibes, then I beseech the leaders of both parties to resist the lazy urge to make punching bags of landlords and to think more expansively and inclusively about how we can solve our national housing crisis together. With an abundance of good will and good intentions, they should embrace an approach that is oriented toward solutions, not blame. This means seeing institutional investors and landlords not as nefarious evildoers, but as people who provide housing. 

They are perhaps not the heroes we deserve, but they are certainly the ones we need. And if you still really hate them, take comfort in the fact that the best rent control policy is a highly competitive housing market in which landlords must compete for tenants—just take a look at Austin.

Punishing rents and home prices are hurting so many Americans, but nothing will be fixed by punishing the people who provide housing. Let’s stop making enemies and start getting things done.

Further Reading

Blaming the Bogeyman