Political analysis is often pointless, given the utter dishonesty with which politicians spew nonsense, especially during an election year. Despite that, I want to zero in specifically on the housing proposals made recently by Kamala Harris—the left’s latest political avatar and presidential candidate.
In building the narrative of her candidacy, Kamala has made a slew of recent remarks about things like price gouging, the housing shortage, and apartment rents. According to her, she has a plan to address those issues. What follows is a high-level analysis of her proposed solutions, such as they are currently.
Friedman’s Boiling Kettle
Imagine you’re in your kitchen. You have water in a kettle on the stove, on high heat. The water begins a rapid boil, threatening to blow the lid off the kettle. At this point, the sensible action would be to lower the heat on the stove, thus bringing down the boil. The harmful and absurd action would be to place a heavy brick on top of the kettle lid and turn up the heat even more. The latter is exactly what price controls and subsidies do, and this approach forms the basis for Kamala’s deranged housing policies.
The Continued Assault on Private Property—Apartment Rents
From the eviction moratorium enacted during the Covid panic to the more recent proposal to cap apartment rent growth at 5% annually, apartment operators are increasingly in the cross hairs of government bureaucrats. Kamala’s housing affordability platform includes restrictions on the use of rent-setting software used by landlords across the country, which she says allows apartment operators “to collude with each other and jack up rents.”
These software platforms work in similar fashion to airline and hotel algorithms. They process available market data, including the occupancy of the subject property, and adjust asking rents on a more or less continuous basis. The idea that landlords collude to “jack up” rents is a canard. Collusion by landlords to increase rents would allow non-colluders to immediately capture their market share by undercutting them. If the quality of the product is comparable, the lower rents will win out in the market, thus harming the colluders.
But the Kamala team has not considered the underlying economic reality—as leftists, they don’t have the capability. Rather, what this proposal entails is turning an economic issue into one of class struggle. The narrative is that powerful landlords are picking on helpless tenants, and Kamala is coming to the rescue. That the tenant class will undoubtedly suffer more due to her policies is beside the point.
Low-Income Housing Tax Credit (“LIHTC”)
Alongside attacking landlords, Kamala has proposed an expansion to LIHTC—a federal program run through state housing agencies that subsidizes apartment developers and investors who build apartment units and then cap rents at a certain ratio of the surrounding area’s median income.
At market costs, such low rents are not economically feasible, so the tax credits are used to bridge the economic gap—a type of financing often referred to as “tax equity.” While meant to increase the availability of affordable rental properties, LIHTC units end up costing more to build than market-rate units. Complex qualifying and compliance procedures guarantee that the primary beneficiaries of the LIHTC program are the developers and investors—primarily banks—rather than the consumers of low-rent housing.
Subsidizing Single Family Homes! Why Didn’t I Think of That?
Central to Kamala’s agenda to make housing affordable again is a scheme to build 3 million new homes over her initial term. This figure of 3 million is in addition to whatever the market would provide naturally. While details are vague, Kamala plans to affect this new construction primarily through—you guessed it—government subsidies. To begin with, she has proposed offering tax incentives to homebuilders that construct smaller, more affordable units.
The first thing to notice is that the cost of things, generally, in the US economy is immediately higher by whatever it costs to implement this plan. The funds required for its implementation are either tax receipts or printed/borrowed money. In either case, they represent a cost burden on the American people, followed by a distribution of that cost from the payers to the beneficiaries—homebuilders in this case, not homebuyers.
By their nature, subsidies allow inefficient producers to compete with those who are more efficient. Inefficient producers rely on subsidies for their very survival. In their absence, such companies would be driven out of the market naturally. In this context, they develop political skills—at the expense of productive talent in their actual industry—that allow them to take advantage of such subsidies. And, since subsidies do not guarantee lower end prices, the result is a poorer product at a higher price.
In this same vein of disturbing the housing market, Kamala has proposed a $25,000 down payment subsidy for first-time home buyers. While this is ostensibly meant to ease the burden and cost on those first-time homebuyers, it will do precisely the opposite. The most superficial analysis will conclude that any direct subsidy on housing will increase the demand and price for housing correspondingly. Higher prices mean higher property tax and insurance premiums, thus doubly stiffing new homebuyers and existing homeowners.
Building in the Boonies
Yet another Kamala proposal involves freeing up federal land for affordable housing. While taking land out of the government’s hands is welcome, this idea will do nothing for first time homebuyers.
The federal government owns land far away from population centers, most of it lacking supportive infrastructure. The US does not have a shortage of similar land that’s privately owned, particularly in the west and southwest. In my home state of Texas, large swaths of the state offer per acre land costs well under $1,000. The issue is proximity to gainful employment. Homesteading on acreage in rural areas is a commendable approach to life, but that opportunity already exists privately and is generally not a fit with the demographic looking for a starter home.
The “Incentive to Intervene”
Politicians in both parties suggest policies that attempt to “fix” the problems caused by prior policies. The current policies cause further damage, resulting in yet more “corrective” policies, ad infinitum. The result is a chaotic and inefficient mess, where the possibilities of a thriving free market are buried under layers of economic policy intervention and political skullduggery.
Paraphrasing Osho—an Indian spiritual teacher who became a viral sensation—democracy is government by the people, of the people, for the people…but the people are retarded. At least most of them are. Kamala Harris and her team know this. They know their proposed policies are inflationary, immoral, and historically ignorant. They are relying on an American voting public wired to insist on action from their political leaders, no matter how foolish.
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