CLAIM: The government should make housing more affordable.
REALITY: There are several problems with the government getting more involved in affordable housing. For starters, public housing has a long history of failing. Examples like Pruitt‐Igoe and Cabrini-Green were absolute disasters. Also, the government does a horrible job at oversight. Often public housing units fail their inspections and funds are mismanaged.
Furthermore, the government is largely to blame for unaffordable housing prices and increased poverty rates. Strict regulations and fees imposed by the government significantly contribute to the overall housing price. In addition, the government lowering economic freedom increases poverty rates. Democrats want to further interfere with the market/economic freedom by creating rent control. So, the very same entity that created the problem, by interfering with the market, wants to try to solve the problem by further interfering with the market.
If the government wanted to help, it would ease up on regulations and increase economic freedom so that individuals can lift themselves out of poverty. But instead, they are set on using taxpayer money to solve the problems they caused by lowering economic freedom.
Below, I go over more of the evidence about public housing.
GOVERNMENT REGULATIONS CAUSE HIGH HOUSING PRICES
According to a study by the National Association of Home Builders, regulations enforced by the government contributed to an additional $93,870, or 23.8%, of the average home price.
In addition, according to the Cato Institute, “The statistical results show that rising land-use regulation is associated with rising real average home prices in 44 states and that rising zoning regulation is associated with rising real average home prices in 36 states. In general, the states that have increased the number of rules and restrictions on land use the most have higher housing prices.”
Democrats often say that high housing prices or rent are the result of greed from landlords, banks, and building companies— This is false. Greed does not explain how some states have much higher housing prices than other states. One example is Minnesota. In 2017, residents of Minnesota paid an average of 26 percent more on housing than neighboring states.
What caused the higher prices in Minnesota? According to a survey by the Pioneer Press, more costly fees and tougher regulations are the reason for higher housing prices.
According to John Phelan, an economist at the Center of the American Experiment, “Minnesota’s affordable housing shortage is the result of government imposing excessive fees and regulations. It will not be solved by more fees and regulations, like rent control. It will only be solved by getting rid of a good number of these excessive, unnecessary costs.”
THE GOVERNMENT DOES A HORRIBLE JOB OF OVERSEEING PUBLIC HOUSING
The other glaring problem is the government’s inability to keep up with the task. The government isn’t nearly as effective as the private sector. According to a 1991 congressional report, much of public housing is “severely distressed.” Many of the public housing units fail or continuously fail inspections.
According to a 2010 HUD analysis, about 10% of public housing units received failing scores for their inspections. To make matters even worse, the HUD inspectors often pass public housing units that clearly should fail. The HUD inspectors have given passing grades to units that show clear signs of leaks, asbestos, black mold, backed-up sewage, broken AC units, broken furnaces, and lead paint.
This is confirmed by a report by the Southern Illinoisan and ProPublica, “Dangerous buildings that presented immediate health and safety concerns often passed HUD inspections. An August 2017 inspection of a public housing project in Richmond, Virginia, for instance, estimated 820 health and safety violations, but the property passed anyway. The year prior, an inspection report estimated over 1,000 violations in a public housing project in New York City. It also passed.”
PUBLIC HOUSING LEADS TO SOCIAL PROBLEMS AND ECONOMIC DECLINE
Generally speaking, public housing has brought about an ineffective and perilous climate.
Housing projects emanate brokenness and social issues outward, harming nearby businesses and neighborhood property values. A Justice Policy Institute report on Housing and Public Safety found a connection between bad quality public housing and a higher rate of drug abuse, worse mental and physical health problems, decreased educational performance, and lower quality of life.
RENT CONTROL HAS NEGATIVE CONSEQUENCES
Multiple studies show that rent control negatively affects tenants and neighborhoods in the long run.
According to an article written by Economist Rebecca Diamond for the Brookings Institution, “A substantial body of economic research has used theoretical arguments to highlight the potential negative efficiency consequences to keeping rents below market rates, going back to Friedman and Stigler (1946). They argued that a cap on rents would lead landlords to sell their rental properties to owner-occupants so that landlords could still earn the market price for their real estate. Rent control can also lead to a “mismatch” between tenants and rental units. Once a tenant has secured a rent-controlled apartment, he may not choose to move in the future and give up his rent control, even if his housing needs change (Suen 1980, Glaeser and Luttmer 2003, Sims 2011, Bulow and Klemperer 2012). This misallocation can lead to empty-nest households living in family-sized apartments and young families crammed into small studios, clearly an inefficient allocation. Similarly, if rental rates are below market rates, renters may choose to consume excessive quantities of housing (Olsen 1972, Gyourko and Linneman 1989). Rent control can also lead to the decay of the rental housing stock; landlords may not invest in maintenance because they can’t recoup this investment by raising rents. (Downs 1988, Sims 2007).”
WHAT IS ECONOMIC FREEDOM?
According to the Heritage Foundation, “Economic freedom is the fundamental right of every human to control his or her labor and property. In an economically free society, individuals are free to work, produce, consume, and invest in any way they please. In economically free societies, governments allow labor, capital, and goods to move freely, and refrain from coercion or constraint of liberty beyond the extent necessary to protect and maintain liberty itself.”
Economic freedom is based on 12 quantitative and qualitative factors: property rights, government integrity, judicial effectiveness, government spending, tax burden, fiscal health, business freedom, labor freedom, monetary freedom, trade freedom, investment freedom, and financial freedom.
By grading each of these categories by a scale from 0 to 100, a score can be derived for a city, state, or country. The higher the score is, the more economic freedom that area has.
HIGHER ECONOMIC FREEDOM LEADS TO LOWER POVERTY
Numerous studies have shown that the higher the economic freedom score is, the less poverty there is.
The Fraser Institute has found “that countries with institutions and policies more consistent with economic freedom have higher levels of income, more rapid economic growth, and a greater reduction in poverty rates.”
A 2020 study titled “The Relationship between Economic Freedom and Poverty Rates: Cross Country Evidence,” by Colin Doran and Thomas Stratmann of the Mercatus Center, proved that economic freedom is essential to lowering poverty throughout the world.
A 2008 Economic Freedom of the World report by Seth Norton and James Gwartney, found a very strong relationship between higher economic freedom and reduced poverty.
A 2003 study, titled “Poverty and Economic Freedom: Evidence from Cross-Country Data” by Rana Hasan, M. G. Quibria, and Yangseon Kim, found that “economic freedom is as much important for economic growth as for poverty reduction.”
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