Recently there have been many people publicly bemoaning the unaffordability of housing in California. So the lawmakers in Sacramento have sprung into action by proposing more than 130 bills that try to “tackle” the issue.
Included in these is a bill that would provide a fund of $100 million of taxpayer money to help build housing for teachers, who otherwise would not be able to afford to live in their school districts. But the only law we really need to employ is the law of supply and demand.
Think about it this way. If you were an investor, why would you invest in building apartment buildings if the rent was being capped by rent-control laws which would keep you from being able to get a maximum return on your investment. You would put your money elsewhere – which directly results in a scarcity of apartment units which, in turn, drives up the rents.
Even worse, if you were an investor who already owned apartment buildings that were subject to rent control, you would do everything you lawfully could to convert your units into condominiums – or parking lots – so that you could get a stronger return on your investment.
Of course, rent-control laws do help those who are fortunate enough already to have a lease for below-market rates. But even those few are socially harmed because they are rightfully fearful to move and lose those benefits, while other renters are frozen out of the market due to the scarcity of available housing.
And if that isn’t enough, these serious but foreseeable problems are compounded by the fact that about 25 percent of the cost of building new homes, apartment buildings or condominiums is spent attempting to comply with basically unnecessary government regulations. This is what has fueled the unaffordability of housing.
The resolution: Employ Liberty! Reduce government involvement and allow the market to satisfy the demand, and this government-generated crisis will be a thing of the past. In other words, get the government out of the affordable housing business, and let liberty handle it. That will be what works.
(Photo of a view of San Francisco’s famed Painted Ladies victorian houses in February 2014 by Justin Sullivan/Getty Images)