© by Mark Dempsey
Supervisor Frost’s latest newsletter discounts rent control as a solution to California’s housing affordability problem. She repeats the standard capitalist, market-based nostrums about why this is so:
- We must let the market handle all such problems.
- Limiting landlords’ profits discourages new home construction,
- Etc.
Pretty standard stuff, and practically speaking, an article of religious faith in right-wing America. God has an invisible hand, and no planning or regulation is necessary to have the optimum outcome. All we need is patience...and a substantial savings account.
But this is manifestly untrue. The Great Recession emerged from the unrestricted, deregulated market on Wall Street basically pushing a Ponzi scheme to its logical conclusion. And if you think Wall Street has no stake in the housing market, you’re ignoring the number of rental homes purchased by Private Equity investors like Blackstone...from 0 in 2010 to more than 200,000 now, or the increase in debt service as a percentage of disposable income...creeping up! (Source: Washington Post)
In fact housing is highly regulated, from its finance (FNMA, FHLMC, FHA, etc.) to the actual buildings themselves (building and planning codes). The “free market” doesn’t exist in this area. Rather than "freedom," subsidies pervade this market since interest paid on mortgages is a tax write-off. Unfortunately, renters get no such subsidy.
Sacramento County used to have the best kind of program to encourage building affordable housing. Called “inclusionary zoning,” it required builders to integrate those affordable homes among their existing subdivision proposals. This prevents ghettos and has market acceptance--the most valuable propery in the region, McKinley Park, integrates multifamily homes among the mansions.
Unfortunately, the Supervisors caved when the builders protested, saying they would rather pay a per-square-foot fee than build affordable homes that would integrate poorer people in their subdivisions. The fee they settled on was less than a third of the equivalent inclusionary zoning requirements, so now it's no surprise we have a shortage of affordable housing.
You might wonder why we need to integrate poor people into rich folks’ neighborhoods. Answer: So the rich can appreciate that there’s more to life than money. It’s healthier for all concerned.
So Ms. Frost wants to deregulate a tiny corner of a highly regulated market in a way that favors the wealthy and crushes renters. Of course no one gamed the system to get extraordinary wealth, and predatory rent increases are really just things we must bear without protest...for our own good!
This is consistent with her other positions, and just as clueless and heartless.
Supervisor Frost’s latest newsletter discounts rent control as a solution to California’s housing affordability problem. She repeats the standard capitalist, market-based nostrums about why this is so:
- We must let the market handle all such problems.
- Limiting landlords’ profits discourages new home construction,
- Etc.
Pretty standard stuff, and practically speaking, an article of religious faith in right-wing America. God has an invisible hand, and no planning or regulation is necessary to have the optimum outcome. All we need is patience...and a substantial savings account.
But this is manifestly untrue. The Great Recession emerged from the unrestricted, deregulated market on Wall Street basically pushing a Ponzi scheme to its logical conclusion. And if you think Wall Street has no stake in the housing market, you’re ignoring the number of rental homes purchased by Private Equity investors like Blackstone...from 0 in 2010 to more than 200,000 now, or the increase in debt service as a percentage of disposable income...creeping up! (Source: Washington Post)
In fact housing is highly regulated, from its finance (FNMA, FHLMC, FHA, etc.) to the actual buildings themselves (building and planning codes). The “free market” doesn’t exist in this area. Rather than "freedom," subsidies pervade this market since interest paid on mortgages is a tax write-off. Unfortunately, renters get no such subsidy.
Sacramento County used to have the best kind of program to encourage building affordable housing. Called “inclusionary zoning,” it required builders to integrate those affordable homes among their existing subdivision proposals. This prevents ghettos and has market acceptance--the most valuable propery in the region, McKinley Park, integrates multifamily homes among the mansions.
Unfortunately, the Supervisors caved when the builders protested, saying they would rather pay a per-square-foot fee than build affordable homes that would integrate poorer people in their subdivisions. The fee they settled on was less than a third of the equivalent inclusionary zoning requirements, so now it's no surprise we have a shortage of affordable housing.
You might wonder why we need to integrate poor people into rich folks’ neighborhoods. Answer: So the rich can appreciate that there’s more to life than money. It’s healthier for all concerned.
So Ms. Frost wants to deregulate a tiny corner of a highly regulated market in a way that favors the wealthy and crushes renters. Of course no one gamed the system to get extraordinary wealth, and predatory rent increases are really just things we must bear without protest...for our own good!
This is consistent with her other positions, and just as clueless and heartless.
I also read Supervisor Frost's article regarding rent control. As such, I have two questions for you:
ReplyDelete1) In her article she provided a source that there are virtually zero nationally recognized economists that agree with your position. Why do you think that is?
2) You indicated that you believe her argument is "right-wing". If that is the case, why has California (arguably the most liberal state in America) not even allowed rent control bills to get passed by a single committee?