Housing protesters are looking for answers in wrong places

Forget about government action, a truly free market will make sure prices drop.

Tent city 311 (photo credit: Ben Hartman)
Tent city 311
(photo credit: Ben Hartman)
Having grown up in the US during the Vietnam war, I’m quite familiar with protesting the government. And we all know how that ended. America lost. But during that time, I also learned some marxist code words that sound nice for the media, but have much darker undertones. Now, in Israel there are protests against cottage cheese and housing prices. Sometimes it’s a good idea to learn from history so as not to repeat the same mistakes.
“Social justice” is one such term. It is just a blatant call for communism. Nothing social about it. Nothing ‘about justice’ either. It’s only a call to appropriate private property and wealth redistribution in line with the marxist manifesto of soap opera philosophy and propaganda.
“Affordable housing” is another nice-sounding marxist term. It has nothing to do with “affordable” or “housing,” and doesn’t even pretend to. It is liberal progressive (socialist/marxist) extremist speak for the appropriation of private property through legislation, to make stealing legal. It also covers private property owners subsidizing the renters. It’s just an element of the communist-marxist ideology being put into practice. There is nothing capitalist about it. Rent control in the US is an abject failure, to put it politely. A property owner who makes his or her apartment available for rent should be viewed as a provider of housing, not someone whose assets are to be appropriated by the socialist regime running the place. Rent control and its variants only serves the political class, and always has. In reality, the system was never designed to provide housing for the people who really need it. It was never designed to create additional housing units. It suppresses the creation of new housing units, discouraging repairs and maintenance of existing units, destroying neighborhoods and even cities. It only exists to provide subsidized housing for the voting base, political cronies and hacks. So why do politicians do it? The answer is in political arithmetic. If politicians screw a property owner, they know they will lose one vote, but gain 100 or more from the tenants. The soapopera philosophy of the liberal extremists and socialists who endeavor to provide rent subsidies to people who really need them only backfired. The wrong people, sometimes wealthy people, are frequently found living in these apartments. Removing them is political suicide, so that won’t happen. Furthermore, it does nothing to address the underlying problem, which is a shortage of housing units.
BEFORE APPLYING a solution, a problem has to be properly identified. The symptom here is high housing costs.The underlying problem is a shortage of housing units. If you don’t solve the underlying problem, the symptom can never disappear. The source of the problem is government bureaucracy and corruption. Housing starts in Israel are down due to convoluted land laws, bureaucratic nonsense, bureaucratic bickering, corruption and political correctness. Add to that the bureaucratic obstacles, unions, all the fees and permits – legal and otherwise – that a builder needs to pay and building becomes much more expensive than it needs to be. Getting rid of these unnecessary expenditures will make housing more affordable. I know the liberal progressive (socialists) will scream fits, but 98% of it is hogwash. And frequently most of the kvetchers are those who benefit from the bureaucratic nonsense and corruption.
Politicians are only interested in being portrayed positively by the liberal media and getting re-elected. But eliminating these extra costs probably won’t do anything to get them re-elected. Note that allowing housing to be built for the citizens they purport to represent has no place on this agenda. The current housing protests are only begging for a solution to the symptom, which is high rental and property prices. They’re not really demanding that the underlying problem be resolved. And they are demanding the solution from the problem’s creators. Why they do that I cannot comprehend.
How can one expect the creator of the problem to fix it, especially when they’ll never even admit that they created the problem in the first place?
Rearranging the existing housing unit inventory doesn’t create any new housing to solve the problem. Rearranging tax schemes doesn’t create any new housing either. That only rewards the politically connected for exhibiting the appropriate socialist behavior, or penalizes those who don’t. Believing that politicians can snap their fingers and solve a problem they created in the first place is a socialist fantasy.
Property owners don’t set rental or sale prices. The marketplace does that. For example, if there are 20,000 units available and 10,000 people seeking them, they will be priced at one level. Alternatively, if there are 20,000 people seeking 10,000 units, the price will be significantly higher. A property owner can only ask the market price, whatever that may be. The economic term for this is “supply and demand.” If you ever sat or slept through an economics class, you’ve likely heard this term.
THE CURRENT situation is that demand exceeds supply. One doesn’t really need a bloated government ministry to figure that out.
The government simply can’t legislate supply and demand, although no doubt they’ve it has tried. It just doesn’t work. Ask the soviets what happened to the USSR after many years of planned economies. The system can only collapse.
In the longer run, without government interference, the marketplace will build enough housing to satisfy demand. In the short run, there can (and likely will) be periods of shortages and excess. But the marketplace is self correcting. Governmental meddling usually makes the problem worse, not better. History has taught us that. Legislators worldwide are perpetually obsessed with cooking up schemes to repeal the economic cycles. No government or regulatory bureaucracy has ever been able to do that. Yet we seem destined to repeat the same stupidity.
The only solution is to build more housing. The best, quickest and most efficient way for that to happen is for the government to just get the hell out of the way.

The writer is a recent immigrant from New Jersey living in Karmiel. He has been practicing accounting for over 30 years and has dealt extensively in the real-estate sector.