Nov142014

Socialist solutions to housing affordability problems suck

Socialists want to regulate outcomes and deny or ignore the forces of markets. Their solutions to difficult housing problems are dangerously foolish.

“Show me a young Conservative and I’ll show you someone with no heart. Show me an old Liberal and I’ll show you someone with no brains.”

Winston Churchill

Preserve the American DreamBack in September I reported on the big right-wing housing bubble lie. In that post, I pilloried the gross misrepresentation of facts spewed by the right-wing spin machine to advance their political agenda. I also recently lamented that Republican victories may doom mortgage finance reform, and I’ve been a strong supporter of the Dodd-Frank financial reform legislation. From those posts and facts, it appears I favor a left-wing political agenda.

I also recently asked Are evil landlords capriciously evicting hapless renters? In that post I called San Francisco legislators communists and pointed out the errors of their ways. In today’s post I review some extreme left-wing drivel and expose it for the nonsense it is. From these posts and facts, it appears I favor a right-wing political agenda.

In truth, I’ve always been more of a centrist with strong Libertarian beliefs. I believe both extremes are wrong, and at times I embrace the policies supported by one side or the other depending on the wisdom of the proposal, but I rarely agree with the rhetoric or the methods they embrace to move their agenda forward.

What struck me about this post was how well-meaning people can concoct political solutions that are completely and foolishly wrong, a common trait of young liberals. Further, a good writer can stir up emotional arguments, lacking in real substance, to garner support for awful policy ideas. See for yourself, and let me know what you think.

Fighting Back on Unaffordable Housing

Published On November 10, 2014 | By Calvin Priest

Working people in America face a severe housing crisis. …

In cities across the nation, the cost of living is exploding – first and foremost the price of housing. …

housing expenditure

Rent Control – An Essential First Step

Economists commonly define affordable housing as “only” taking up to 30% of household income. But even that is out of reach for a great many households in metropolitan areas, where real estate developers and landlords are making profits hand over fist.

The greedy developer meme makes its appearance.

Let’s assume for a moment that developers are greedy, and they will raise rents or prices capriciously. If they raise prices beyond the ability or desire of people to pay, what happens? Their property sits empty and idle, and they don’t make money. What this author calls greed is merely an owner responding to the forces of the market.rejected

Why would anyone, greedy or otherwise, rent a property for far less than market rates? Let’s assume some idealistic socialist owns a property and wants to rent it for far less than market value for the sake of the community. How would this idealistic socialist owner select a tenant? If a property is offered under market, dozens if not hundreds of applicants will apply. What criteria will this benevolent owner use? Most likely they will select a sycophant who writes a sappy letter, and in selecting the bootlicker, they disappoint the hundreds of applicants who didn’t get the under-market property. Where is the social justice in that?

Rent control, which would tie all rent increases to the cost of living, is an essential first step. It would prevent rental costs from spiraling further and further out reach of working people.

Rents are already tied to the cost of living. Where does this author think renters get the money to pay rent from? People use their current wages to bid for rental properties, and the more desirable the property, the more they will bid for it, perhaps even to the exclusion of other expenditures. It’s a choice, a conscience choice among participants in a rental market.

As Jess Spear, Socialist Alternative candidate for the Washington State House, said: “There is no mystery about rent control. Rent control would set limits and prevent the big property owners from rapidly raising our rents. Developers and their representatives hate rent stabilization laws for a reason – because they limit their ability to make massive profits on the backs of working people.”

free_housesThis is emotionally charged ignorant drivel. Rent control limits the ability of landlords to perform proper maintenance or improve properties that may be dated and substandard. Why would any landlord put money into a rent-controlled property? Out of their altruistic desire to improve the quality of their tenants lives? While that may be a laudable goal, most landlords would put granite countertops in their own kitchen for their personal enjoyment long before they would donate such an improvement to their rent-controlled tenant.

Effective rent control needs to be comprehensive and implemented citywide. This avoids the pitfalls of rent control in cities like New York, where rent-controlled apartments have become an all-too-scarce commodity. The main weakness of San Francisco’s rent control laws, “vacancy decontrol,” must also be avoided. This practice means that rent control only applies for the duration of the tenancy – incentivizing evictions and failing to control rapid rent escalations for all but long-term tenants.

The solution to rent control is not making it even more controlling. Rent control is a failed policy that will continue to fail until futile attempts to correct the errors are abandoned.principal_forgiveness

The surest sign of any policy failure is the advocates for the failed policy contend that it would have succeeded if the policy had been implemented more forcefully or for a longer period of time. Consider the similarities among following policy failures: Vietnam war, Iraq war, war on drugs, abstinence programs, tax breaks for the rich, welfare for the poor, affirmative action, minimum wage laws, Keynesian stimulus, and many others. In each case, the policy was in place for a long time, it was an obvious failure, yet advocates claimed the policies would be a success if we just stayed the course or if the policy were only applied more vigorously.

But in addition to capping rent increases, the shortage of affordable housing must be addressed by building high-quality, below-market-rate, public housing. This would create tens of thousands of jobs and greatly expand the availability of affordable housing, without being dependent on private developers.

PREFAB-ABANDONEDThe below-market-rate aspect of the idea is nonsense, but the idea of increasing supply is the key. We have high housing costs in California because we have a chronic shortage of housing.

Paying for any significant expansion of affordable housing will require a reversal of current regressive tax policies and major expansion of taxes on developers and the wealthy. This is why the fight for affordable housing cannot be waged without a struggle against income inequality and the ending the billions in corporate handouts.

If the wealthy and real estate developers are taxed heavily, they won’t fund new housing developments that directly opposes the goals of increasing the quantity of affordable housing.

Publicly funded construction of housing has to be democratically overseen, by representatives of the communities, the labor unions, and the tenants. This will ensure the best use of resources and avoid waste and bureaucratic mismanagement.

LOL! Has anyone, anywhere ever seen a well managed project overseen by a committee of novices? Such an arrangement would ensure the worst possible use of resources, horrendous waste, and bureaucratic mismanagement. Consider the $200,000,000 boondoggle the city of Irvine just managed.rented_room

Socialist Alternative demands:

  • Comprehensive rent control, implemented citywide, in all major cities
  • No “vacancy decontrol”, and increased protection of tenants’ rights
  • Tax the developers and the rich to fund publicly owned, high-quality housing that is affordable for working people
  • Reverse all cuts for low-income public housing; expand a national program of green growth to build public housing, mass transit, and jobs in an environmentally sustainable way …

That’s a wonderful list of exactly what not to do. If their demands were ever met, it would be a disaster.

Failure of the Profit System

The chaos created by capitalist markets is at the heart of the crisis in affordable housing. Developers build only when and where they can maximize profits. … We need a fundamental shift towards a democratically planned socialist economy, which will use resources in the interests of people and the environment, not the wealthiest 1%.

terminate_ownershipA planned socialist economy worked so well in China and the former Soviet Union, I can see why we would want to implement the same here. ~~ giggles to self ~~

The struggle to make housing a human right is inextricably linked to the struggle against capitalism. …
Socialist Alternative demands:

  • All foreclosures must be halted until a just negotiation takes place to keep families in their homes

What specifically is a “just negotiation?” Didn’t the borrower and the lender have a “just negotiation” when they came to terms in the promissory note? And when the borrower signed the mortgage agreement, weren’t they pledging to repay the loan under the terms of the promissory note?

It certainly appears that the negotiation is already over, and if a borrower is facing foreclosure, they failed to live up to the terms of their previous “just negotiation,” and now they face the consequences. Any further negotiation is not “just” for the lender who provided the loan in good faith.4.2.7

  • For homeowners in negative equity, revalue the principal on today’s market value

Principal reduction is the worst policy option. With foreclosure and bankruptcy, both lenders and borrowers endure consequences for their behavior. The lender losses money, and given the loan practices of the housing bubble, they deserve to lose money. The borrower losses their house and endures restricted access to credit for a time — both of which are appropriate consequences for taking on a debt they could not repay. If neither party experiences these consequences, the mistakes of the past will be repeated. That’s the essence of moral hazard.

  • Stop evictions; police and other public resources should not be used to carry out evictions or any other aspect of the banks’ dirty business

If lenders don’t have the assurance they can foreclose on delinquent borrowers and get their money back, they won’t make loans. Similarly, if landlords don’t have assurance they can evict deadbeats and get their properties back, they won’t lease it. Stopping evictions is the first step toward shutting down all lending and leasing in the housing market.

  • Take the big banks and major developers into public ownership so the resources can be democratically used to provide housing for all

LOL! Any who is going to run the operation once you take it away from the people with expertise?dumb_idea

I was an advocate for nationalizing the banks back in 2008 because the people in charge proved themselves to be incompetent, but the assumption was that control of the new banks would be given to new private-sector experts with banking experience, not incompetent bureaucrats and community activists who know little or nothing about banking.

The same is true for real estate developers. If they find some way to steal the money from property developers, who is going to develop property? It’s not an easy task. It requires experience and expertise, something bureaucrats and community activists completely lack.

The people who support these socialist policies are well-meaning young people who are overly idealistic, and older fools who don’t know any better. If any of their policies were implemented, it would be an epic disaster.

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