Sowell: The 'Affordable Housing' Fraud

Creators Syndicate ^ | September 29, 2015 | Thomas Sowell

[jazusamo]

Nowhere has there been so much hand-wringing over a lack of "affordable housing," as among politicians and others in coastal California. And nobody has done more to make housing unaffordable than those same politicians and their supporters.

A recent survey showed that the average monthly rent for a one-bedroom apartment in San Francisco was just over $3,500. Some people are paying $1,800 a month just to rent a bunk bed in a San Francisco apartment.

It is not just in San Francisco that putting a roof over your head can take a big chunk out of your pay check. The whole Bay Area is like that. Thirty miles away, Palo Alto home prices are similarly unbelievable.

One house in Palo Alto, built more than 70 years ago, and just over one thousand square feet in size, was offered for sale at $1.5 million. And most asking prices are bid up further in such places.

Another city in the Bay Area with astronomical housing prices, San Mateo, recently held a public meeting and appointed a task force to look into the issue of "affordable housing."

Public meetings, task forces and political hand-wringing about a need for "affordable housing" occur all up and down the San Francisco peninsula, because this is supposed to be such a "complex" issue.

Someone once told President Ronald Reagan that a solution to some controversial issue was "complex." President Reagan replied that the issue was in fact simple, "but it is not easy."

Is the solution to unaffordable housing prices in parts of California simple? Yes. It is as simple as supply and demand. What gets complicated is evading the obvious, because it is politically painful.

[rey]

“environmental laws have socialized so many assets on the land as to have depressed its value for anything but development. “

I can see that. I also think it may make it valuable for set aside requirements, which I see as a variant of development, and little more. But how can you say if such restrictions make it too costly for anything other than development that it is not a supply and demand issue? Doesn’t the restriction distort or limit supply? Wouldn’t loosening restriction increase supply? When supply meets or exceeds demand doesn’t price adjust? I think you and Sowell say the same thing but slightly differently.

“The distortions are everywhere, and politicians run around plugging them with yet more dirty deals.”

This I can buy 100%. It is no mistake that local city councils and county board are comprised largely of realtors or property investors. The result is they stack the deck in their favor. No one ever seems to wonder how many of our public officials earning tens of thousands to hundred of thousands a year are often millionaires. How can a president who make $400 K a year be worth $1.3 million in 2007 and in excess of $7 mill today? The same is true for senators, representatives, and our local officials. It is dirty and crooked. Sowell does not address this as he is an economist not a reporter.

I do not think Sowell says land would be cheap if there were no regulation and I do not think you can quote him on saying so. I think he implies that it would reflect a truer market value if it wasn’t warped by the distortions you note.

[Swordmaker]

They used to have a website called “Crackhouse or Mansion” which showed random pictures of houses in Vancouver, Canada.

Some of them were crack houses which had been raided by the police. Others were real estate listings which had recently sold for over $1 million Canadian.

It is sorta like how some properties can be worth a lot of money when you wouldn't think it. . . Location, location, location. For example, what would you say this little two bedroom, one bath house is worth?

It might help to know it is in Bellevue, Washington.
It's on a 5900 square foot lot. . . if that helps.

My property manager guessed between $160-$200 thou.

Would you believe it sold in May for $3.9 Million? Yup. It's the last lot in Bellevue that has lake shore access to Lake Washington that has not had a McMansion built on it. Zillow says it can accommodate a three story 6,000 square foot house. All of the rest of the houses on the same dead end street as this little shack are at least that size and are listed at $5 million and up. My girlfriend and I spotted this little house with a sold sign on it when we were in the Seattle area two weeks ago, the shrubbery all dead, and weeks grown up, all around it. We wondered what it would take to live in it, so I looked it up. As I said, "Location, location, location!"

[Darteaus94025]

Lefties think of people as serfs, not a citizens.

[Carry_Okie]

There is no “housing shortage”. If there was a shortage, construction would be up, because nothing drives up prices (and therefore profits for builders) like a shortage.

As I said, grossly oversimplified. There are multiple markets for real estate involved such that a single variable demand curve is bogus for which we have the substitution effect and indifference curves. Sowell knows it.

[kvanbrunt2]

Would you believe it sold in May for $3.9 Million?
thst’s why it’s called real estate not houses. Houses are improvements.

[Swordmaker]

thst’s why it’s called real estate not houses. Houses are improvements.

My girlfriend and I figured that little house was occupied by a long time owner, a little old lady or man who refused to sell until nature and the grim reaper caught up with him or her. Now the heirs, or the county administrator of estates, has auctioned it off to the highest bidder who will build a McMansion on the lot.

[RipSawyer]

“But if it is located in Bel-Air it would be worth many millions.”

Well, to be technically correct wouldn’t you say that the lot it sits on would be worth millions and the house itself would have a negative value? Wouldn’t the lot be worth MORE WITHOUT such a house on it?

[driftless2]

Well, I heard from someone named Madeleine Albright that America has vast tracts of land to house new and future immigrants.

But only for immigrants.....people already born in America, you know, native Americans, should be living in 10x12 boxes in huge megalopolises. No land for them.

Basically, liberals are saying: "screw you native born Americans....immigrants, legal and immigrant are far more important than you. But dear immigrants, please don't move near me or other liberals. We need our space."

[Vinnie]

A recent survey showed that the average monthly rent for a one-bedroom apartment in San Francisco was just over $3,500.

No problem, the minimum wage has been raised to $15/hr.
Yeah, that should do it.

[ladyjane]

They could have bought every single man, woman, and child an entire house EACH for 1/3 of that.

And that house would have been trashed within a year.

There's a neighborhood near here that is all run down but it has a good location. Developers have been going in building $450,000 houses and the residents are outraged. They claim housing is getting too expensive for them to continue to live in their neighborhood. Huh? That's crazy.

Most people would be thrilled to live in an area that is being beautified and values are going up. These people don't want their houses to be more valuable. Stupid is as stupid does.

[This I Wonder32460]

No riding lawn mower, how about a small herd of goats or a couple of horse?

[This I Wonder32460]

More like a lack of houses for the realtors to sell. A lot of the squawk about a lack of housing is by those who make money, the developers, the realtors. I’ve lived in my home just over 20 years, my parents in theirs 50 and my grandmother about 68 years and of course this is a big problem because there are people out there looking to buy homes like us. So of course we should move shouldn’t we? How selfish can we be, keeping someone from getting a commission and keeping someone else out of “our” home as we happen to like our home and plan to stay put. Which in some eyes makes us all mean and greedy. Hahahaha. Barely getting by and gonna stay put as long as we can afford to do so which many people do.

[Rodney Dangerfield]

Just as bad here over the GGBridge in Marin County.
Hard to save for retirement when half your income goes to having a roof over your head.

I’ll be living in Thailand hopefully around the time the next POTUS is sworn in.

It’ll be nice spending $300 a month instead of nearly $3,000 just on housing.

[lacrew]

“No riding lawn mower, how about a small herd of goats or a couple of horse?”

In Kansas, farming and raising livestock is strictly protected against zoning laws. But laws and distinctions are creeping in, which aim to distinguish between a ‘real’ farmer and the rest of us. An example would be that a recent ordinance prevents me from putting a metal building on my property without a permit. I do have a few horses, but a one person jury (planning director) would probably deem that I am not a real farmer, and subject me to his code.

Anyway, for now, I can have horses eat my grass...but sooner or later that will be gone.

[Swordmaker]

Sowell doesn't know what he's talking about. He's discounting that the reason the land would be cheap if the restrictions were lifted on development is that environmental laws have socialized so many assets on the land as to have depressed its value for anything but development. The distortions are everywhere, and politicians run around plugging them with yet more dirty deals.

I am sorry Carry, but I too am an Economist and Sowell DOES know what he is talking about. It looks like your book has little to do with economics but more to do with the Environmental movement pressures. . . but those are economic too. Just because choices place ENVIRONMENTAL economies over other economic choices. . . doesn't mean that Sowell doesn't understand those choices.

Liberals are making those choices that are placing the pressures on the people least able to afford the economic costs of those decisions. Those liberals don't think of those choices as being economic at all. . . or even as having economic costs attached to them. It just makes them feel good and they think they can afford such nice things off in the distance as open space down there or over there or even in "my neighborhood", as in their minds, everyone else can.

I think you probably have an intuitive handle on the same issues that Sowell is pointing out Economically, and if you were to discuss it with him, you, he and I would wind up on the same page, just from different approaches. The environmentalists have a hammer, and everything the see is a nail. . . bang! There is a mix which would take into account the environment, housing demands, water, AG, power, etc., but the environmentalists use their hammer to BANG everything and nothing can happen as long as they use their hammer on everything in sight.

Your book sounds interesting. . .

[Swordmaker]

There is no “housing shortage”. If there was a shortage, construction would be up, because nothing drives up prices (and therefore profits for builders) like a shortage.

There's a housing shortage of affordable housing. . . where people want to live. A lot of it is caused by Liberals being unreasonable about building codes.

[Carry_Okie]

I am sorry Carry, but I too am an Economist and Sowell DOES know what he is talking about. It looks like your book has little to do with economics but more to do with the Environmental movement pressures.

Oh, is that what the analysis of 14,000 real estate transactions on a real-time opportunity-cost, inflation adjusted basis against the 30-year bond is about?

I three am an economist, besides having an engineering degree.

Just because choices place ENVIRONMENTAL economies over other economic choices. . . doesn't mean that Sowell doesn't understand those choices.

The book proposes market-based means to account for the trade-offs between environmental externalities, mitigations, offsets, and risks with pricing determined without any interference by government or academics for which I was awarded a business method patent that is capable of invalidating the Bartels carbon trading patent by prior art. Try reading a little more before posting. M-kay?

[Swordmaker]

Well, to be technically correct wouldn’t you say that the lot it sits on would be worth millions and the house itself would have a negative value? Wouldn’t the lot be worth MORE WITHOUT such a house on it?

Such a house is an irrelevancy. When my wife and I moved to Stockton, California, in 1978, one of the houses I looked at was selling for $165,000. It was a nice five bedroom with a huge game room/den over the garage and a free form swimming pool. It was located on the corner of Meadow and Parkwoods. . . an upscale area. It was more than I needed and slightly out of my target price range at the time. We bought a house about a half-mile away in the same neighborhood. I noticed it sold for slightly above the asking price just after I lookie-Looed the property.

Shortly after we moved in our new place, I was driving down Meadow and much to my surprise I saw a bulldozer running through the front picture window of that very nice house! Over the next three days, they knocked the entire house down, jack-hammered out the pool and filled it in, and turned the corner into an empty lot. They then proceeded to build a new single story five-car garaged house there.

I researched the purchase and discovered it had been bought by Alex G. Spanos, owner of one of the largest Real Estate Empires in Norther California, a multi-billionaire, and in 1984, owner of the San Diego Chargers! He bought the property to build a house for his mother. He lived in an inconspicuous house around the corner on Lincoln Road. The same week he bought that house he bought the TransAmerica Pyramid in San Francisco for $78 million, so I guess he can afford to tear down a real nice house for a bare lot. LOL!

Funny thing, his mother's maid and driver conspired to kidnap her and hold her for ransom from that house. . . which caused him to build his new estate on Lincoln Road. . . a walled, gated with guard houses mansion worth a couple of hundred million. My property manager who has done my renovations and is now renovating my girlfriend's rental property, did much of the sheetrock plaster work inside. He says it's gorgeous. Spanos got it done in time to come down with Alzheimers. Sad.

In any case, there were empty lots available within a quarter-mile that could have been purchased for $8,000 of equal size. . . I'd estimate it probably cost about that to tear down and haul away that other house. Po¢ket ¢hange.

[Swordmaker]

The book proposes market-based means to account for the trade-offs between environmental externalities, mitigations, offsets, and risks with pricing determined without any interference by government or academics for which I was awarded a business method patent that is capable of invalidating the Bartels carbon trading patent by prior art. Try reading a little more before posting. M-kay?

I said we'd probably be in agreement. . . LOL!. . . and so would Sowell. I think you are erroneous in disagreeing with Sowell on scant evidence from a 500 word essay, is all. Sorry about my wording.

I sure hope your patent DOES invalidate that damn idiotic idea of trading carbon credits. . .

We can be two or four of those economists who laid end to end will never reach a conclusion. Just don't kick too hard. . .

[Carry_Okie]

I said we'd probably be in agreement. . . LOL!. . . and so would Sowell.

Sowell is too busy pontificating at a kindergarten level to really grapple with this kind of topic, partly because he lacks the technical background in ecology I now have. When I was writing the book, he refused to even look at a summary despite the fact that it had quantitative analyses of what he was writing about in principle. I was so far ahead of where he was going it was pathetic, showing how free markets using the lowered cost of massive data analysis and communications with intelligent agents drafting contracts could optimize the balance among the myriad possibilities in ecological resource land uses with currently intangible and unaccounted aperiodic risks and industrial demands. It left those idiots at Stanford touting Gretchen Daily and their "nature's services" scam in the dust. Henry Lamb told me in 1999 it would be fifty years before people would be ready for it. Hi might have been right, but somebody had to do it.