Just Darts Since 2009
The law of foreseeable consequences
March 23, 2007Posted by on
Ignoring (or being ignorant of) basic economic principles leads to liberal head-scratching. They know their hearts are in the right place, so why doesn’t utopia ensue?
A case in point:
Habitat for Humanity and Marin County seem like a perfect fit: A well-regarded builder of affordable housing meets a progressive locale acutely short of homes for low-income and middle-class workers.
The two have had a rocky relationship.
Habitat for Humanity volunteers in the county grew so frustrated with neighborhood opposition in the 1990s that they disbanded their chapter of the international organization. Habitat is trying again with four proposed houses just outside this upscale town along San Francisco Bay but is meeting more hostility.
[Bill] Duane says he and his neighbors aren’t “NIMBYs,” the acronym for Not in My Backyard, a label often stuck on affordable-housing foes. Neighbors think the bad traffic around the site on a vacant hillside would get worse, and they say the houses are poorly situated on land that floods in winter.
Let’s quickly dispense with the two objections cited. First, the increase in traffic caused by the addition of four single-family homes must surely be negligible. That’s not the issue. Second, how exactly does a hillside flood? And even if it could, how is that the neighbors’ concern? If Habitat for Humanity wants to build houses there and they’re not violating any zoning laws, surely that’s their business.
The neighbors want to protect their property values. They want their sizeable investments to make money, not lose it. But liberals aren’t allowed to say that. Profit is a dirty word, after all.
The only principle of economics that I can wrap my brain around is the law of supply and demand, but that’s enough to figure out San Francisco’s housing shortage.
First, the San Franciscans love their open spaces. Preservation of open space is referred to twice in the article:
The county’s slow-growth policies keep demand for homes strong, putting them out of reach for many middle-class wage earners.
The county considers Habitat’s site ideal because its fills in an existing neighborhood without expanding into open space. [sic]
It’s certainly reasonable for a community to decide it prefers open space to more development. That’s what local government is all about. But there are consequences to that decision. Limiting development necessarily causes the price of existing housing to rise. And that’s when liberals run into trouble.
You see, it’s a problem that poor (or even middle-class) people can’t afford to live in or around San Francisco. And yet the only solution the free market can provide is to allow developers to come in and build housing on previously undeveloped land, or put more housing units on previously developed land. For money.
So, that’s out. What’s the liberal solution?
Rent control! It’s perfect. A lack of housing results in higher housing prices, right? Not if you institute rent control, it doesn’t! That’ll teach those greedy landlords! Except that doesn’t work, either. If you’re living in a rent-controlled apartment, the only way you’re vacating it is on a gurney. So now, we’ve got legislated open spaces artificially reducing the supply of housing, and rent-control reducing it further still. Poor people just can’t get a break.
So now what’s the liberal solution?
Mandated affordable housing! Force any builder who can somehow find a spot to erect new homes to sell 20% of them for below-market levels. Now, who wouldn’t jump at a chance like that? Builders who want to make a profit, that’s who. Habitat for Humanity wants to do it, because it’s a charity. It’s not looking to make a profit.
These well-meaning, compassionate people with their well-meaning, compassionate legislation are causing the problem they seek to alleviate. In a complex system, this is called the law of unintended consequences. But seeing as this is just supply and demand, I’ll call it the law of foreseeable consequences.
Now, a good question might be: How many houses could Habitat for Humanity build for the price of four houses in perhaps the most expensive real estate market in the country? But that’s really not my point here. It’s their money, and they can damn well do what they want with it. If donors don’t like it, they can give their money to another charity.
My point is that Habitat for Humanity wouldn’t have to build any homes in the San Francisco area if builders, motivated by profit (gasp!), were allowed to supply the demand. If only that appealed to liberals’ emotions as much as rent control or mandated affordable housing. Those compassionate measures have caused San Francisco to have the highest rate of homelessness in the nation. Poor liberals. Their hearts are in the right place. But their heads are… well, you know.
Further Required reading:
Pricing 101 by Thomas Sowell (Thomas Sowell is always required reading.)
NB: I’ve criticized Republican Governor Jodi Rell for similar economic ignorance here.