Trust the Marketplace to Determine Housing Affordability




I’m a Republican. To be more precise, I’m an economic conservative. I have been a conservative since high school. While my friends were marching at the State Capitol and boycotting classes to protest Vietnam, I was working part-time jobs, wondering why the government was using something called FICA to confiscate a portion of my earnings to save for my retirement 50 years hence. Wasn’t that my responsibility? My feeling was (and is), this is my money, and I should be able to do with it as I please. If I don’t set aside enough to live on in my later years, I will suffer the consequences and I will have only myself to blame.

During my first few years of college, I took classes that I found interesting, rather than classes that I needed to earn a diploma – that’s probably why it took me 5½ years to graduate. During those years, I gravitated toward classes offering instruction in both political science and economics. To me, the two were synonymous. I believe it is impossible to appreciate the intricacies of the American political system without also developing a deep and abiding respect for free-market economics. The more I learned, the more I respected the concept of free trade and laissez-faire capitalism, and the more I opposed government subsidies and public-sector manipulation of the economic marketplace.

Adam Smith and “The Wealth of Nations” became the foundation for my beliefs and principles; John Maynard Keynes became the anti-Christ. Modern-day adherents such as Ayn Rand (in fiction) and Milton Friedman (in non-fiction) gave voice to my beliefs. I started to write, and to take actions based on those beliefs. I became opinion-page editor for a daily newspaper so that I could write editorials encouraging others to support those philosophies, and I moved into politics so that I could work to enact laws and policies that are consistent with those beliefs.

I find it amusing that so many people rail against what they perceive as “injustices,” when in fact they just don’t understand the laws of supply and demand. An issue in vogue right now is that of more “affordable housing” in the suburbs. Many well-intentioned but economically-illiterate do-gooders want to share the trials and tribulations of inner-city life with those who had the fortitude and means to escape it by foisting low-income housing and their attendant problems onto the ‘burbs. Just as horses are given blinders so that they won’t be distracted by movement in their peripheral vision, those liberals attempt to blind the public to the realities of the economic system by pretending immutable laws do not exist. They do, whether they want to acknowledge them or not.

The housing market is as democratic as it gets. Home values are determined when men and women work hard to provide a quality standard of living for their families, then “vote with their pocketbooks” to select properties that best meet those needs. Land values and home prices rise and fall based on certain criteria. Parents are willing to pay more to live within a quality school district, so that their children have access to a good education and extracurricular activities. Many homebuyers are willing to pay a premium for a wooded lot or lakeshore property; conversely, they will pay less for a lot that sits behind a shopping center or apartment complex. Being near airports and interstate freeways is a plus, because it shortens travel times, but being adjacent to the roadway or directly under the flight path is a negative, because of the noise and view. Downtown lofts in secure buildings command a steep price, but single-family homes a mile away in crime-infested slums come pretty cheap.

Of course, whether housing is “affordable” or not depends entirely on your situation and perspective; what’s affordable for one person may not be affordable for another. Census data show that the more education you have, the more income you make and the nicer your home. The question you have to ask yourself is, do you believe in rewarding excellence and effort, or do you want to “level the playing field” by providing benefits to those who have not earned them?

If life was a lottery -- if jobs, income and lifestyle were determined by pulling ping pong balls out of a bubble machine -- a case might be made for divvying up housing stock likewise. But life is not a lottery; life is a game of self-determination. For the most part, our stature and status in life has been built brick by brick over a period of decades, changing (for better or for worse) incrementally each time we made one of a thousand small decisions. When we make wise decisions, when we work extra hard or smart, when we pay a price others are unwilling to pay, we move up. When we make poor decisions, when we get lazy or slough off, when we sit still instead of move forward, we move down. We pay a price, either for success or for failure.

Government isn’t a “manufacturer,” government is a “distributor.” It is impossible for government to “create” anything; government merely determines which services it should offer and who should pay for it in what proportion. The next time you ask an elected or appointed official for something, remember: government cannot give something to one person without first taking something away from another person.

On the issue of affordable housing, the “winner” is the person who receives housing greater than that to which they are entitled, and the “loser” is the developer who doesn’t maximize his profit potential or the adjacent homeowner who had to pay more for the same benefit. Too many people want to reap the rewards without putting in the effort. They seek instant gratification without paying the price.

In my case, I currently live in a very nice 5-bedroom, 4-bathroom, 4200-square-foot, two story home on a half-acre wooded lot, within a highly sought neighborhood in a well-respected suburban community. Almost everyone I know would like to be in the situation my wife and myself are in. But I wonder whether they would have been willing to pay the price that we paid.

When we were first married, attending college, we rented a cheap one-bedroom apartment. When we graduated and began working, we rented the first floor of a two- story home. By working hard, saving our money and holding off having kids, within two years we were able to purchase a small, 900-square-foot, two-bedroom home of our own. Two years later, when the first child arrived, we bought a larger three-bedroom home. Both of those properties would be qualified as “fixer-uppers.” We spent much of our time tearing out carpeting, refinishing floors and steaming layer upon layer of wallpaper off the walls. Each house we owned, we bought low, put in some “sweat equity” and sold for a profit (sold them ourselves, thus pocketing the real estate commissions). When our children were nearing school age, we moved out to the suburbs and bought a nice four-bedroom home on a corner lot for more than we could afford, then worked hard for 15 years to pay for it. The home we live in now, purchased four years ago, was the culmination of more than 20 years of work.

I don’t think there’s anything special about what my wife and I did. We had a goal, we were willing to work and we paid the price. I believe that we are better off because we put in that effort. People don’t appreciate what they don’t work for. Giving someone something is a disincentive; it rewards lack of effort and ineffectiveness. In the long run it hurts them more than it helps them.

If someone aspires to live in a certain type of house in a given community, they have every right in the world to set that goal and accomplish it. But it’s not government’s right or responsibility to pick those winners and losers; it’s the place of the marketplace. The more elected officials who believe that, the better off we will all be.

Previous Articles

Determine Your Beliefs
Personal Experience
Half a Loaf
Compromising on Strong Opinions

---

About the Author;
Vic Ellison, Apple Valley, Minnesota, is the father of three and the grandfather of two, and has been married for 25 years. Vic is an independent businessman with extensive backgrounds in politics and writing. He can be reached at Vic@boomerjournals.com