|Especially in California, where I live, each day seems
to bring a new story about housing problems, particularly those facing
low-income families. There are complaints about housing being not only
hard to find, but unaffordable, whether for rent or purchase.
are exposes about deplorable housing conditions, code violations, and
overcrowding. There are apocalyptic warnings about earthquake risks if
structures aren't made stronger, fire risks if more sprinklers and
smoke detectors aren't required, and health risks if new, tougher
inspection standards aren't imposed. And as ubiquitous as the problems
trumpeted are the calls for the government to fix it through taxing,
subsidizing, regulating, mandating, outlawing, or building.
Unfortunately, seldom does anyone notice that those housing
"scandals" are primarily the consequence of past and present
government interventions in the housing market. Still fewer dare
suggest the real solution: fewer government restrictions.
The constant drumbeat of housing "investigative reports," cut from
their common mold, would be almost farcical, if the problems were not
so serious. But the fact that those problems exist today is
deplorable, because they are the result of willful ignorance of what
has long been understood about the housing market.
For instance, in the 19th century, Herbert Spencer, in works including
Social Statics (1851) and The Man Versus The State
(1884), had already accurately analyzed the problems in today's
headlines as examples of "that increasing need for administrative
compulsions and restraints, which results from the unforeseen evils
and shortcomings of preceding compulsions and restraints. Moreover,
every additional State-interference strengthens the tacit assumption
that it is the duty of the State to deal with all evils and secure all
As can be seen in the following quotes, Spencer's understanding of
housing problems stands in sharp contrast to the simplistic arguments
and shrill demands for the government to fix the latest housing
crisis, which now often passes for analysis.
"...in the case...of the supply
of houses for the poor--it needs but to ask what laws have been doing
for a long time past, to see that the terrible evils complained of are
mostly law made." If that wasn't enough, "The State's misdoings
become, as in the case of industrial dwellings, reasons for praying it
to do more!"
"...houses built in
accordance with the present [more costly] regulations, and let at
this established rate, bring in nothing like a reasonable return.
Builders have consequently confined themselves to erecting houses in
better districts, and have ceased to erect dwellings for the
masses....Meanwhile, in the inferior districts above described, has
resulted an increase in overcrowding....Nay, more than this has
resulted. That state of miserable dilapidation into which these
abodes of the poor are allowed to fall, is due to the absence of
competition from new houses. Landlords do not find their tenants
tempted away by the offer of better accommodation. Repairs, being
unnecessary for securing the largest amount of profit, are not
made....In fact, for a large percentage of the very horrors which
our sanitary agitators are trying to cure by law, we have to thank
previous agitators of the same school!"
"...by prescribing the structure of the housing to be built, and the
extent of yard or garden to be allotted to each, has rendered it
impossible to build working-class dwellings at such moderate rents
as to compete with existing ones. As a consequence...the population
are debarred from the new homes they would otherwise have, and are
forced to live crowded together in miserable places unfit for human
habitation; and so, in its anxiety to insure healthy accommodations
for artisans, the law has entailed on them still worse
accommodations than before."
"...a further penalty on the building of small houses is inflicted
by additions to local burdens...to the cost of each new house has to
be added the cost of pavement, roadway, and sewerage, which is
charged according to length of frontage, and which, consequently,
bears a far larger ratio to the value of a small house than to the
value of a large one.
"...The misery...made continually worse by artificial impediments to
fourth-rate houses, and by the necessitated greater crowding of
those which existed, having become a scandal, Government was invoked
to remove the scandal....What have been the results?...[people]
artificially made homeless, who have had to find corners for
themselves in miserable places that were already overflowing!"
"See then what legislation has done. By ill imposed taxes...it added
to the costs of houses...it established regulations which, in
medieval fashion, dictated the quality of the commodity produced:
there being no perception that by insisting on a higher quality and
therefore higher price, it would limit the demand and eventually
diminish the supply. By additional local burdens, legislation has of
late still further hindered the building of small houses. Finally,
having, by successive measures, first bad houses and then a
deficiency of better ones, it has at length provided for the
artificially-increased overflow of poor people by diminishing the
house-capacity which already could not contain them!"
"Where municipal bodies turn house builders, they inevitably lower
the values of houses otherwise built, and check the supply of more.
Every dictation respecting modes of building and conveniences to be
provided diminishes the builder's profit, and prompts him to use his
capital where the profit is not thus diminished. So, too, the
owner...already subject to troubles of inspection and interference,
and to subsequent costs, and having his property daily rendered a
more undesirable investment, is prompted to sell...at a loss. And
now these still-multiplying regulations...must further prompt sales
and further deter purchases: so necessitating greater
depreciation. What must happen? The multiplication of houses, and
especially small houses, being increasingly checked, there must come
an increasing demand upon the local authority to make up for the
deficient supply. More and more of the municipal or kindred body
will have to build houses, or to purchase houses rendered unsaleable
to private persons in the way shown...this process will work must
work in a double way; since every entailed increase of local
taxation still further depreciates property."
The extent of government involvement in our housing markets has
been mind-boggling. Slum clearance, urban renewal and redevelopment
programs, rent controls, permit fees, development limits, density
requirements, low-income housing mandates, open space and green belt
set-asides, zoning, regulations for everything from earthquake
standards to low-flow toilet mandates, to bans on using PVC pipe for
plumbing, indecipherable and interminable environmental rules, not to
mention a massive and intrusive Housing and Urban Development
And the list goes on and
on. But none of these of the many failures seems to undermine the
faith that doing even more of the same or doing it in a "new and
improved way" will work. This, too, reflects Spencer's insight that
"The advocates of such may claim credit for philanthropy, but not for
wisdom; unless wisdom is shown by disregarding experience."
"As the alchemist attributed
his successive disappointments to some disproportion in the
ingredients, some impurity, or some too great temperature, and never
to the futility of his process of the impossibility of his aim; so
every failure of State-regulations the law-worshipper explains away
as being caused by this trifling oversight, or that little mistake:
all which oversights and mistakes he assures you will in future be
avoided. Eluding the facts as he does after this fashion, volley
after volley of them produce no effect."
Herbert Spencer long ago
correctly understood many of the failures of government intervention
in the housing market that are still with us today, and we ignore that
understanding at our peril. But he also showed that those failures are
just the tip of the iceberg when it comes to harming those
whom legislation and regulation are intended to help. In innumerable
ways, he demonstrated that the results were no different in kind than
that found by the Corn Law Commissioners in evaluating the poverty
programs of his day:
"We find, on the one hand, that there is scarcely one statute
connected with the administration of public relief which has
produced the effect designed by the legislature, and that the
majority of them have created new evils, and aggravated those which
they were intended to prevent."
Gary M. Galles is a professor of economics at Pepperdine
University. Send him MAIL,
and see his Mises.org
Daily Articles Archive.