OPINION:
Three of my children recently became first-time homeowners. They all had to compete with other buyers who bid above the asking price for the home in the Washington metropolitan area. I heard lots of complaints about a shortage of houses that has led to a persistent seller’s market. Yet I also heard complaints from my would-be homeowners about competition from large institutions driving up the costs of homes and rents.
As I saw them struggle to get a home, I decided to do a little research to see whether Wall Street was sticking it to my kids trying to grasp the American dream. What I found was economics 101 at work. Low supply, high demand and innovative American companies trying to respond to meet part of that demand.
At the heart of the problem is the lack of supply of single-family affordable housing caused by none other than the politicians who scream the loudest about the shortage. Left-wing regulatory policies to retard the development of land, delay construction, and drive up the costs of materials and workers have stymied the construction of new homes, thus limiting the much-needed supply and driving up housing costs. A recent National Bureau of Economic Research study found that if the country had kept building homes at the same rate from 2000 to 2020 as we did from 1980 to 2000, 15 million more housing units would be on the market today.
Do you think 15 million more new homes in high-demand areas would lower costs for hardworking families?
This problem is not going to improve until voters in high-demand areas toss out the politicians who impose anti-development zoning laws and regulations, allow permitting processes to be buried in red tape and stoke a NIMBY (not in my backyard) culture. Let’s face it: Fewer voters are looking for homes than those who already own homes, so politicians have little incentive to deal with the issue.
So when homebuyers complain, they simply find a scapegoat to divert attention away from the problem. First, they went after real estate agents to lower their fees. Now they are after big corporations for outbidding the would-be homeowner as the reason for high home prices.
The reality is that the market is simply responding to reverse the high home price crisis created by the government by buying and building more single-family rentals and making them affordable to families priced out of the homebuyer market.
Single-family rentals create pathways for working families to pursue the American dream and own a home. These affordable housing options allow families to access better schools and safer neighborhoods while saving for down payments for their dream homes. Single-family rentals offer working families the chance to live in stand-alone dwellings without worrying about mortgage payments, property taxes and other costs associated with homeownership.
The benefits are proven. Recent studies found that increased access to single-family rentals allows low-income families to enroll in better schools, and children exposed to high-opportunity neighborhoods at an earlier age earn significantly more income as adults than those who move later in life.
Unfortunately, federal, state and local lawmakers are trying to drive professional housing providers out of the housing market entirely by restricting their ability to own, revitalize and build.
By proposing punitive taxes, ownership caps and burdensome oversight on professional housing providers, lawmakers are wasting time and energy that could be dedicated to crafting practical solutions to the housing crisis and choosing to embrace policies that have proved to “limit renters’ options and depress current property values.”
I found that narratives claiming institutional investors are “dominating” the housing market don’t comport with the facts. According to the data analytics firm Cotality, smaller investors, such as “mom-and-pop” landlords and fix-and-flip buyers, are leading the charge in the U.S. housing market. Similarly, a recent Wall Street Journal article found that, in the first half of this year, small investors made up about 25% of single-family home purchases while large investors accounted for only 5% on average.
Punishing housing investors does not make any progress. It may only worsen the crisis. Larger investors are already pulling out of the market, but as the Mercatus Center has stated, these institutions are “the only market segment capable of filling the gap of supply at scale.” If lawmakers continue to deter private investments, more capital will leave the housing market, fewer homes will be restored, fewer communities will be built, prices will jump, and we will be back at square one.
Policymakers ought to promote initiatives that support investments in American neighborhoods for working Americans. This can be done by overhauling the permitting and zoning processes and realizing that the government needs to lean on the private sector for more support in solving the housing crisis, rather than driving them away.
• Rick Santorum is a former U.S. senator from Pennsylvania.
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