Let Me Explain the Housing Crisis

The US has a housing crisis. You've probably seen it for yourself, because buying a home or renting an apartment is almost impossible right now. Prices and rents are way too high, and even if you can afford it, there's almost no houses on the market right now.

Part of it comes from inflation, the result of the flaming train that is unregulated government spending. As a refresher: when the government spends too much on something, the increase in demand of one good means that the price of that good increases. If the price of wood increases, for example, businesses that need that wood for maintenance will increase the prices of their products to be able to keep their income. This cascades down the economy, eventually leading to extremely high housing prices.

Another part of it comes from there simply not being enough houses in the first place. It's hard to move out from a tiny apartment when there are no townhouses being sold that meet your requirements. It's hard to buy a house when you can't find one you like and can afford while you scroll on Zillow.

This means that a lot of people compete for every single house, and the current owners start charging more or accepting the highest bidder.

Which means that it's even harder to find a place to live now. Great.

We've tackled the inflation problem in previous posts (the government should spend less), but tackling the supply problem is a bit more difficult, and a lot of solutions that seem obvious at first glance don't actually work.

A lot of people propose having the government spend money to build more homes. If you've been paying attention to my blog at all, you know that this is counterproductive. All it does is increases inflation, making houses more expensive. It also makes homes harder to build because prices go up, leading to yet another government spending spiral.

Instead of having the government do it, we should turn towards the private sector.

Real estate companies are competing over ownership of homes that exist right now. They're not building any new ones because, well, construction materials are way too expensive. The way to go about lowering these prices is to decrease government spending and make these materials more affordable. This creates an incentive for the private sector to start building homes.

Once more homes get built, competition for each home decreases. Prices decrease as a result.

Only lowering government spending, though, won't solve the problem. The private sector won't build homes if they're restricted by zoning regulations.

Zoning regulations limit, for example, how high buildings can be built. They outline certain areas in red tape and say that only single-family homes can be built there. They create a whole host of problems for the private sector when it wants to build a high-rise apartment building.

I can hear the people screaming, saying that high-rise apartments "ruin the picturesque suburban neighborhood." I can hear them pounding on the (metaphorical) door, lamenting the loss of the perfect American life.

That life doesn't have to go away. If 100 families can now be housed in a much smaller area (in an apartment building), all that does is frees up space in suburban neighborhoods for larger homes. It takes the pressure off builders in these neighborhoods, who had to compete for land with other builders before.

All we have to do is tear into overgrown zoning regulations  like they're our favorite type of food.

So we have our solution to the housing crisis. We need to decrease government spending (I feel like this is becoming a common theme lol), and tear into zoning regulations to give the private sector the ability to build these homes.

Thanks for listening.

P.S. This is completely unrelated but check out Avril Lavigne. Her songs are great.