By Charley Mills
In the first presidential election after the full recovery from the subprime mortgage crisis, which was largely caused by legislation promoting “affordable housing,” presidential hopeful Senator Cory Booker (Spartacus) has released his plan for achieving affordable housing. Thomas Sowell clarifies this way of thinking in his book “The Housing Boom and Bust,” where he explains how the market learns from these mistakes and adjusts with remarkable speed, but “the question is whether politicians and government bureaucrats learn, especially when they pay no price for being wrong, and are able to deflect blame toward the market with denunciations of ‘greed,’ ‘Wall Street’ or whatever other convenient scapegoats are available.”
In Booker’s plan, renters who spend more than 30% of their before-tax income on housing expenses would be eligible for a credit. As expected, Booker did not think this through. The result of this legislation would be that people who spent under 30% of their before-tax income on housing would now be incentivized to spend more than 30% on their housing in order to get the credit. People would be encouraged to purchase housing that they would struggle to afford because if they passed the 30% barrier they would get a free boost in housing extravagance. Along with this credit, Booker seeks to roll “back barriers to federal housing assistance programs to expand access to stable, decent, and affordable housing.” This means beyond the encouragement to spend 30% of an individual’s income on housing, Booker wants to have programs to help in providing money for “decent” housing. Cory Booker’s definition of “affordable housing” has become “you pick out a place to live that you cannot afford, and I will make the government find a way to pay for it.”
Booker would also like to eliminate “source of income discrimination.” This is when landlords refuse renters because they are trying to use a different form of payment, like housing vouchers. The issue here is when a landlord accepts a renter who is using a housing voucher, they must undergo inspection to make sure the housing is up to the standards enforced by the government. While it might seem nice to have legislated requirements that landlords need to abide by, maintenance costs money and the landlord must get this money from their tenants. The other issue with accepting housing vouchers is they can make a landlord subject to rent control. After the housing is inspected, if the government deems the landlord is charging too much for housing then they must reduce the rent. The result is the landlord must have standards that cost a certain amount of money, but they might not be allowed to charge the renters using different forms of payment enough to pay for these standards.
The problem with housing IS government intervention. During the housing boom, while housing prices in California were skyrocketing, some counties increasing $2,000 a day, in cities like Dallas, where the market was mostly left alone, housing prices decreased relatively to the average family income. This crusade to legislate affordable housing has been a political tool as far back as the 1920s when then Secretary of Commerce Herbert Hoover wanted to turn tenants into home owners, and the predictable result was increased home ownership, followed by increased foreclosure. If Cory Booker truly wanted to make housing more affordable then he would fight to peel back housing and land-use regulations that effectively place a price floor on the amount housing may cost.