Here’s a fun question. What happens if the United States government spends $2.5 Trillion to build 10 million new housing units? I’m not just talking about alleviating homelessness, or making housing affordable, both quite laudable goals. I’m also asking, what happens to the value of existing homes? If, quite suddenly, 10 million new homes popped into existence, how many existing home owner would just as suddenly be upside down on their single biggest asset, with mortgages far higher than their home’s plummeting value?
Do you remember 2008? Of course you do. Now imagine 2008, on steroids, with a Saturn V rocket up its posterior.
Folks, I’m a liberal. You’ve probably figured that out by now. But I understand that actions lead to reactions, and you can’t wave a magic wand and change an economy for the better, you can just change an economy and hope the better outweighs the worse.
Why am I asking you this? Because that’s Bernie Sanders’s “Housing for All” plan. You can read it at https://berniesanders.com/issues/housing-all/.
Here’s an interesting tidbits:
Bernie wants a national cap on rent increases, at either 3% or 1.5x the Consumer Price Index. That might sound attractive, but real estate is an intensely local market. What’s good for one community might destroy the rental market in another community.
And here are a couple of pieces that just don’t make sense, outside the larger view that ownership and profit are evil. First:
“Place a 25 percent House Flipping tax on speculators who sell a non-owner-occupied property, if sold for more than it was purchased within 5 years of purchase.”
Seriously? So if a home went into foreclosure, was in disrepair, and was sold for far below the market for other homes in the neighborhood, and some hardworking entrepreneur fixed it up herself and sold it for a profit, you want to tax that to the point nobody will take the risk? Is it really better to let a home sit empty, rotting into the ground? Is there anybody who still believes, not in vulture capitalism, but just in hard work and profit, that thinks this is a good idea?
Second:
“Impose a 2 percent Empty Homes tax on the property value of vacant, owned homes to bring more units into the market and curb the use of housing as speculative investment.”
I think I get it — try to force a landlord to rent a home for a loss, or pay a penalty tax for letting a home sit empty while somebody else needs a place to live. It semi-nationalizes empty home ownership through taxation. Is this really who we are, or what we want to do? Do we want to tell a landlord, often a very small business investor who owns their own home and a rental home, that they will be penalized if they don’t rent the space out for a loss? And again, what is the overall effect on the market, and does Sanders understand that there are negative ramifications to a downward market, in addition to his goal, which is to make housing more affordable?
The irony in the plan, by the way, is gobsmacking. Check this out:
“The rate of homeownership in America is lower today than it was in 1980 and still has not recovered from the 2008 housing crisis. That has got to change.”
Just what, Senator Sanders, do you think was the cause of the 2008 housing crisis? The mechanisms were subprime mortgages, but the problem was that home values dropped below the amount owed on the mortgages. So if the federal government drops four times the entire defense budget into building 10,000,000 new homes, what happens to the difference between the value of existing homes and the amount owed on mortgages?
Yeah, you got it. Steroids. Rockets.
Folks, I truly don’t think Sanders is malicious, or stupid. But he’s so driven by dogma, and the confidence that he can pick up the government and and use it as a bludgeon to beat any problem into submission, that he is utterly blind to the secondary and tertiary ramifications of his actions. And a leader who can’t see past his idea to the results is a poor leader, indeed. We’ve got that now. We don’t need it again.