What can Washington do to help create more pro-growth housing policy?
AEIdeas
I’ve definitely written more about tax cuts than creating pro-growth housing policy, primarily through land-use deregulation. Yet when it comes to which is more important for US growth prospects, the balance probably should have been reversed.
Of course one issue seems more a federal concern, the other state and local. What can Washington do to nudge things along, if anything? Well, I asked just that question to Brink Lindsey and Steve Teles when I podcasted with them about their new book, The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality. From the podcast:
PETHOKOUKIS: Is the federal government going to do anything? Or is this all state-level policy?
LINDSEY: So you think, “Zoning, wow, what a localistic problem, thousands of jurisdictions. This is a bottom-up problem.” But most of the macro-economic distortion is occurring in these big cities on the coasts, so it’s really, you know, a couple of states. It’s New York, Massachusetts, and California. Decisions are made hyper-locally now.
They don’t have to be. States can take authority back, as they’ve just done partially in California.
Also the feds have some role to play. They’ve got carrots and sticks. They could offer — in exchange for better city performance on housing permits — they could offer infrastructure money to build the infrastructure that would be needed for all the people moving in. Or they can use sticks: if you like that, you know, mortgage interest deduction, then build more houses, otherwise people in this area won’t be able to use it. So there is leverage that the Feds could exert over this area.
TELES: And you could also imagine a kind of race-to-the-top mechanism which was used in education, where you could say, hey, here’s a big pot of money. The winners of changing their rules around zoning get to compete for that big pool of money.
That’s a way the federal government can actually get leverage over localities. It’s not a coercive mechanism. It’s not forcing them to do something they don’t want to do, but people who want to go out ahead and want to deal with some of the transaction cost, they want to be able to pay off some of the affected interest could do that.
And that also is a way of spreading new ideas and also giving people on the ground some leverage or a kind of — something, a hook they can grab onto.
As an ex-landlord, I’d never buy rental property again. Today’s tenants know that they can pretty much trash a place with no real repercussions. Landlords who obtain a judgment (at their cost), and then attempt to track down (again, at their cost) the defendant, soon learn that it isn’t worth the cost or bother. Renters typically have little to go after, and what assets they do have (like a car) are protected from being taken.
I’d like to see the government pay the judgment right up front (up to a cap, so it would mainly benefit the little investor), and then use their vast resources to track down and get reimbursed from the defendant (if the defendant won’t settle the judgment outright, the government should impose a collection fee including interest). Additionally, these bad tenants should be entered into a database so that prospective landlords can screen them out.
Rental pricing goes down when supply goes up, and as long as a bunch of us ex-landlord types (who have been let down by our toothless justice system) sits on the sidelines, the supply will remain tight.