Dr. Thomas Sowell has some thoughts on the notoriously nutty San Francisco Bay area and its lack of “affordable housing.” Excerpt:
One house in Palo Alto, built more than 70 years ago, and just over one thousand square feet in size, was offered for sale at $1.5 million. And most asking prices are bid up further in such places.
Another city in the Bay Area with astronomical housing prices, San Mateo, recently held a public meeting and appointed a task force to look into the issue of “affordable housing.”
Public meetings, task forces and political hand-wringing about a need for “affordable housing” occur all up and down the San Francisco peninsula, because this is supposed to be such a “complex” issue.
Someone once told President Ronald Reagan that a solution to some controversial issue was “complex.” President Reagan replied that the issue was in fact simple, “but it is not easy.”
Is the solution to unaffordable housing prices in parts of California simple? Yes. It is as simple as supply and demand. What gets complicated is evading the obvious, because it is politically painful.
One of the first things taught in an introductory economics course is supply and demand. When a growing population creates a growing demand for housing, and the government blocks housing from being built, the price of existing housing goes up.
This is not a breakthrough on the frontiers of knowledge. Economists have understood supply and demand for centuries — and so have many other people who never studied economics.
The Bay Area’s political class (and, indeed, most of the Golden State’s governing class) seems to believe that good intentions can override this fundamental law of economics. It’s too bad they are wrong; but it’s also inevitable that they are wrong. Onerous zoning and regulations have continued to drive housing prices through the roof in the Bay Area, and the only answer the city governments seem to have is to interfere with the market more, and more, and more.
This is a smaller scale and yet more extreme example of the kind of market meddling that resulted from Imperial meddling in housing markets due to such well-intentioned but stupid ideas as the Dodd-Frank law. When you artificially meddle with markets, the result is never good.
You’d think these people would learn.
Examples of this kind of silliness abound. Price controls in the Nixon-Carter era led to gas shortages. Attempts to solve the “every family should own their home” led to a housing bubble. Excessive regulation of land use in California has, by restricting supply, wildly inflated housing prices.
Markets aren’t perfect. But left to themselves, they almost always get things right eventually – no planner(s) can possibly match the efficiency of millions and millions of consumers deciding for themselves, freely, how best to expend their own resources.
Dr. Sowell concludes: When more than half the land in San Mateo County is legally off-limits to building, how surprised should we be that housing prices in the city of San Mateo are now so high that politically appointed task forces have to be formed to solve the “complex” question of how things got to be the way they are and what to do about it?
Was it just a coincidence that some other parts of the country saw skyrocketing housing prices when similar severe restrictions on building went into effect? Or that similar policies in other countries have had the same effect? How “complex” is that?
It’s not complex: It’s supply and demand. But it’s apparently too hard for Bay Area politicians to understand.