Local governments could end the housing crisis by becoming landlords. My brother suggests governments buy up existing housing, including expensive condos, and rent it at affordable rates.
This idea is not as far-fetched as you might think because market inefficiency causes housing crises in many American cities. Sixqft estimates there are nearly 250,000 vacant apartment rentals in New York City for example.
Therefore, 11% of the apartments are vacant in a city with an estimated homeless population of 61,697. In particular, there are 15,032 homeless families with 22,384 children in the Big Apple, the Coalition for the Homeless estimates.
New York City could eliminate homelessness by buying a third of those vacant apartments and making them available to the poor. Interestingly, the solution will be cheaper than housing vouchers, shelters, and “public housing.”
Why Government should Buy Housing to end the Housing Crisis
There are some exciting potential benefits to a government program of existing housing purchases that include:
- Driving down excessive rents by purchasing existing homes and renting them out at below market rates. My suggestion is rent the homes out at half or one third of market value.
- There would be no need for expensive public housing construction.
- We can preserve traditional neighborhoods and prevent gentrification.
- We could eliminate rent subsidies; or housing vouchers, which are just welfare for landlords.
- We can eliminate rent control; which gives property owners an incentive to demolish housing.
- We could drive slumlords out of business by offering better housing at lower prices.
- The existing housing stock will probably be far better than public housing. Real human beings might want to live in it.
- Cities will need less bureaucracy because we could eliminate agencies that administer public housing. Government can hire existing management companies to rent and maintain the properties.
- We can create building management and maintenance jobs.
- Neighborhoods will be more diverse because government can rent to everybody not just whites or the affluent.
- We can eliminate all the problems created by empty housing stock, such as homeless sleeping in them, and deterioration.
- We can protect property values by filling empty housing.
- It can eliminate housing that caters to transient populations.
- We can drive Airbnb and time-shares of areas by eliminating the properties they rent.
- Cities can create stronger neighborhoods by bringing in more middle and working-class families.
- Cities can end homelessness and all the problems and expenses it creates.
- Cities can incentivize construction of affordable housing by giving builders a guaranteed market for cheaper homes.
- Cities can create a steady market for affordable housing. That can eliminate the boom and bust cycle that makes it difficult for homebuilders to survive.
- Cities can create large numbers of steady high-paying construction jobs with constant housing construction.
- We can lower property taxes by discouraging the construction of luxury housing.
- Cities can discourage the construction of luxury housing. Luxury housing is bad because it drives up rents and property taxes. Obviously that hurts the working class.
- We can create a housing market that serves the middle and working classes.
- Cities can encourage home ownership by allowing families to buy government owned housing units.
- Communities can set housing aside for groups like seniors, veterans, government employees, teachers, the mentally ill, the poor, ex-convicts and the homeless.
- Local governments will reduce expenses by eliminating homelessness. For instance, it will spend less tax money on jailing the homeless or cleaning up after them.
A Method of Ending Homelessness and the Housing Crisis
My suggestion would be for NYC’s government to buy up as many of the vacant apartments as possible.
The government could finance the purchases by issuing bonds. The government will rent the apartments at one third of the “market rate.” The rent could pay off the bonds, since they can pay the bonds off over decades low rent payments will be required.
A similar solution could work in Colorado’s ski country; where workers live in tents in the woods while expensive condos sit empty. One advantage in particular, is that towns like Breckenridge, or Vail will create housing locals can afford. Another is that communities can discourage timeshares; which use government services but add little to the community.
A greater benefit will is real neighborhoods where people live full time. Strengthening democracy is another result because the working people will live in town and vote and hold political office. This might end the hollowing out of communities and the domination of local governments by corrupt real estate interests.
A city that might serve as a model for Colorado communities is Burlington, Vermont. For instance, a city land trust owns apartment houses in Burlington and rents them to working people.
Bringing Social Housing to America
Moreover, buying existing housing stock will allow American governments to adopt the Austrian style social housing model.
In social housing, the government rents units to everybody regardless of income. Therefore, millionaires might live next to Uber drivers in social housing projects. The idea is to eliminate market-driven rents that price housing out of reach.
A city that might serve as a social housing model for American communities is Vienna. In particular, Vienna’s social housing projects contain both the middle class and the poor. Significantly, visitors report few homeless people in Vienna, The American Prospect claims.
A target for housing purchase might be 10% of the housing on the market. Potentially, this could stabilize the market, and give the government control over prices.
Can the Housing Crisis Be Fixed?
Government housing purchasing will hard to implement because real estate interests will fight it tooth and nail.
For instance, Realtors, mortgage bankers, speculators, and others that profit from sky-high housing costs want the gravy train to keep running. The fight will be tough because those groups control many city councils, state legislatures, and boards of county commissioners.
Moreover, many Americans’ only investment is homes with inflated values. In particular; home-owning senior citizens with nothing but Social Security to live on will be easy targets for real-estate interest propaganda. Therefore, they will oppose any effort to lower housing costs and property values.
I predict government housing purchasing will only work after a major real estate crash. Obviously, America missed a significant opportunity to lower property values after the Great Crash of 2007 and 2008.
How Baby Boomers can End the Housing Crisis
Unfortunately, we will probably have to wait until the next housing crash to implement effective fixes to the housing crisis. I forecast that the next crash will occur around 2022 to 2024, just as the Baby Boomers’ retirement accounts run dry.
Broke Boomers with nothing but Social Security to live on will dump vast amounts of housing on the market to raise cash. Obviously, that will give governments an opportunity to fix the housing crisis by buying up all that property and renting it out at realistic prices.
Therefore, a logical way the federal government can prepare for the next housing crisis is to finance real estate purchases by local governments. Uncle Sam can begin by financing real estate purchases in depressed communities like Pueblo, Colorado, and Dayton, Ohio.
When the crash comes, we will expand the program to more communities. Obviously, desperate property owners will happily sell their property to the government in such a situation. Government bonds that will paid off through the rent or lease of the property will finance the housing purchases.
Having a mechanism to protect local communities from the effects of the Baby Boomer real estate crash definitely makes sense. Using that mechanism to fix the housing crisis and shore up communities is a brilliant use of tax money.
In the final analysis, government buy up of real estate is the best solution for the housing crisis. Unfortunately, we will only attempt such a solution after everything else has failed and the housing crisis spins out of control.