Free Enterprise Is Not A Handout
Against a NIMBYism which glorifies rent-seeking
Donald Trump said this recently, on the question of maintaining home values versus promoting housing affordability:
This idea—that building new homes would cause existing homes to decline in value, and therefore reduce the equity of homeowners, is a pretty common one. It’s the basis for the “homevoter hypothesis,” the idea that NIMBYism is largely explained by existing homeowners wanting to maintain the value of their assets. (It’s not clear, really, that most homeowners actually think of it this way, but certainly some do. A lot of NIMBYism, I would say, is probably less cynical and self-conscious.)
What’s interesting about the president’s remarks here, to me, is not that he expresses this “homevoter hypothesis” view. Nor is it that despite having once been a builder, he sides with homeowners or real-estate investors1 against homebuilders and the construction industry. Nor is it the rest of his remarks there that aren’t quoted in the social media post, which don’t exactly cohere into a consistent theory of, well, anything:
We’re gonna make it easier to buy, we’re gonna get interest rates down, but I want to protect the people that for the first time in their lives, feel good about themselves, they feel like they’re, you know, that they’re wealthy people, and I want them to understand that there’s so much talk about ‘Oh, we’re gonna drive housing prices down,’ I don’t want to drive housing prices down. I want to drive housing prices up—for people that own their homes.
No; what really interests me is that he says, almost in passing, “We’re not gonna destroy the value of their homes so that somebody who didn’t work very hard can buy a home.”
This is important, because the president is saying here explicitly what many NIMBYs never quite spell out: that as far as they are concerned, even advocating the use of market mechanisms to lower the cost of a necessary good is morally and functionally the same as “asking for a handout” or betraying an “entitlement attitude.” In their worldview, there is no acceptable way for young people locked out of the housing market to explain their adversity, or ask for the situation to be improved.
This idea that increasing the supply of a good is tantamount to handing it out to people who don’t deserve it or haven’t worked hard enough for it is absurd on its face, and it isn’t applied to any other good or service or policy area. Does anyone think making gasoline or eggs or televisions cheaper is bad because it means that people who “didn’t work very hard” can afford them? Of course not.
What about computers? It would be ridiculous to say, for example, that a computer “should” cost $5,000-$10,000—about the range for an IBM PC at release, adjusted for inflation—and that the reduction in the cost of computers represented the greed, laziness, or entitlement ethic of consumers who just wanted a computer without paying the “real” cost. It would be even more ridiculous to say that competition in the computer industry was morally soft and should be curbed by force of law.
Nobody ever says this sort of thing. On the contrary, products or services which have seen price declines over time are typically considered successes of technology, globalization, or free enterprise.
It is only housing, too, where questions of price become questions of morality, virtue, or work ethic. It is only housing where the current state of home prices—a highly artificial status quo enforced by a regulatory regime which stymies new construction—is taken as some sort of metaphysical truth, as a reflection of the moral worth of the homeowners who managed to afford it.
Artificially holding up property values is not only morally legitimate, but morally superior to the alternative. This is a secularized Prosperity Gospel, a heresy of a heresy: My house is worth so much because I am worth this much, any attempt to devalue it is an attack on me.
Of course, a home is the major investment for most homeowners, and precipitous declines in home values would indeed hurt many of them. But in the kind of markets where high housing costs are really an issue, there is no world in which building more homes will lead to large declines in home values. It might produce very modest decreases in value, or even just a slowing of appreciation. The collapse of home values happens when economies collapse, not when economically healthy metro areas build more homes.
Donald Trump, of course, says a lot of things, and I don’t know to what extent he really speaks for regular homeowners or NIMBYs when he says this. But I’ve absolutely encountered this idea before, and I consider it both to be 1) itself an example of an entitlement attitude, and 2) inconsistent with an American understanding of property rights or free enterprise.
Related Reading:
“Give Me a House,” Says Almost No One
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Blaming real-estate investors for high housing costs is popular, but it mostly goes the other way: the chronic shortage of housing turns housing into a scarce resource of the sort that can be invested in. Private equity firms have even admitted as much. This is a website for hedge fund investors: “One of the reasons why hedge funds have become so drawn to the real estate market in the last decade is the lack of supply. Either single- or multifamily homes, these markets are struggling to meet demand. Where there is a lack of supply and an abundance of demand, hedge fund managers are seeing an investment opportunity with a large upside.”
The second quote does sort of chime with another NIMBY thread, that the WAY additional supply affects incumbent property owners' value is that it brings in undesirable (low income, or other ethnic group, or other culture/behavior) residents. It "ruins" the neighborhood not architecturally, but demographically.
That said, I second Addison’s belief that fear of loss of pecuniary value is the basis of much opposition to land use and building code reform. And part is just unawareness of the benefits to the city that reform will bring.
Perhaps exclusivity is a key part of the Trump brand?
Notably, in 1961 when huge swathes of New York City were downzoned, the only one of the city's real estate developers to support the downzoning was Fred Trump (Donald's dad). And Donald himself was the only real estate developer to support an (unsuccessful) 1970s plan to downzone much of the Upper East Side.