I am going to explain the housing crisis. This will take less time than you think, because the housing crisis is not complicated. It is merely treated as complicated by people who benefit from the complication.
Here is the housing crisis in one sentence: we decided that the place where people live should also be the primary vehicle for wealth accumulation, and we are surprised that these two functions are incompatible.
That is the entire crisis. Everything else is detail.
The Incompatibility
A house that is affordable for the person who needs to live in it is, by definition, not appreciating fast enough to serve as an effective investment. A house that is appreciating fast enough to serve as an investment is, by definition, becoming less affordable for the person who needs to live in it.
These are not two versions of the same system. They are two systems in direct conflict, and for the past several decades, the investment system has been winning.
The result: in every major city, housing costs have outpaced wage growth. The person who could have afforded a home twenty years ago cannot afford one today, not because they are earning less or working less or deserving less, but because the asset they need to live in has been claimed by the asset class that treats it as a financial instrument.
The homeowner who bought twenty years ago is wealthier. The renter who needs a home today is not. The system is working perfectly for one of them.
The Landlord’s Vocabulary
I enjoy the vocabulary of the rental market. It is a masterclass in euphemism.
“Market rate.” This means: the maximum the landlord can charge before tenants physically cannot pay. It has nothing to do with the cost of providing the housing. It is a measure of desperation, not of value.
“Investment property.” This means: a place where someone lives, owned by someone who does not live there, managed as a financial asset rather than as a home. The tenant pays the mortgage, the maintenance, and the profit margin. The investor owns the appreciation.
“Property rights.” In the housing context, this phrase is deployed to protect the rights of the property owner, which are considered fundamental, against the needs of the tenant, which are considered negotiable. The person who owns the building has rights. The person who lives in it has a lease.
I am not opposed to property rights. I am opposed to the selective application of rights language in a way that consistently privileges ownership over habitation.
The Missing Category
There is a category that our economic system does not recognize: housing as infrastructure.
We recognize roads as infrastructure. We do not expect roads to generate a return on investment. We build them because people need to get from one place to another, and we fund them through public expenditure because the alternative – privatized toll roads everywhere – would be both inefficient and unjust.
Housing serves an identical function. People need a place to live. The failure to provide adequate housing has cascading effects on health, education, employment, and social stability. The argument for treating housing as infrastructure is at least as strong as the argument for treating roads as infrastructure.
But we do not treat it this way, because treating housing as infrastructure would remove it from the investment market, and the investment market is a powerful constituency.
So instead we have a housing “market,” which is to say a system in which the basic human need for shelter is mediated by the profit motive, and the people who can least afford the profit motive are the ones who need the shelter most.
The Proposal
Build housing. Not “incentivize housing production through tax credits to private developers.” Build housing. Public housing. Quality housing. Housing designed for the people who need it, funded by the public that benefits from its existence, and managed as infrastructure rather than as an asset class.
This is not a radical proposal. It is what most wealthy nations did, to varying degrees, in the middle of the twentieth century. It worked. Then we stopped doing it, for reasons that had more to do with ideology than with evidence, and here we are.
The housing crisis is a policy choice. The solution is a different policy choice. The only thing preventing the second choice is the profitability of the first.
I was grilled alive by an empire that valued its own power over the welfare of its people. The mechanism was more dramatic then. The principle has not changed.
Shelter the homeless. House the people. It is not complicated. It is just not profitable, and until we stop confusing those two things, the crisis will continue.
Turn me over. I am done on this side.