Discover more from The Evening Post and Mail
The cost of something is what you give up to get it
It's when homeowners are feeling the wealthiest that housing advocates ought to rally people to their cause, and that's right now.
One of the ten basic principles of economics taught in the inimitable introductory textbooks by Greg Mankiw is this: The cost of something is what you give up to get it. In other words, opportunity costs matter. Everyone who's ever thought about the value of their time has at least a glancing familiarity with this principle, but we too often miss the opportunity to put the opportunity-cost principle into action.
■ For instance: Right now is the ideal moment for people concerned about affordable housing to get ordinary homeowners to rally to their cause. Once a person becomes a homeowner, they tend to become fixated on preserving the value of that home. That's because a significant portion of American household wealth is tied up in home values. For the median household that owns a home, home equity is the biggest asset. And families that don't own a home fare dramatically worse.
■ The argument can be made that this reflects the consequences of a lot of counterproductive polices (and, indeed, it does). Some form of shelter is a universal need -- not a human right, in the sense that free speech is an inalienable right, but a thing that everyone needs and which somehow must be paid for.
■ One of the other basic laws of economics is that the natural market-clearing price occurs where the supply curve and the demand curve intersect. Anyone paying attention to the housing market right now knows that supply is on a tear, but prices are still perceived as being sky-high.
■ This presents a special opportunity when it comes to public policy: Right at this moment, many homeowners are aware that their property values have risen. They might even be receiving unsolicited offers for their homes, while their mailboxes fill with flyers from local real-estate agents hunting for inventory. In other words: This is the moment at which the ordinary homeowner probably feels the least threatened about their own home equity that they have felt in a decade or more -- at least since the 2008/2009 panic, when home values last took a meaningful downturn.
■ That makes right now the optimal moment for advancing the cause of housing affordability. There are a wide range of possible policies that could help, from reforming or rolling back restrictive zoning measures (which may be the toughest hill to climb) to easing back on parking requirements to making multi-family housing more attractive to focusing attention on the very real impact of transportation costs on housing.
■ By the time the housing market cools off (which history suggests it will), it will be too late for further reforms. This is the moment when the average homeowner -- who, on average, carries the most weight in local politics -- can be most easily persuaded to see their own self-interest in encouraging the supply of housing while giving up the least.