What could a post COVID-19 housing world look like?

What could a post COVID-19 housing world look like?
Published on May 6, 2020,09:30 am by Roger Valdez for Forbes.com

In my last post, I pointed to quantitative damage assessment as key to recovery from COVID-19 for the rental-housing sector. What could a post COVID-19 housing world look like if the damage was stopped, fixed, and government and the private sector joined in a sensible rebuilding of the housing economy using economics rather than rhetoric? Maybe when the COVID-19 mess gets sorted out, we can work together toward a rational approach to housing in the United States. Maybe softened demand and resulting lower prices will take the heat off the conversation and lead to more constructive dialogue. What might emerge from that? 

Housing Providers and Residents 

There are no “landlords” in the United States. The term is feudalistic and conjures up the image of man riding a horse wearing cornet berating tenant farmers – it’s right out the Holy Grail. 

But socialists and government don’t see this image as satire, they see it as the basis to make policy and the media reports it as news. “I’m being repressed!” Well, the nature of the relationship between housing providers and residents isn’t one of repression but mutual benefit. 

Does that mean there aren’t unscrupulous people in the real estate business? Of course there are, just like any other business. But the basic principle is one of fair exchange of value, a person looking for housing and a person who has housing meet, come to agreement and the relationship is established. What creates a power imbalance like the one in Monty Python satire? Lack of supply! When consumers have to scrap over scarce housing and pay more for it, they see more of their income consumed by it. Lack of supply is self imposed crisis that hurts people with less money. 

Cash for Rent 

Along with an adjustment of the narrative, we need to emphasize efficiency. We need a better measure of what we mean when we say “affordable.” Currently we  have the arbitrary normative standard that  household should spend no more than 30 percent of its gross monthly income on rent. Anything above that is declared a “cost burden.” Fine. But that doesn’t mean that a person who is paying say, 40 percent of their rent on housing needs a unit build by a non-profit housing agency five years from now bought by taxing market rate housing. That person just needs the extra cash to increase her gross income so that her housing costs 30 percent. 

In the pre-COVID-19 housing world, policy makers constantly cite cost burden as the basis for all sorts of foolish and unhelpful policies from rent control to eviction bans; if cost burden is the problem, just buy it down with cash subsidies

Let’s Use Data, Not Anecdotes to Make Policy

Finally, what drove the media (and still does) is a good story. And there isn’t anything wrong with a media outlet reporting the drama of a person who is struggling with housing issues. The problem is when elected officials and advocates for interest groups substitute story for science. We need both. But we need to ask, “What problem needs to be solved here.” Eviction is the perfect example. 

Eviction is used as a power grab, and because of the landlord-tenant narrative I started this with, the notion of the rapacious and racist landlord evicting everyone in sight is believed. But there are very few evictions completed in most parts of the country. And when a person does get evicted, it is usually a long and complicated story with many variables including mental health, economic issues, and other intractable issues that couldn’t be solved. When things break down badly enough for a court to issue an order and the sheriff to show up, many things went wrong. 

The good news is that because the number of evictions is relatively small, resources could be more efficiently brought to bear to prevent them from happening further up stream. And housing providers are good at housing, not employment, financial counseling, or social work. Expecting a housing provider to do all that work is unfair and inefficient. We need to bring those resources to bear early, not in eviction court. 

Can This Happen? 

I don’t know if this vision of a post-COVID-19 world is possible. Right now, I’m not so sure. What I see is the trends from 6 months ago – more and more pointless and unhelpful regulation – accelerating. I’m seeing almost permanent eviction bans and rent control falling into place with no worry about lost income or lost rent. The best that we can do now is keep saying what we’ve been saying for years, the best solution to housing problems is more housing, not more rules, regulations, and taxes.