A Man's Home is Whose Castle?

One of the hallmarks of President Bush's domestic policies, has been his use of the term "the ownership society."  Simply put, this means trying to make sure that as many Americans as possible, have an investment in their own country.  This can mean through home ownership; through having stock investments or a 401(k); or through owning a small business. 

Indeed, this is a wise strategy.  A look at historical revolutions and riots clearly shows that civil unrest is generally not caused by people with a stake in society - who have something to lose.  It was not property owners who participated in the Rodney King riots, generally speaking; it was people who owned nothing.  The property owners, such as the Korean grocery store proprietors, defended their property - as one would expect.  If everyone owns their home, not very many will be inclined to set fire to the block.

While the same holds true in the larger economy, regarding financial investments, home ownership has always been a foundation of the "American dream."  Owning a piece of paper that says you have an investment in some big company somewhere, is all very well; but nothing can compare to owning the keys to your own, physical, solid home, large or small.  The CEO of the company you invest in isn't going to much care what you think of his management; about all you can do is sell your stock.  But you have direct and personal control over your own home.  You can affect its immediate environment, by talking to your neighbors, even suing them.  And you can even affect its larger environment, through voting and running for local office.

In recent years, however, the dream of home ownership has gotten farther and farther out of reach, as house prices have escalated.  Of course they rise with inflation; but the increase of house prices has far outpaced that.  A good rule of thumb is that the average wage in an area ought to be able to buy the average local house - this makes intuitive sense, since everybody has to live somewhere.  Yet in most parts of the country, the average income cannot hope to touch the average house.

Now, it's true that there are more people living in the United States than ever before, and as salesmen say about real estate, "they aren't making any more of it."  But the U.S. is not a particularly full country.  Manhattan is about the only place that could be considered true high-density living by the standards of other parts of the world.  If housing prices were out of whack only there, it would not be such a problem.

Yet the area of unaffordability extends far out into the suburbs around every major city; this has led to the common problem of policemen, firemen, and teachers having to commute long distances, because they cannot come close to affording a decent home in the cities that employ them.

There are many forces that have contributed to this enormous rise in housing prices.  But, according to a recent study, the primary cause is excessive zoning laws - that is, government over-regulation.

Think about it for a moment - Why would anyone pay the prices for a house that we've seen in the last few years?  Just buy a plot of land and put a house there.  Constructing a new house is much less expensive than buying one that already exists.  Economically, this makes no sense - if there is a large price gap, almost always someone will step forward to make a buck by closing the gap.

According to the study, however, a house costs more than just the price of the land it sits on, the materials that are used, and the labor that was expended to assemble them.  There is a heavy and increasing cost associated with obeying local regulations.  Some of these are direct costs, as with excessively strict building codes and permit fees.  Other costs are the cost of delays, as when waiting for a required inspection before proceeding to the next phase of construction.  But the worst cost is that associated with approvals.

We have somehow come to the point where we take it for granted that you must obtain permission before building on your own property.  This permission in many places is not easy to come by, and takes a long time to get.  At every step costs increase, with attorney's fees, architect's fees, permit application fees, and the like.  All the while there is the carrying cost of the unprofitable empty land and the risk cost that, when all is said and done, you still will not be allowed to build anything.

It is for this reason that the normal competitive instincts of capitalism have not driven housing prices down - the supply of housing is artificially reduced, and its provision delayed, by excessive government regulation.  Remove the regulations, and the issue of "affordable housing" goes away.

So local government red tape harms the wider society in two ways.  First, it makes home ownership harder, and increases the number of people who have no real investment in the society.  And second, it removes the sense of "ownership" from even those who have managed to purchase a home.  We read of such nonsense as homeowners imprisoned for failure to comply with regulations.  If this were a matter of  chaining fire-doors shut on a theater, that might make some sense - but apparently, this was for repairing a fence!

The government response to this incident is that the homeowner failed to follow the clearly written law.  This is the wrong issue.  The true question is, how is it the government's concern at all, and why do we put up with it?

One of the complaints against King George which Thomas Jefferson leveled in the Declaration of Independence, is that "He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance."

Is this not the perfect description of zoning ordinances, inspectors, and the local bureaucracy?  Once upon a time in America, a man's home was his castle.  Now, it is merely his dwelling, by sufferance of the local zoning board.  The vision of an ownership society can never be reached until we return to, well, actual ownership.