Price Controls and Local Real Estate: Why Federal Governments Should Stay OUT of the Housing Markets – January 14, 2024

Society has reached a point in which local/municipal governments in most developed nations and federal governments are not compatible. One of the main reasons for this problem is fiat money, which comes from the federal level.

Municipal governments typically don’t have the power to print money, so municipal voters usually have to find a way to increase fees. If you’re a real estate investor, typically, the municipal government in a major Western city, to gain more tax revenue, will raise taxes and increase regulations to appease and increase the income levels of the lobbyists or monopolists that send the city the most money.

These price controls make the barrier to entry into BUILDING housing more expensive. Making matters worse are the voters, who will usually vote for LOCAL laws like price controls, which limit the profitability of the real estate investor, who now must find creative ways to get more revenue as the price the landlord can charge for their property is limited.

You then have to factor in local JUDGES, who typically side with the tenants, which equates to another added layer of bureaucracy that a real estate investor has to consider when renting to anyone and right there, you create the housing problem, because once it becomes impossible to LEGALLY kick out a tenant/squatter who may not want to pay their rent, then fewer property owners will get involved in being a landlord, thereby creating shortages.

What I pointed out there, was purely LOCAL politics, now, we move into the topic of FEDERAL government which might have a FEDERAL housing initiative, which typically revolves around building more housing.

Well, building more housing typically equates to building more condos because you still have to go through the municipal permitting and overall legal systems prior to building any property, so at this phase, the real estate investors will conclude that condos are a superior investment, because a small real estate investor especially in the modern day, will instead of dealing with municipal RENTING laws, will seek to turn their property into a hotel and get involved in Airbnb.

Because a foreigner visiting a country has to leave after a set period, just from an investing point of view, this timeshare system can not only be profitable but will also be assisted by the federal government.

Now, eventually, the Federal and municipal governments find out that their schemes to build housing are being undermined, and so they’ll seek to ban Airbnb or tax it excessively.

This is why the Federal government shouldn’t get involved in housing because the Federal government throws money at problems indiscriminately, and municipal governments often spend money indiscriminately and bother the federal and local governments, blaming the private sector for why their stupid plan didn’t work out as planned.

How do you fix housing? Is keeping the government out of it to a degree. There are instances in which one could ask why the government wasn’t here to stop this or that tragedy, but that’s on society.

Enforcing property rights laws, as well as transparency, is the best form of societal regulation on housing. By that, I mean we’re now in an era in which people can voice their complaints about landlords, so scumbag landlords in this era should be allowed to go BANKRUPT.

I’m also not a huge fan of property taxes. Instead, property owners should have to pay for utilities that they are entitled to. I actually think that’s the better way to deal with UNPROFITABLE landlords who do not take care of their properties; they should be allowed to go bankrupt.

There still are safety codes, and if, let’s say, a property becomes unsafe, that owner should be fined because property taxes, for example, don’t equate to local governments being efficient with resources however with the federal governments of the world often pushing interest rates down unnaturally, you reward bad behavior.

Because maintenance for any property becomes more expensive the longer, it’s not being managed, and this is how you get bad actors out of the marketplace. You might say you’re creating a different problem. I’d argue yes, you are, but most humans seek to be PROFITABLE, and you don’t want to reward people who engage in unprofitable behavior.

With the fiat money system, the federal government can basically reward badly run local governments, and this creates massive structural problems with housing. A competitive housing market not only lowers rent, it frees up more people to rent out their residences.

We all know about stories of 8 people living in a one-bedroom, and you might say to yourself that’s cruel and unfair. Well, would you rather have that or UNNECESSARY HOMELESSNESS?

Drug abusers, for example, should be arrested if they’re homeless because by not arresting drug abusers who are doing no good to the public, you’re rewarding bad behavior, as well as squandering resources.

If housing prices came down, likely the private sector would deal with the drug addict problem, likely via funding local charities, as their money would be freed up. You have to remember that one of the reasons people become LESS generous is because we live in litigious societies, so I’m not going to house a drug addict because I might be held financially liable if something happens to them while they’re in my care.

Now even I’ll admit there’s no easy fix to drug abusers in a free society, but higher priced housing is not helping anyone.

Interesting times ahead!