Taking Sides Between Potential and Current Landlords

An increase in the relative price of housing (along with the prices of other goods and services) is the result of an increase in price below demand. There are many economic factors at play, such as population growth, land prices and construction costs. Many political mandates and restrictions play a role in reducing the supply of new housing. Local control is a big factor. Import taxes on Canadian lumber create a special tax on home construction. Over the past two years, the Fed has raised interest rates—and thus, indirectly, mortgage rates—to control inflation caused by the money it created to meet higher government spending.

Some interventions work the other way around. The federal government’s role in providing mortgages likely reduces their rates. On the demand side, mortgage interest deductions from income taxes (like any home purchase subsidy) increase housing demand and prices. The full impact of a range of government interventions on specific markets is often unclear.

Conflicting government policies are not uncommon, but a more fundamental question is being overlooked: Why should governments take sides in favor of or against certain landlords? Why should governments be concerned at all about this issue (without questioning their ongoing intervention)? Consider the simple case of owner-occupied housing (houses or condos) and their rising prices.

When house prices rise, the new buyer has to pay more while the existing owner sees the value of his property increase and can get more from its sale. Heirs of a deceased homeowner or any homeowner who wants to downsize benefit. A homeowner who sells at a higher price obviously calculates that the extra money is more important to him (or, yes) than the profit of the residence. If a homeowner is upgrading, the price difference between their old home and their new home may increase, but this is not necessarily true in different markets where home prices do not rise at the same rate. To repeat this question: Why do governments—by allowing low housing prices—discriminate between one group of citizens and another, such as between new and existing homeowners?

Most if not all government policies involve, and only work, favoring and discriminating against citizens. It is mainly a political myth that governments produce “public goods” that all citizens want, thereby benefiting everyone. When they produce goods or services that can be called “public,” they usually belong to a certain group of citizens. And there is no guarantee that many citizens will emerge as beneficiaries of the government’s massive intervention. Governments are essentially, or at least largely, redistributive machines. The underlying reason for redistribution is the myth used by favored citizens who benefit more than those discriminated against who lose, that the former are helped more than the latter are harmed.

It is this risk of exploitation of some citizens to help others that led James Buchanan and the school of constitutional political economy to emphasize the “general” requirement of government intervention: no discriminatory taxation, no unequal subsidies, and no regulation aimed at redistributing benefits and lower costs. costs between parties (indeed, such as zoning). A similar observation led Anthony de Jasay to dismiss all moral arguments in favor of the state. Both of these approaches—Buchanan’s and de Jasay’s—can be seriously defended. (Friedrich Hayek offers another approach, which is not neatly constructed and can be left aside here.)

The political work of government intervention that, in some cases, raises housing prices and, in other cases, lowers them may appear to respond well to the demands of different electoral clients and special interests.

If certain general conditions of legal equality are found, the beauty of the market is that the voluntary exchange without fraud between two adults takes care of itself: each benefits or assumes that he will act according to his preferences. Trying to figure out who benefits most from free trade, who gets more “help”, is a fool’s errand: it’s impossible to calculate, even conceptually. Using coercive measures including special taxes to get people to make a different choice than they would otherwise be is unjustified authoritarianism.

We may repeat the directive to the government that the Marquis d’Argenson, a friend of Voltaire and former minister of Louis XV, wrote in his memoirs: “Laissez faire, morbleu! Laissez faire!” (Laissez faire, for God’s sake! Laissez faire!).

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