Bernie Sanders’s housing plan would increase homelessness

Bernie Sanders (I-Vermont) is not content to undermine our health care industries by instituting “Medicare for All”; now he wants to make homelessness even worse by having the federal government provide “housing for all.”

In his newly-released ten-year plan, the presidential candidate proposes to end homelessness in part by reducing the incentives for developers to provide housing. Specifically, he wants to “enact a national cap on annual rent increases at no more than 3 percent or 1.5 times the Consumer Price Index”; in other words, enact rent controls across the country of the kind that have without a doubt sent rents soaring in our biggest cities.  

Economists agree: Rent controls are a bad idea. Even the notoriously liberal Paul Krugman wrote in 2000: “The analysis of rent control is among the best-understood issues in all of economics, and – among economists, anyway – one of the least controversial. In 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ‘a ceiling on rents reduces the quality and quantity of housing.'”

Ignoring a mountain of data proving otherwise, Sanders thinks rent controls are just the ticket to reducing homelessness. Ironically, he points to cities like New York and San Francisco as especially hurt by high housing costs; both have had aggressive rent control policies in place for decades.

Of course, that’s not the end of his meddling. Sanders also wants to spend $2.5 trillion to beef up housing supplies, in part through the federal National Housing Trust Fund.

Where will the money come from? A wealth tax on the richest Americans, of course, whose already-taxed earnings and investments have become the favored piñata of progressive candidates. Never mind that those folks are already on the hook for paying off trillion of dollars in student debt and funding universal health coverage. Surely they can provide shelter for the country, too.

The problem is, Mr. Sanders’s prescription for cities in California and elsewhere is likely to exacerbate the problem. The progressive politician and his like-minded colleagues have yet to realize: Investors have choices. You cannot demand that landlords build rental units. If you take away the incentive for doing so, they will build even fewer apartment buildings, and rents will go even higher.

Presumably, Sanders is focused on California, which hosts 12 percent of the country’s population and 50 percent of the nation’s homeless. California’s Democratic primary, which proportionately awards 416 delegates, takes place on Super Tuesday and is a rich prize. A recent Emerson poll shows that Bernie Sanders has a real shot of winning the Golden State; he currently is tied with Joe Biden at 26 percent of the vote. Elizabeth Warren trails with 20 percent. Kamala Harris unexpectedly attracts only 6 percent of her home-state voters. 

Sanders’s housing plan could boost his prospects with California voters fed up with the tens of thousands of homeless people living on their streets, fouling their cities. Homeless encampments are rife with crime and disease; no one seems to have a satisfactory answer.

There is no disputing that high rents are part of the problem. According to John Phelan, writing for the Foundation for Economic Education, “In San Francisco the median cost of a single-family home is five times the US average, and the city now has the highest rent per square foot of any municipality in the nation.”

The controversy is why those rents are high. Is it really because of what Sanders describes as “corrupt landlords” trying to fleece the public? Or is it because the impossible tangle of California building and environmental regulations has made it all but impossible to build new structures?

A study by the Cato Institute’s Vanessa Brown Calder convincingly links “local zoning and land-use regulations [which] have increased substantially over the decades” to a reduction in the supply of affordable housing. As she notes, “These constraints on land development within cities and suburbs aim to achieve various safety, environmental, and aesthetic goals.” The goals may be laudable, but their impact is harmful.

Nowhere is this more evident than in California, home of environmental zealotry. Another study, by the Mercatus Center at George Mason University, analyzes zoning and land-use rules across California’s cities. If finds that “more regulation is associated with slower housing growth.”

An article in Reason brings home how burdensome rules can have real-life consequences. It tells the story of George Tillman, who decided in 2013, with housing prices sky-rocketing, to knock down his San Francisco laundromat and replace it with an eight-story, 75-unit apartment building. The project was uncontroversial; no renters would be displaced and it moreover “qualified for a density bonus and streamlined approval process under state law, and the site was already zoned for housing.”

Nonetheless, Tillman faced various hurdles, including conducting an environmental review, receiving an application for a conditional use permit and surviving multiple public hearings. After three and a half years, the city council was ready to consider his proposal. But Tillman then encountered numerous new challenges, including opposition from a group critical of the Mission District’s gentrification, which of course would be resolved by building the very sort of structures that Tillman was planning.

This piece cannot enumerate the many obstacles thrown in Tillman’s path; they are too numerous. But the struggle, with no resolution five years in and many thousands of dollars spent on legal fees, provides just one example of why building in California (and elsewhere) has not kept pace with demand.

It is also a great example of why Sanders’s plan would make the nation’s housing shortage worse, not better. At the moment the progressive senator leads with California’s young voters; that’s not surprising. Those people have not witnessed how even well-intentioned top-down government programs can prove drastically wrong.

Elect Bernie Sanders, and they’ll quickly learn.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.