A Solution to the Housing Crisis
Help has to come from a historically unreliable source
You’ve found a great job with excellent benefits. Awesome, well done. It is further away than a comfortable commute so you start looking into moving, then — well, crap (or some variant of that) . Rent is too high. Home prices are too high. Like many other people, you’ve just entered — the housing crisis. (Twilight Zone reference… the real one with Rod Serling)
We need to back up a sec and step out of the actual problem and look at this mechanically.
When they were working to perfect the steam engines of old, the testing revealed that if the engine was given all the steam it could handle, it would overspeed and fly apart.
The engineers working on this were faced with two main options — leave it to the operators to control the speed or install a device called a “governor” — a mechanism that would mechanically protect the engine from self destruction. They decided relying on a human was not a good option.
Dude, how do steam engines solve the housing crisis?
As laid out in my book The Machine, economies are mechanical and require certain safeties to be installed to prevent mechanical catastrophe.
— This E-book is free to read with Kindle unlimited BTW —
Legislative efforts have been made in the past where landlords would be forced to keep rents at a reasonable rate. It was/is called “rent control”. This is an approach that is effective, yet does encroach upon free markets.
Curtailing a proprietor in a capitalist society is generally not a favored remedy.
From a mechanical standpoint, that is like installing a brake on a spinning shaft while the rest of the machine runs at full speed. You will create A LOT OF HEAT with the notable side effects including, stress, fractures, and eventually cause a breakdown in multiple components.
The wiser choice would be to slow the machine down by reduction of fuel.
In a free market, housing is basically market price.
The whole supply/demand function comes into play and when there is less of a thing and more demand for it. Ergo, the value goes up.
I hear you asking, Dude — where the hell did the supply go? How does demand spike on a consistent thing?
Glad you asked — because you’re about to get an answer…
The core driver of the housing crisis
You wouldn’t believe me if I told you, but the housing crisis was caused by long term tenants — Bad ones.
There I said it. As a former landlord myself, I can attest to this being the main problem with rental housing.
The verbiage “long term” (anything over 30 days) carries certain problems for landlords. Long term tenants have eviction rights and the price they pay is often only a few percent over the monthly mortgage payment that the landlord is paying a bank.
I know it’s hard to believe but landlords are not all independently wealthy and just sit around twirling their greedy landlord mustaches.
Landlords want the rent so they can pay the mortgage so they can enhance their long term financial portfolio. That’s it.
The less drama and hassle they have to deal with to get that, the happier they are. End of story, close book.
Long term tenants can be the cause of grief and loss for landlords and often make them second guess their strategy.
The disruption in the housing force
Enter the age of house sharing. Amazingly now with a smartphone you can put your home, room, apartment, boat, camper, minivan (have to fact check that last one), or small bed at the bottom of a well (complete with lotion, rope, and basket and inspirational speaker at the top) all online to rent out for nightly rates.
Travelers are no longer bound by traditional hotels or bed and breakfasts. Through the magic of a few apps we are now able to find a place on the fly.
How does a traveler interfere with housing??
Once again, I’m glad you asked…
If you are a landlord and are renting out a property for $1200 a month and suddenly see that you can get $120-$200 a night for — your financial strategy is going to be rapidly shifting to a higher profits model.
This new direction also comes with the added bonus of not being bound by the landlord/renter rules and regulations that are restrictive and can be quite burdensome.
The landlords that do keep long term tenants are then strapped with the task of keeping up with current rates based upon the new reduced supply and increased demand for normal housing.
=Sum(not good either way) Enter …..Error
The formula is simple. More landlords are doing short term rentals at higher profits with less headache. Wouldn’t you?
Where there used to be a a few dozen places for rent in an area or there would be a short wait for availability, has now been replaced by an “every man for himself/survival of the fittest” (most income) scenario.
The free market combined with a growing percentage of entitled renters and a not so helpful hand of governmental stipulations has created a doomsday situation for long term housing.
We simply can’t let the machine run how it wants to, some form of operational control has to be implemented.
A healthy restriction
If this machine is left to its own devices, certain components will just self destruct. Kaboom, goodbye…
In order to safely bring the operation back into optimal parameters, we need to take a holistic approach and find a way to balance the operation.
Slowing down the output end causes stress, suffocating certain sections causes stress. We can’t be selective, we have to hit it equally. The best way is to siphon off some demand.
Enter the historically unreliable source
Like Batman’s Joker bursting onto scene we actually need to see the local governments step in. This time not in the way of regulation and restriction, but in the way of community development.
We build parks, sidewalks, roads, schools, and other facilities that communities need and use.
We now need these same people to start building housing. Not cheap government housing or Section 8 stuff but actual livable homes that are not publicly subsidizing private investors.
These homes could just be simple 1–3 bedroom apartments that are good enough to live in “short term”, maybe less than 5 years. The rent would be set at rate consistent with where it should be following long term trends using a 10–20 year graph to track and predict rates.
The 1st people to get priority of young fresh out of school citizens who deserve a chance to live independently. Then from there, open debate could be made as to who deserves next priority.
As an added idea, we could enact some form of renter score. The tenants would be indirectly taught how to be good neighbors. If there are complaints the score goes down, if there are none your score stays high.
When the tenant moves out, that score can be used for future long term rental to let the perspective landlord know what kind of person is moving in. I know the landlords would love this.
As a landlord, you never really know who or what is moving in. So anything that is official is always welcome.
Doing this reduces the demand on our limited housing, sets the prices to affordable standards, gives citizens, younger working people, and others in need a chance, and hopefully teaches people how to be good tenants.
All of these things combined can help everyone involved in the housing community — which last I check is like all of us.
The renter score can also be used for home buyers to let the bank know that you are likely to not completely trash a house they are lending money on.
It is really worth it?
If we again look at the economy as the machine it is, to do nothing and hope it doesn’t fly itself apart is reckless.
We do have the resources to build and maintain parks and other infrastructure that are entirely dependent upon tax payers. The difference here is that these can be set up in such a way that they actually pay for themselves and solve a major problem.
What do you think? Is it worth it to let housing prices become unreachable, or worth the risk to invest in a housing solution that addresses multiple problems at once all while helping your community?
As always friends, I welcome an open discussion on any of my articles. If you leave me a message in the comments, I’ll do my best to respond in a timely manner.
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