Decommodify Housing

The United States housing crisis is an issue that needs to be tackled. While many cities and states are looking to create and improve programs post-pandemic, they generally aren't long term fixes. As housing costs continue to rise, fewer Americans have been able to afford the quality of housing they need. We can also see that as time goes on, younger generations tend not to have the resources to purchase their own homes like their parents did. In order to address this issue, we need to shift our perspective. Instead of looking at a couple programs to subsidize housing for those struggling the most, we need to find a solution that will support everyone struggling with housing.

First of all, there are many things in America we identify as necessary. Due to them being necessary, we take them out of the free market in order to ensure they remain affordable for everyone. A great example of this is utilities. If your local electricity supplier decided that your monthly $50 bill was instead going to cost you $200, most people wouldn't be able to do anything about it as many cities only have 1-2 electricity suppliers. Due to this, we have restrictions that force utilities not to overcharge. They need to charge enough to cover the cost of producing the electricity and pay their employees, but they don't need to make any more money, and therefore aren't allowed to.

Unlike utilities, housing is not like that. If I bought a house with the intent to rent it out, I would want the rent to cover the costs of operation. So naturally, the amount of rent will be high enough to cover the mortgage, property management, and maintenance. These are all necessary costs as they are all required to keep the property inhabited and in good condition. However, why would I rent out my property if I'm not getting anything from it? So I'm going to add an additional charge on the rent that will go into my pocket. I am not doing any work to earn that money as I've outsourced all the necessary work. Instead, I'm inflating the cost of rent because I want to. As we all need shelter to live a healthy life in modern society, people will have little choice but to pay the inflated costs, especially in a tight housing market. And this is assuming there is a mortgage to pay off. If there isn't, that's a lot of money the renter is paying that is not going towards the property. This process is known as decommodifying housing.

One of the easiest ways to see racism over the past 100 years is in housing. In FDR's new deal, he pioneered the 30-year mortgage system that allowed many people with lower incomes (important during the Depression) to purchase homes. This lowered monthly costs and in turn lowered rents, allowing many people to get back in homes. However, this benefit only existed for white Americans. This is the original redlining where if you were Black or from a Black neighborhood, you wouldn't qualify for these loans. Pair this with owning a home being the main way that wealth is passed down from generation to generation means that many Black Americans have had to start with nothing each generation whereas many white Americans have had a bit of money behind them. Sometimes this is a lot and sometimes it's not. Regardless, it's more than nothing. This is a big reason why white and black American homeownership is so different today.

If we gave all of the residential homes to non-profit entities, what do you think would happen? They would still need to charge rent, but where would that rent money go? Property tax and maintenance would still need to be paid. The workers at the non-profit would also need to make an income to survive. However, even if they have to pay mortgages for the first 30 years, after that, they will own the property and not need to pay that cost. That means the biggest cost in housing will just disappear. They may still charge slightly more than they need in order to stockpile some money to expand or improve their systems, but that is a cost companies that rent out property also already charge today.

We can run a little experiment using zillow.com. Ideally we can find a place for rent that's also for sale. However, just for sale also works. I found a really nice looking $300k 1 bedroom condo just outside downtown Seattle. Depending on where you look, there are many ways to determine what you should charge for rent if you own the place. Some say about 1% of the property value which would be 3k/month. Granted, that's more expensive than surrounding properties. Instead, with a 5% intrest rate (not possible today, but was not too long ago) the loan for the place would cost about 1,300/month. With another 400/month for HOA and Taxes, that totals at 1700/month in costs. After that, we might want to add an extra 50-200/month for our profit. That means we can price it at 1,800/month, which happens to be roughly what other 1 bedrooms of similar size in that neighborhood costs. If a non-profit owned the property, we would not see massive benefits immediately. It would start at the same price at first in order to make enough money to stay sustainable. However, after it starts paying off it's properties, why would it continue to charge 1,800 when it would only need about 700/month to keep everything running? With housing becoming a public service, it wouldn't make sense for it to be taxed either, saving 150 on the monthly payment. Especially if the government bought the land outright and we didn't have to go through the whole mortgage process, that would almost instantly fix the housing crisis.