Western nations are dealing with a serious housing crisis right now. Many people have opted to break into people’s properties and try and claim squatters’ rights due to how severe it has become. And the response of governments around the world has been to begin building public housing?
Public housing will not solve the housing crisis. It will not solve a worker shortage. And will not solve, especially, material inflation. It will only hurt our economy further. And I’ve already wrote extensively on migration being the main cause of this crisis. So, let’s look at some of the reasons why the free market should take over housing production instead of the state.
One of the primary reasons that the free market is superior to that of the controlled state run/influenced market is that the government has little to no risk when it comes to economic projects, they get their capital for free, it is guaranteed by the taxpayer, and they suffer relatively no consequences personally if a project fails when compared to a private business owner risking his own capital.
👉🏼Public works risk other people’s money, if it fails, they personally don’t lose anything.
👉🏼Private works risks the capital of the individual conducting the works, if it fails, they could go bankrupt and lose everything.
The person conducting private works using his own money will spend and invest that money to peak efficiency, knowing the risks. But the person conducting public works does not have to worry, since they are using someone else’s money. So there will ALWAYS be less incentive to be efficient.
But then one could say that public housing gets people off the streets. That it finally gives them a place to be safe, that it allows for them to dust themselves off and get back into work, etc. However, Milton Freidman has already addressed these types of arguments;
“You are looking at the objectives and not the results!”
most arguments for the welfare state are based on noble objectives, and don’t account for the reality of the outcome being more negative than what they had hoped. Assuming the person conducting state works is actually trying and genuinely cares about the project.
In remote communities’ houses are burnt down and stripped bare, for various reasons, and one being that the people who are housed in them risked nothing to get them, so don’t lose anything when that particular house is gone. In Milton Freidman’s example, The housing in New York was destroyed by their tenants because it turned out cheaper for them to do so, since the houses weren’t being maintained by the New York government, and New York introduced rent controls.
This isn’t an argument for New York to maintain them better, since doing so would just lead to other issues, since the government will never be as efficient as a private business owner who risks his own money.
Instead, this is an argument that government should never be involved in the economy at all. Because no matter what, the state will always be less efficient than the free market.
Milton Friedman has also explained elsewhere that the government’s primary function should be to serve simply as a referee. They should never be involved with people’s day to day lives, but instead, just ensure private contracts and laws are maintained.
At the end of the day. The housing crisis is controlled by supply and demand. Like every other product in the market. And the demand for housing has well outpaced the supply. Leading to the crisis. This crisis is caused by the state, because they refuse to bring migration back down to manageable levels. In this case, I would see a clear case for the government to step in and be the “referee” of the situation, capping migration to reasonable levels, and allowing the market to catch up.
On top of this, supply is low because of the enormous amount of red tape and taxes in this country and in the building industry, along with vested interests working with the state etc. Safety and building standards in cities make perfect sense but everything else does not.
👉🏼Taxes should be reduced to as close to 0% as possible in order to speed up free market production of housing and everything else people need. Yet taxes are consistently going up instead of down as the state gets bigger.
The solution is to get the government out of the housing sector, as all they are doing is just making a bad situation worse. The state should be removed from the entire economic sphere. Taxes and red tape should be cut down as much as possible.
Total freedom and liberty are superior to total control measures.
The people can solve their own economic problems so long as the state stops get involved.
Alex James.