John Hood: Public conflicted on housing markets

Published 12:00 am Wednesday, November 3, 2021

RALEIGH — As they witness rapidly escalating costs for building, buying, and maintaining homes, the vast majority of North Carolinians clearly want their leaders to do something about affordable housing.

What that something ought to be, however, remains far from clear.

In a recent Elon University survey, for example, 66% of respondents agreed that North Carolina leaders should “allow the free market to deal with housing costs without government involvement.” At the same time, 61% of respondents said North Carolina should “increase government spending to support housing costs.”

A flat-out contradiction? Not necessarily. One can certainly argue for an unrestricted market for building, buying, and selling houses while also arguing for a direct or indirect subsidy to low-income households to help them enter that market as renters or buyers. Indeed, these two policy approaches coexist in broad swaths of our state and nation, especially in small towns and rural areas where housing and zoning codes are either flexible or nonexistent.

The contradictions creep in when the questions get more specific. For example, here’s another policy the Elon pollsters represented to respondents: “change zoning laws to allow more houses per acre.” Because zoning is one of the main tools with which government restricts the housing market, you might expect public support for this option to be comparable to public support for a free-market approach.

And you’d be wrong. Only 40% of North Carolinians support a looser approach to zoning, with 60% in opposition to it.

Looking at the subgroups of respondents, I was struck by the extent to which Democrats were reasonably consistent about this. Among North Carolina Democrats, 57% said we should allow the free market to deal with housing costs and 54% said we should change zoning laws to allow more houses per acre. Among Republicans, 77% favored fewer government restrictions on the free market in general but only 31% favored lighter government restrictions on houses per acre. Unaffiliated North Carolinians were almost as conflicted about this issue as Republicans were.

As a longtime advocate of deregulating North Carolina’s housing market — which means, inevitably, allowing developers to offer a wide range of housing options to willing consumers — I found the Elon results disappointing but not surprising.

Over the years, I’ve found that many folks otherwise friendly to free enterprise and hostile to government encroachment see zoning codes in a different light. In their version of events, they enter a housing market already overlaid by lot-size minimums and other rules. They make their choices accordingly, in good faith, opting for neighborhoods with more or less density based on their own preferences.

Then some pesky politician or greedy developer (or reckless free-market ideologue) comes along and threatens to pull the regulatory rug out from under them. If some of the homes in the neighborhood get torn down and replaced by duplexes or triplexes, traffic will worsen. There’ll be more noise. The character of the neighborhood could change.

I can understand these concerns. Still, I find that I can’t reconcile them with a broader belief that free markets and individual choices represent a better way of solving problems than government dictates and central planning. Healthy, robust markets are always full of dynamism and churn. New technologies can radically increase the availability or decrease the cost of goods and services, but they often do so at a cost. It may take a while for workers skilled at shoeing horses or growing hay to become skilled at riveting car panels or drilling oil. Or they may have to learn how to do something else, somewhere else.

In other words, markets are simply institutions for using prices to coordinate the varying and changing tastes of many different kinds of people. If a private developer brings new inventory to market that requires buyers voluntarily to restrict what structures can be placed on their property later on, so be it. But I don’t think governments should make such decisions. It’s a free-market thing — I hope you understand.

John Hood is a John Locke Foundation board member and author.