Why I Don’t Believe in the Private Housing Market

After two and a half weeks of desperate housing search, I have finally found a simple, small room in a rather dilapidated house inside Princeton, where I will take up residence in connection with my doctorate program that begins in the fall. I don’t want to waste any space to say how happy and relieved I am to not have to worry about organizing housing for the rest of the month. Let me instead use this opportunity to blast the private housing market. My argument is that the private housing market does not reflect the individual need for housing, but the lucky encounter between buyers and sellers with the assumption that tenants have the ability to pay the rent. Housing should better be organized in terms of personal need rather than open market availability. The best way to achieve this is not by prohibiting private housing, but by expanding the sphere of public housing.

To illustrate my point, I shall explain how my housing predicament was created to begin with. (This story also provides my impetus or this article.) I had written to my department, asking them when the deadline for the campus housing would be. I had delayed my acceptance to the program for a year, so I could study in Oxford. I was told that I did no have to worry about housing for another year. Then the department asked me about my whereabouts in January, and I replied that I would like to stay informed about the requirements for housing, and I was assured that I would be informed in due time. I heard nothing, and did not further investigate. A friend had asked me in July where I lived in the fall. I shrugged my shoulders, not knowing where I ended up in, and he suggested me to check the on campus housing website at the university, where I found out that I had long passed the on-campus housing deadline.

I immediately sent an email to the department, who confirmed to me that the on-campus housing deadline had long ago passed. I was about to panic. Unlike Oxford, I realized that Princeton had an opt-in housing system (i.e. no housing unless I applied for it) rather than opt-out in Oxford (where I was offered housing upon acceptance). Oxford, which had a private rental market largely unaffordable to the public, took good care of its students by providing on-campus accommodation to virtually any student they accepted. Oxford knew how to organize housing based on social need. Maybe this nice situation had made me oblivious of the harsh housing reality in the US.

Back to my Princeton situation: The department secretary referred me to two websites affiliated with the university and they happened to be my best bet. I networked like crazy by asking anyone that I encountered about my housing situation, and most were naturally not really able to help. I really wanted to bypass the housing market, where I was a random college student desperately looking for a place to live in what is largely a seller’s market. In other words, there were many buyers (mostly students and some junior college staff) and not enough sellers, so landlords could easily ignore potential tenants they found unsympathetic.

Encountering the housing market was a complete nightmare, as it was hard to fit the mutual requirements. First, many sellers I contacted did not bother to reply to me. Others replied but lived too far away from campus. Another took my call and visit but had 4 other tenants applying, so I was passed over. There were other landlords, who rented out for a short period of time, another that already rented out until January even though I needed to move in September, and another who only took female tenants. One person wrote to me to share housing near campus that would have cost me a fortune. Another potential landlord first invited me to visit him, but then passed me over after his friend referred another person to him. Sorry, buddy. Eventually, I was lucky enough to find a place in the campus vicinity (a rare feat in the college town). I wonder where I would be now if I had less luck, less networking skills or could not impress on a potential landlord. In the private housing market, these skills and luck are essential.

Proponents of the free market will now either seek to find fault with me, because I have not looked for housing early enough, or did not network properly, or they will blame the lack of good search resources (though there are plenty including apartments.com and craigslist) or the government for having too strict zoning laws. The logic in the latter point is that the government makes it difficult to convert more rural land into residential areas, and thus tilt the market balance in favor of landlords (scarce housing, many tenants). There is some case that can be made for the latter, especially given the reality that more wealthy people than ever acquire property to rent to people, who cannot currently afford a mortgage to buy a house. “The haves in our society are renting homes out to have-nots, and they’ve been able to do that at increasingly high rents.” (Bloomberg 2016)

But I question why we have to put the market logic front and center in housing when there are better ways to allocate housing, i.e. based on social need. Among college students, there usually is no expectation that they should worry about housing by negotiating with sketchy landlords, who can easily rip off gullible college students. The universities create on-campus housing and shield their college students from having to deal with the open housing market. There is still a modicum of a market because the colleges usually offer different tiers of housing with the most expensive housing offering the most frills (e.g. with balcony and separate bathrooms).

Really poor people, who would face homelessness without government housing assistance, usually don’t have to deal with the housing market either, because in most cases, where there is substantial social housing, they are allocated a guaranteed place to live. Vienna, Austria (my home town) has a rather extensive social house-building history stretching back to the first two decades of the 20th century, allowing public apartment tenants to pay an affordable 400 euros a month in rent (compared to double the value in the private rental market).

The US does not really have good social housing, but they do provide subsidized rents for low-income people, who still have to search for a private landlord. This arrangement sort of guarantees housing to low-income people, but after volunteering for a self-help organization in Philadelphia, I had heard of many stories of low-income tenants, who were brutally ripped off by private landlords, who claimed rent on top of the government housing voucher from their tenants. The only thing these financially haunted tenants can do is to either find a way to pay up or to organize in a tenant organization with other tenants in a similar situation and fight back against the abusive practices of their landlords.

People, who believe in minimalist government intervention, will probably be okay with retaining certain protections for low-income people, seniors, students and other vulnerable populations, but would not want to change the housing situation for the rest of the society. But I would challenge this position, because I think housing should not be another commodity, which should be up to the individual to be consumed like a car. A car and a house have very different values attached to them, namely that the former is a choice and the latter is not. The lack of choice tremendously increases the market power of the sellers. At least in big cities, where public transportation is ubiquitous, people could choose not to buy a car and instead rely on buses and subway systems to be mobile. But housing is not really a choice. People need housing, and those who lack it (the homeless) show every day in a tangible way how unjust the society is. For goods that are clearly so important and essential to have a decent life, it is morally reprehensible to expose people to a market, which will never guarantee them a place to live where they need it.

I define housing as a social right. Let us assume that you don’t challenge this argument (because if you do, then we just have to agree to disagree, and my T.H. Marshall social citizenship pep talk will not work), there are some practical objections that can legitimately be raised. Firstly, some might claim that if housing is a social right there is no end to the level of entitlement that can be granted to people. How big shall the house be? Are we giving out apartments or luxury mansions to the working-class man? But we should not make ridiculous caricatures here. I am highly skeptical of houses in densely populated cities, where land is scarce and zoning laws should not be weakened, which could result in fewer public parks and a more stressed out community (think of traffic jams and the lack of open-air relaxation opportunities). I also don’t think that we can afford such an expansive entitlement policy if people continue to choose to live in big cities (for which there are many justifiable reasons, including access to good jobs and education). People living in more rural areas, on the other hand, should have no problems in building houses, because the land is relatively cheap.

It is not too much to be asked to want to guarantee a modest-sized apartment to all people, who need it. I would not advocate the abolition of the private housing market (those people thinking they can get something better and want to search for it in the private housing market, should go ahead), but I would substantially increase the supply of public houses. This step would most naturally reduce the requirement for people to search for houses. Initially, there will be huge investment costs for the government, and there will be substantial pent-up demand, because people will seek to flee the oppressively expensive private rental market once the government increases the stock of affordable public housing (which should be need-oriented and not profit-oriented, which ideally lowers the rental cost to building and maintenance costs). But these are short-term transition costs that are well worth bearing.

One of the most business-friendly places with hundreds of multinational companies headquartered in that city-state is Singapore, which incidentally leaves most of the land and housing ownership to the government of Singapore. It is only via the central coordination of the scarce land and housing that it is feasible to grow the island country from about 2 million people, when it got independent in the 1960s, to over 5 million people today. (The land reclamation from the sea, which grew the country’s square miles, certainly helped too.) My only objection in Singapore is that while the housing market is largely publicly controlled, the method of acquisition is still privately and individually organized, because housing is financed from private savings (using the CPF funds).

I learned about another interesting housing model in Spain’s Marinaleda, a small town, which has been controlled by a Communist government for many years. While much of the city policies are rather conventional capitalist (e.g. the need to attract outside businesses to make investments in the city), they distinguish themselves from other cities with their housing policy. Essentially, all the inhabitants of the town are guaranteed a house. When someone wants to build a house, they get the empty land allocated by the city government, which then supports the individual and his family with the material costs (cement, brick etc.). The labor to build the house is provided by neighbors, who will do it for free in return for other favors, e.g. have that neighbor help them build their house. When the house is finished, it is the individual, who owns the house, and they have no debt or mortgage on their shoulders. That is quite a feat for a working-class person.

It is true that this is a rather rosy image of how housing policy can be handled, because not all people are as sociable and helpful as the people in that Spanish town, who have tremendous trust in each other. I think there will be a lot more logistical and trust problems if we try to replicate a more socialist housing policy on a national or international level. But I would just put forward the potential and proposition to expand the public housing policy to enable people to have a place to live regardless of their circumstances. Erik Olin Wright (2015) wrote that there are four modes of anti-capitalism: smashing, taming, escaping and eroding. He said that smashing and escaping is difficult, so we have to try taming (Keynesian economics) and eroding (find alternative structure to layer on top of existing structures) capitalism. A more aggressive public housing strategy would do both.

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