Protect Property Rights: More Government Intervention Won’t Fix Housing Affordability

The Senate is now considering legislation called the ROAD to Housing Act, but a more accurate title would be the Path Toward the Destruction of Property Rights Act. A newly released section would prohibit large institutional investors from purchasing certain single-family homes. But, since there are two sides to every transaction, the provision also acts as a prohibition on property owners from selling their property to the highest bidder. In other words, this provision would make illegal an otherwise lawful contract simply because the government would prefer that the seller sell to someone else. Since many of the houses owned by institutional investors are rented, banning this class of investors may decrease the number of rental houses thus raising rents. Many economists argue the ban affects such a small percentage of the market that the ban may have no effect on housing prices at all. According to a recent study conducted by the American Enterprise Institute, large institutional investors only own about 1 percent of single-family rental homes. With such a miniscule amount of the housing stock owned by large investors, the proposed ban could well have little to no effect on housing affordability or rent. The drafters of the legislation make a disingenuous sales pitch. They argue homes should be for people, not corporations. But the prohibition to buy is also a prohibition to sell. In other words, sellers, many of whom may have owned a home for generations and may be able to attract a tremendous windfall that could be life-changing for their families, would be commanded to sell to a buyer with more modest means. The ban would not simply deny investors from purchasing homes but would also effectively steal home value from sellers who will be prevented from selling to the highest bidder. The obvious solution to housing affordability is to increase supply through local zoning reforms or tax incentives, but the ban on institutional investors purchasing homes is an answer in search of a problem. In fact, a ban on institutional investors could harm housing affordability. As John Berlau , Senior Fellow and Director of Finance Policy at the Competitive Enterprise Institute, points out, investors that rehab those homes for the rental market “provide a service to many families with children unable to finance homeownership but seeking a living space larger than an apartment.” Regardless of whether people are financially capable of buying a home, some people would rather rent and leave the cost of property maintenance to a landlord. If the ROAD to Housing Act is enacted, renters will have fewer options and, as a result, either be forced to live in a lower quality apartment or pay increased monthly rates. And yet, the cost of this ineffective solution to housing affordability is a high one: the surrender of property and contract rights. These are the foundations of individual liberty but the drafters – hiding the fact that they will erode your rights with sweet talk about housing prices – expect the American people to accept that the government will prevent an otherwise legal contract between two willing parties simply because the state prefers one type of buyer over another. Even in the Jim Crow era, that long and shameful time in our history when the state legislated discrimination, property rights served as an antidote to government-imposed racism. In the 1917 case Buchanan v. Warley , the Supreme Court unanimously struck down a segregationist housing restriction, stating, “Property is more than the mere thing which a person owns. It is elementary that it includes the right to acquire, use, and dispose of it. The Constitution protects these essential attributes of property.” It is no accident that, for over a century, Buchanan v. Warley is viewed for the proposition that property rights strengthen civil rights. The concept of property rights did not originate with the drafting of the U.S. Constitution. The notion that persons could not be deprived of their property without due process can be traced back over 800 years ago to Magna Carta. For centuries, the Anglo-American commitment to rule of law recognized that no person would be deprived of his right to freely acquire, use, and dispose of property without a fair trial or just compensation. Against this elementary and ancient heritage of protection of property rights stands section 901 of the ROAD to Housing Act. It likely will have negligible effects on housing prices in exchange the loss of your liberty. The federal government has long promoted homeownership, which served to increase demand and result in higher purchase prices. The drafters of the ROAD to Housing Act now futilely seek to reverse the effects of those misguided interventions with even more government intervention. The difference is that this time, they seek to prohibit sellers from selling their property to whom they wish. The proper course is to preserve and strengthen the ancient concepts of property and contract rights as an inalterable principle of individual liberty, not ineffective provisions that likely do nothing to address affordability while curtailing the freedom of homeowners to sell their property in a way that best benefits their families. AS SEEN ON X