Trump Touts ‘Housing-Ban’ Buncombe

SACRAMENTO — Democratic Socialist U.S. Sen. Bernie Sanders of Vermont toured Silicon Valley and Los Angeles in recent weeks, where he gave his usual class-warfare stump speeches warning about the nefarious threat posed to the nation by billionaires. “Billionaires have gotten much richer, they got a huge tax break from Trump, meanwhile working people, low-income people lost their health care,” he said to a crowd at a Stanford University auditorium.

Sanders was promoting a union-backed initiative that would impose a one-time 5 percent wealth tax on the assets of California-based billionaires. Despite some of the national commentary, the measure is by no means a fait accompli. It’s still in the signature-gathering phase. California voters, who often are surprisingly conservative in their choices on ballot-box initiatives, would need to approve it. Only a handful of prominent politicians support it, with some of the state’s biggest progressive names on the record adamantly opposing it.

Even Gov. Gavin Newsom offered this spot-on assessment: “It’s really damaging to the state. … The evidence is in. The impacts are very real — not just substantive economic impacts in terms of the revenue, but start-ups, the indirect impacts of … people questioning long term-commitments, medium-term. That’s not what we need right now, at a time of so much uncertainty. Quite the contrary.” And if it does pass, it will be subject to litigation, especially the retroactive portions of it.

Yet these days, many Republicans are also playing the class-warfare game, as they burnish their “vanguard of the working people” populism. For instance, Sen. Josh Hawley, R-Missouri, last year joined with Sanders in sponsoring legislation that would have capped credit-card interest rates at 10 percent — a great idea if one’s goal is to assure that lower-income Americans can no longer receive credit cards and must turn to payday loan companies or loan sharks to occasionally make ends meet. (RELATED: Why Is Congress Importing New York’s Housing Failures?)

And then, of course, there was Tuesday’s marathon State of the Union address. As Reason magazine noted, Trump was all over an idea that has also garnered support from the far-left and far-right fever swamps: banning large institutional investors from buying single-family homes. As the publication noted, “he’d likely find many allies” on that issue, which is “a hot policy right now.” (Like a hot mess, I suppose.) Here’s Trump:

Another pillar of the American dream that has been under attack has been home ownership. With us tonight is Rachel Wiggins, a mom of two from Houston. She placed bids on 20 homes and lost all of those bids to gigantic investment firms that bypassed inspection, paid all cash and turned all those houses into rentals, stealing away her American dream. She was devastated. Stories like this are why last month I signed executive order to ban large Wall Street investment firms are buying up in the thousands single family homes.

Wiggins’ frustration is understandable, but that’s the function of a housing market that has been overheated in large part because of all the regulations, growth controls, and permitting fees that have made it difficult for builders to construct new houses. Texas has been less problematic that way than California, but institutional investors simply are engaging in the all-American free-market system, where willing buyers and sellers bid on properties. Institutional investors own around 3 percent of homes nationwide, but a relatively large (though falling) share (7.9 percent) in some growing areas such as Houston. They aren’t the cause of the housing crunch. (RELATED: Housing: Trump and Newsom Are Odd Bedfellows)

Despite Trump’s rhetoric, these buyers did not steal away anyone’s American Dream. “We want homes for people, not for corporations. Corporations are doing just fine,” Trump added. That’s as bad as anything from Sanders, by the way. We all know that corporations aren’t living in these homes. They are buying them, fixing them up, and renting them out to people who happen to be renters.

A new study by the Brookings Institution found “rents are lower on net in markets with high institutional ownership of single-family rental homes.” It also noted such laws are an assault on property rights: “Unexpectedly limiting what firms in the SFR [single-family residence] sector can do will lead investors to be more cautious about dedicating capital to the sector going forward. … [P]rivate equity investment in housing was welcomed a decade ago for its surge in buying of foreclosed single-family homes that put a floor on house price declines following the global financial crisis.”

Homeownership can be a great thing — I highly recommend it — but the country also needs quality rental properties. Most corporations that buy homes are just mom-and-pop buyers who own a few properties, but set up an LLC for legal and tax reasons. Small corporations aren’t subject to the proposed bans, but the anti-corporate rhetoric needs to stop. As I explained for American Spectator, Trump’s approach echoed the one advocated by his nemesis, Gavin Newsom, although Trump’s idea goes much further than the California governor’s.

It’s understandable that Democratic socialists view the economy as a zero-sum game, whereby one wealthy group’s success comes at the expense of the less wealthy. But Republicans ought to know better. Institutional investors are just the latest populist bogeyman, just as short-term rental investors are the bogeymen at the local level. The GOP ought to push for a better-functioning housing market that lets investors build housing of every type and every price point and get control of inflation. The fundamental problem is not the market, but the government.

Populist blather might sound enticing to Americans who are struggling with higher prices, but it won’t fix what ails our housing markets or economy. We should all reject these simple solutions, whether they come from left or right. As usual, the answer can be found in freer markets, lower tax rates, and fewer regulations. Then everyone — and not just billionaires — will have the chance to get richer.

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Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.