Good Friday Morning, especially to the NFL for announcing that in 2022 it will allow teams to wear alternate helmets in games. This decision by the league screams throwback uniforms, which I 100% support. I’m hoping the Tennessee Titans go full old-school and bring back the Oilers powder blue uniforms. The oil derrick logo on Derrick Henry, there’s a rhyme to it! I’m a fan, I look forward to the NFL taking even more of my money.
This week, we’re going to jump into the issue of large companies buying up entire neighborhoods and then renting them back to that same community. I think this is a bad trend, and I’ll get into why below. Links to follow.
Where you can find me this week
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The United States needs more nuclear power – The Conservative Institute.
Tom Cotton is right – the US should be wary of Beijing Olympics – The Conservative Institute.
How Housing is Changing, and Why Conservatives should care.
I’ve talked about inflation, housing, semiconductors, and more in the last few months. This week, we’re keeping that general theme and exploring another related topic to housing and inflation: renting. Specifically, we’ll hit large corporations buying entire subdivisions and neighborhoods of single-family homes and renting those houses back to people. I think this causes concerning issues that are getting ignored by most right-wing thinkers right now. But first, the problem.
About a week ago, a writer at Bloomberg wrote a piece entitled: “America Should Become a Nation of Renters: The very features that made houses an affordable and stable investment are coming to an end.” He wrote it after a series of articles came out talking about investment companies like Blackrock are buying up houses (a questionable story, if we’re honest). In the intro paragraphs, the author of the Blomberg piece said:
Rising real-estate prices are stoking fears that homeownership, long considered a core component of the American dream, is slipping out of reach for low- and moderate-income Americans. That may be so — but a nation of renters is not something to fear. In fact, it’s the opposite.
The numbers paint a stark picture. After peaking at 69% in 2004, the homeownership rate fell every year until 2016, when it was 64.3% — its lowest level since the Census Bureau started keeping track in 1984. The rate rebounded in Donald Trump’s presidency, hitting 66% in 2020, but that trend is likely to be arrested by a housing market that is desperately short on supply and seeing month-over-month price increases greater than they were in the frenzied market of 2006.
This process is painful, but it’s not all bad. Slowly but surely, most Americans’ single biggest asset — their home — is becoming more liquid. Call it the liquefaction of the U.S. housing market.
He then goes on to make some arguments in favor of America becoming a nation of renters. I don’t entirely buy this argument. But I also don’t believe the libertarian counter to it either. The CATO Institute posted a response to his piece arguing that the thesis of shrinking homeownership and private firms buying up houses is overstated:
We’ve heard claims like Smith’s before. After the 2008 financial crisis, a spate of opinion pieces came out suggesting that maybe Americans weren’t smart enough or wealthy enough for most of us to own our own homes. Never mind the fact that housing used to be so affordable that low‐income urbanites actually had higher homeownership rates than middle‐income urbanites. Never mind the fact that relatively low‐income countries such as Brazil and Mexico have significantly higher homeownership rates than the United States.
If Smith thinks that private investors buying homes is making housing expensive, he is naive. The real reason for the high cost of housing in many parts of the country, as I’ve documented in Cato policy analyses, is that several state and local governments have used growth‐management policies to make single‐family housing expensive. In at least some cases, the clear intent is to try to force more people to live in multi‐family dwellings based on the fallacious notion that the latter is more “sustainable.” Since roughly 85 percent of single‐family homes are owned by their occupants while roughly 85 percent of multi‐family dwellings are rented, this policy has favored renters over owners.
From a government policy angle, I agree that we need to push more zoning for high-density housing. There’s a lot of lousy NIMBY policies out there. I get that, acknowledge that, and want it changed.
I’m coming to think that large corporations buying up houses is a problem. Or rather, it’s becoming one or has the potential to, let’s put it that way. It’s not just the generic home price stories on a national level. I started thinking about this more after a local news story caught my attention: “Are hundreds of build-to-rent homes coming to Wilson County?“
This story is about my neck of the woods in Tennessee, the suburbs of Nashville. Here are the highlights:
- South Mt. Juliet Road: Florida-based Global City Development is promoting construction of 144 single-family homes on South Mt. Juliet Road, near Suggs Creek. The intent is to rent the homes, according to Wilson County Commissioner and Mt. Juliet Planning Commissioner Diane Weathers.
- Park Glen: The existing neighborhood has up to 137 lots within undeveloped phases that are bought by companies that are looking to rent single-family homes, Mt. Juliet Planning Director Jennifer Hamblen said. American Homes for Rent and another company listed as SCM-WEG MJ DEVELOP LLC are the buyers. M2 Group is listed as the developer for SCM-WEG MJ DEVELOP LLC, Hamblen said.
- Rowland Farms: A previously approved plan for about 56 homes has been purchased by American Homes 4 Rent. “The project wasn’t for sale and (American Homes 4 Rent) reached out to us directly and put offer in at uncertain time in the economy,” Fleming said. “We had planned to move forward with the vertical building of the community.” Lebanon Council member Chris Crowell is concerned about reviews he’s seen about American Homes 4 Rent and said the city will explore “every avenue at our disposal.”“We’re not saying we don’t want someone to own or live in rental properties,” Crowell said. “We have a lot of rental properties and a lot of landlords who live in the city and several that we don’t have any issues with. They take care of their properties and we know where to find the landlord.“We’re skeptical that is the case here.”
- A Smyrna development named Wood Pointe approved for 97 lots in January 2019 has been bought by American Homes 4 Rent, city Public Information Officer Kathy Ferrell said.
- Hendersonville Mayor Jamie Clary is aware of three existing neighborhoods in that city with undeveloped phases bought by an entity that intends to rent single-family homes, he said.“My concern is that far away owners don’t take as much interest in our community,” Clary said.
One of the comments made at the end of the article was, “Middle Tennessee has an extreme shortage of inventory, which may contribute to home rental companies looking to build homes instead of competing for already finished homes, said Bobby Wood, managing broker of RE/MAX Carriage House.”
This situation isn’t the same one described by CATO and others, where companies are just buying off listings like everyone else. This situation involves companies purchasing entire subdivisions and neighborhoods and turning them into rental communities. The libertarian crowd doesn’t criticize this because they hardly criticize anything any private party does on nearly any grounds. I get that if your ultimate expression is freedom in any situation.
But as Richard Weaver famously put it, “ideas have consequences.” And I have two concerns here, from a conservative perspective of entire communities getting purchased by a single company like this. It’s not the same thing as renting an apartment when you’re talking about a single building. This scenario is different.
The American Dream
The very essence of “The American Dream” is achieving some semblance of middle-class life. America presents this lifestyle to everyone on earth as achievable if only you work hard and make wise decisions. And for the most part, in American history, it’s been true. Part of that American dream is the ability to own a home on your own land. This dream is not some 20th Century phenomenon; it’s ingrained in the American psyche.
About a month ago, I wrote about European and Australian conservatism and how Americans were fundamentally different in the things they valued. From the moment the original 13 colonies were founded, Americans surged west in multiple waves for more than 150 years. The idea that you can move anywhere and have complete ownership of your own property, to have your own “castle,” is a virtue in American society. We elevate that concept, praise it, and hold it out as an exemplar for everyone.
The concept of homeownership, the middle class, the “American dream” are all tied up in conservative notions of what America is and should be, and that’s something to “conserve.” Standing by as companies take away homeownership violates that creed on a fundamental level for Americans of all stripes. What libertarians and libertarian-leaning conservatives have to argue is that it’s either not a real issue or a virtuous good for those companies to edge in on that promise to everyone.
I can’t make the argument that it’s good for large businesses to step in like this. I’m open to the idea that this isn’t a big issue. Still, it’s hard to square that argument with the real thing I’m watching in my own neck of the woods where entire neighborhoods are getting bought. And I can’t shake the knee-jerk reaction I have to news like that, that it violates my conservative notions of America.
Building the ingredients for Marxism
The second problem with this growing corporate ownership of single-family households is that it creates one of the unmistakable ingredients of Marxist communism. This issue is probably on my mind because I recently finished Isaiah Berlin’s excellent intellectual history of Marx (which I highly recommend). Communists have long been frustrated by the United States because communism has never taken root here.
One of the reasons communism struggles here is that we don’t have the old economic classes of Europe. We indeed have things like poor, working, middle, and upper classes. But in America, you can also own property, build a business, and live a generally free life at any level. In Europe, capitalism emerged in a feudal society and overturned centuries of issues there. The centralization of power and capital in feudal times was seen as reoccurring in capitalist Europe.
Marx attacked the centralization of capital and wanted the workers to own that. When he made that pitch, he talked to industrial workers and (in the case of Russia) agricultural societies that had never known ownership of capital. In America, that’s untrue. People have an actual ownership interest in our culture. Immigrants knew the progression here too. You could work hard and physically own your slice of America. The first generation did menial labor, the second generation could jump into the middle class, and the third the upper classes if they were lucky and worked hard. It wasn’t a lottery; it was a genuine opportunity.
And all along the way, people could take their money and buy buildings and property in their community. They had personal ownership. Corporations buying single-family homes change that relationship. People lose that ownership connection to their community. If you don’t own your slice of the American dream, you’re far more apt to see that centralization of power as bad in a Marxist sense. It opens up the Marxist notions of class in America in a way that’s never been true before. People see themselves more as renters in a place, not as owners of a community.
In a way, this is the Marxist and Hegelian notion of alienation. Briefly defined, alienation is “a distinct kind of psychological or social ill; namely, one involving a problematic separation between a self and other that properly belong together.” Marxists saw this in work; the less ownership a person had over what they produced, the more alienated they became from that society. The only way to achieve the reunification of self was to seize control of the means of production.
We see some of this with terrorist groups. The disaffected people who feel disconnected from their society feel more apt to blow it all up. The more direct connection someone has to their country, the more they’ll protect it. A nation of renters puts a hedge between Americans and their community, making it easier for Marxism to take root. The more disconnected, the easier it is for the seed to grow. And if not Marxism, other things will fill the void of a loss in the community.
Conservatives should recognize this and work towards protecting that American connection to personal property and community. Maintaining that ownership interest undercuts the power of Marxist communism and socialism. Why would a person want to give up private property, like Marxists want, when it’s offered to everyone as it has in the past in America?
So what to do about this? I’m not 100% sure. It’s a delicate balance. On the one hand, we need more supply in housing across the board. One way to move these companies out of single-family homeownership could be increasing the amount of high-density zoning. It’s worth more to rent out apartments in a building than buying a ton of houses. Giving them more access to that could help, and it would alleviate the housing costs of those seeking the apartment and townhome lifestyle.
Another option being explored locally is taxation. One county is “exploring whether Sumner County can tax single-family home communities as a commercial property similar to apartments.” The taxation rate for apartment complexes” is “40% per $100 of assessed value while residential properties are taxed at 25% of assessed value.” That could work and could beef up local coffers. I’d be concerned those taxes would just get passed along to renters.
In discussions with an intelligent friend of mine, she mentioned that you could potentially set zoning laws to block ownership of single-family homes to groups that only owned a certain number of houses. You don’t want to shut out legitimate small-time business owners who flip or rent. Those kinds of people have more connection to an area. But companies that own thousands upon thousands of houses could be hindered.
It’s an idea. I’m new to the whole housing policy front. I have no for-sure answers here. And I’m open to the idea that I’m wrong. But I’m also open to the idea that I’m right, and it’s incumbent upon conservatives to be ahead of the curve on the changes to society a “nation of renters” represents.
How I’d approach the issue if I were an elected official would depend on whether we’re talking state versus federal level. I think this is more of a state issue, though with nationwide companies that buy up land, maybe there’s a role for Congress. States and local municipalities have much more say in zoning laws, however. A lot of this is me thinking out loud at this point. So I’ll leave it to you, the reader, for your thoughts. Feel free to sound off and hit me up with your ideas.
If you’re friends with me on social media, feel free to message me there too.
Links of the week
Pelosi announces select committee will investigate Jan. 6 attack: The speaker’s decision comes after Democrats attempted to set up a bipartisan commission, which was blocked by Senate Republicans. – Politico
Congress is investigating whether the 2019 Military World Games in Wuhan was a covid-19 superspreader event – Josh Rogin, Washington Post
American Basketball Pro Spent Eight Months in Secretive China Detention: A human-rights group says a legal form of Chinese detention that often leaves people cut off from family and lawyers is used at a ‘mass level’ – WSJ
Trumpism after Trump – Sean Trende, The Washington Examiner
Twitter Thread(s) of the week
Satire of the week
Thanks for reading!