A moron suggest that we destroy new homes

Holman Jenkins, a guy who is obviously a complete moron, says in a Wall Street Journal opinion piece that the government should pay to demolish new homes, to reduce the oversupply.

When there are people who can barely afford to rent a cockroach-infested trailer, how can it possibly make sense to destroy perfectly good new homes?

This is just a negative sum transfer of wealth from the poor (people who rent or are even homeless) to the well off (people who own homes and big corporations that built too many homes and can’t sell them).

Steve Sailer also write about this.

Comments

[hugh go naught]

I just checked his bio. He has a Masters degree in Journalism, which makes him supremely unqualified to talk on matters of economics. Like having a PhD in Women's studies give a lecture on plasma physics.

Then again, checked out the article and it reads like he has his tongue firmly planted in cheek. Maybe, as was mentioned in one of Sailor's comments, he is aware of the Broken Window fallacy and just wants to see how many of his readers are.

[Peter]

Then again, checked out the article and it reads like he has his tongue firmly planted in cheek.

I've read a number of Holman Jenkins' columns, and while they're not satirical, they definitely have a more idiosyncratic tone than most economics and business writing.

[miles]

Banks like home prices high. They dont want you to be able to have a small mortgage. About five or ten percent down is as much as they ever want you to have. People who put half down piss banks off, just like people who pay their credit cards off at the end of every month piss Visa and Discovery off. Whats good for America is not what is on Wall Street's mind, what is good for Wall Street is.

Its a damn fine time to buy if you are in the market. Lots of houses are going down in price.

[SFG]

What do they do to you if you try to make a large down payment? I'm nowhere near in the position to do so, but I'm wondering...

[Joshua Holmes]

Siggy, when the hell did you start caring about the poor?

[Me]

"Knocking down surplus homes would be the most efficient and equitable way to spend taxpayer dollars."

Er, no. It wouldn't.

One of the benefits of boom cycles is the is the creation of "surplus" infrastructure. Think of the creation of "surplus" railroads at the end of the 19th Century, or the "surplus" in telephone wire in the early 20th. Consider the "surplus" in fiber optics more recently.

Jenkins would have us destroy that -- at taxpayer expense!

Sometimes when you think outside the box you just end up with damaged goods.

[Russ]

What happens when someone finally subdivides McMansions into apartments and the poor move in? Lots of these exurbs are in unincorporated townships, the developers are likely to change the zoning requirements as they see fit.

The 21st century will be people moving into the city center and out of the country.

[slwerner]

"the government should pay to demolish new homes, to reduce the oversupply."

Sounds like a new version of Farm Subsidies.

Next, I suppose that we (the taxpayers) will be asked to pay developers to NOT build homes in order to keep prices up.

[Tired of Smoke Rings]

"Next, I suppose that we (the taxpayers) will be asked to pay developers to NOT build homes in order to keep prices up."

Restrictive zoning already fullfills this function. The average price of housing in a state like Oregon is measurably higher due to zoning and so-called Urban Growth Boundries. Not that I feel too cheated by-the-way, still plenty of sprawl for everyone, it just costs more and takes longer.

[slwerner]

Tire of Smoke Rings - "Restrictive zoning already fullfills this function."

While I understand your point here, I was making a tongue-in-cheek comparison to the way we now pay farmers to not plant crops so as to not produce excess amounts which drive down prices.

My view is that when developers first build a house that they cannot sell, then the government ends up stepping-in and essentually "buying" that house (for demolition), that such a scenario (as proposed by Holman Jenkins) would lead to the next logical step of the government simply paying them for houses that they never actually build (eliminating the need to demolish them) based on the logic that if they were not recieving the money to not build houses, they would instead build excess houses which, in turn, would drive the prices for other house down.

[Tired of Smoke Rings]

Slowlearner,

Developers here build fewer but more expensive houses. It drives up the cost per square foot just as if they had say, been paid to tear down or never build every fourth house. It's a covert subsidy even if most people don't see it.

[sammler]

I've piled on, here.

[slwerner]

Tired tries to be clever - "Slowlearner"

Yes, I understand your point...but, if you go back and read HS entry you will see that it is about..."Holman Jenkins, a guy who is obviously a complete moron, says in a Wall Street Journal opinion piece that the government should pay to demolish new homes, to reduce the oversupply."

You might be able to detect that Holman Jenkins is not calling for more restrictive zoning to be employeed, which work in the manner you suggest. He is calling for the government to buy and demolish existing houses (i.e those already built be developer who cannot now sell them). This is where comparison to Farm Subsidies comes into play. The governement does not apply limitations (via zoning or alternate mechanisms) to the amount of land that can be cultivated nor used for raising livestock. Instead, it has historically acted in two ways to prop-up prices. It either buy's excess product (i.e. gov cheese), or it pays farmers directly to not produce.

If Holman Jenkins had his way - the government buying up excess rather than limiting it's building in the first place, then the next logical step would be to recognize that if the devolper never built a house that the government had to buy and destroy (at additional cost), the governemnt would come out ahead (in this stupid scenario) by simply paying the developer the same price for the house not to be build.

You may think I'm slow, but at least I can understand both points, yours and mine.

[Anon]

When there is an oversupply of houses, it becomes a renter's market on behalf developers who overbuilt. And this guy wants us to use our tax dollars to help developers pay for their mistakes? What a joke.

But even if you were crazy enough to do something like this, it wouldn't ever make sense to tear down NEW houses...geez. At the very least swap them with old inefficient houses to tear down.

God I hate the press. This article is only level away from suggesting that money be printed to pay for the federal debt.

[Tired of Smoke Rings]

"Tired tries to be clever" ...touche, slwerener!

Tired of Smoke Rings --> "Tries to Be Clever" even better.

Sorry, feeling cranky. Really I take your points as well. There are many forms of subsidy built into our government programs. I have to correct this notion that you have that:
"The governement does not apply limitations (via zoning or alternate mechanisms) to the amount of land that can be cultivated nor used for raising livestock. "

This too is done I can't remember the exact name of the program, conservation set-asides or some such and others as well. I could talk to some of my cousins if I wanted the real scoop.

[slwerner]

Tired of Smoke Rings - "This too is done I can't remember the exact name of the program, conservation set-asides or some such and others as well."

I believe that you will find that farmers/ranchers/landowners are compensated for their land that is perminantly taken out of agricultural use - it's an off-shoot of paying them not to produce.

I'd also like to add to this anonymous comment, "it wouldn't ever make sense to tear down NEW houses...geez. At the very least swap them with old inefficient houses to tear down."

As I see it, the reason that the likes of Jenkins would prefer to target new homes is a way of protecting the developer even further. If the government agrees to buy a house which has never been sold, thay will undoubtably also agree to pay for that developers "asking price". While tearing down an older home instead (which, BYW, is more often done with abandoned/unsalable properties) will reduce housing options for potential buyers, it cannot force them to pay more than they can afford nor above market value for any home. The upshot of this is that the developer trying to sell his new home in the narrowed market will still not be able to get his desired asking price.

Tearing down the new home will shield the developer from market forces which would otherwise work against them.

[Anon]

While tearing down an older home instead (which, BYW, is more often done with abandoned/unsalable properties) will reduce housing options for potential buyers

Perhaps I wasn't clear on what I meant by swapping. I'm talking about moving people who currently own an old home into a new one and then having the old home torn down. The net effect is the same, one less house on the market. Note that I'm not actually for doing this, I'm just commenting on how awful of an idea it is to tear down new homes.

Tearing down the new home will shield the developer from market forces which would otherwise work against them.

Yes, but if shielding the developer from the market is the goal then this has to be the most idiotic solution imaginable. Sigma is right, this guy is a complete moron.

The real question here is why should these developers be protected at all? Companies of any type that can't forecast demand shouldn't be subsidized by taxpayers. People were talking about a housing bubble two years ago, the warning signs were all there.

[slwerner]

Anon – ” The real question here is why should these developers be protected at all? Companies of any type that can't forecast demand shouldn't be subsidized by taxpayers.”

My feelings, exactly.

The way I read Jenkins piece, he’s doing exactly what I would expect for the business-biased WSJ to do – he’s looking to help out businessmen (vs consumers and taxpayers).

The option of swapping houses, as you suggest, and I would concur, would likely have to involve those homeowners “moving up” to have to pay the difference between the market value of their current homes, (otherwise, everyone would demand one, and there’d be huge legal issues of equality) and what the developer would expect to get for a newly constructed home.

I think this would cause a great deal of difficulty on “fixing” a price for a new home in a new neighborhood (with no comps available).

The developer would be expected to argue “location, location, location” – his new house is worthy of the top market price. The potential buyer would see the prices falling on other housing options, and would want the developer to drop his price to meet the competition. Otherwise, the potential homeowner would be looking at overpaying, and ending up upside-down on that new house – no reason to pursue such a deal.

But, the developer (and financial backers) obviously intended to make a profit from that house. Dropping the asking price would cut into those profits, and perhaps even result in a loss (depending on market). This is why they haven’t been able to sell the house in the first place. If they could have sold it at their price, they would have. That’s why they decided to build the damned thing in the first place.

Thus the strategy of convincing the government to buy the developers house at the full sought-after price both reduces the total number of homes available on the market (arguably, a good thing), while shifting the losses onto the great multitude of taxpayers (like every other bail-out), saving the business interests from their own greed.

Personally, I think it’s high time we let speculators take a loss when they’ve screwed up.

that's my take on it, anyway.

[Tired of Smoke Rings]

"Personally, I think it’s high time we let speculators take a loss when they’ve screwed up."

This attitude is Un-American.
Repeat this to yourself each morning 100 times:

Privatize profits, socialize losses!

[SD]

"People who put half down piss banks off, just like people who pay their credit cards off at the end of every month piss Visa and Discovery off."

If this were true, these activities would adversely affect credit scores and you'd have difficulty getting a credit limit increase in cards you paid in full every month. The opposite is the case.