August 31, 2009
After Fueling Crisis, Government Action Will Only Delay True Recovery
OAKLAND, Calif., August 31, 2009Recent reports have heralded the official turnaround of the U.S. housing market crisis, citing last months 7.29.6 percent rise in home sales. With the homebuyer tax credit expiring this November, however, and foreclosures still devastating many states, this sense of relief is sadly premature. As the Federal Housing Administration continues its attempt to manage the crisis despite its lack of success, mortgage delinquency rates are reaching record numbers. In the worldwide debate over whether government planning or free markets allocate scarce resources more efficiently, noted economists are submitting a powerful case for the latter.
In Housing America: Building Out of a Crisis (July 2009 / Transaction Publishers and The Independent Institute) economists and editors Randall G. Holcombe and Benjamin Powell, research fellows at the Independent Institute, state that most of the current housing problems were caused, not solved, by government policies. Simultaneously released in hardcover and paperback, this volume follows their finding that regulation of the housing sector is better managed by market mechanisms. In fifteen rigorously researched chapters, twelve additional experts in the field join the editors in diagnosing the state of the U.S. housing market, from an analysis of the root of the crisis to recommendations for future planning.
While the media abound with varying explanations of what triggered the meltdown, Holcombe and Powells logic is refreshingly clear. When people perceive problems in a market, the editors explain, they tend to demand government action as an easy fix. Decades of dependence on such easy fixesoften leading to more problems that solicit more government interventioncombined to produce the mortgage meltdown of last fall, a cycle that is central to the discussion of the U.S. economy as a whole. Since the collapse of the Berlin Wall, they write, nowhere in the American economy has the demand that government do something been stronger than in housing markets and related land use issues. The contributing scholars to Housing America describe individual aspects of the U.S. housing market, with each chapter supporting Holcombe and Powells central thesisthat the American housing sector is fundamentally strong, but cannot succeed without decreasing government interference.
Presenting a groundbreaking theory of the collapse, the chapter by University of Texas at Dallas professor Stan J. Liebowitz has already received national pre-publication media attention. Adding postscripts composed in the aftermath of 2008s crisis, Mark Thornton and Lawrence White write prescient explanations of housing bubbles and the problems of government-backed giants Fannie Mae and Freddie Mac, while author William Tucker shows that building codes increase the price of housing for the very people they are intended to helpand erect barriers to quality improvement. Further contributing economists address topics including the restricted development and reduced housing supply created by growth-management policies; the greater success of private contractors compared to zoning laws; the ways in which the use of eminent domain shortchanges ousted residents and leads to inefficient land use patterns; the failures of rent control and government housing projects; and the wise alternatives to government housing legislation that neighborhood associations provide.
With much of its data compiled just before the market bubble burst, this volume reveals research that is unquestionably compelling. At a time when many commentators were predicting indefinitely rising home prices, these scholars had the foresight to focus on the problems that lay ahead. An erudite, comprehensive examination of the housing market, Housing America: Building Out of a Crisis is a mandatory volume to accompany the countrys effort to learn from its mistakes and open the doors for economic opportunity and growth once again.
Praise for Housing America
In Housing America, Randy Holcombe and Benjamin Powell have assembled the work by some of the most insightful and interesting minds in the field. Several chapters, especially that by Lawrence J. White, illuminate the causes of the current housing crisis, and the others offer provocative and highly useful analyses that will remain timely long after the present crisis has passed.
William A. Fischel, Professor of Economics and Patricia F. and William B. Hale 44 Professor in Arts and Sciences, Dartmouth College
Holcombe and Powell have assembled a terrific line-up of scholars to address an issue of fundamental importance as we recover from the current recession. Avoiding a repeat of the housing market mess of the last decade or two will require a careful understanding of the ways in which often well-intentioned policies to expand homeownership and control growth have distorted both the price of housing and the cost of borrowing in ways that have harmed many. Housing America provides a wide-ranging and well-researched look at almost every aspect of the housing market, and this much-needed volume is irreplaceable in thinking about how to reform government policy in the United States.
Steven G. Horwitz, Professor of Economics, St. Lawrence University
Housing and land use in America (they are a package) may be our most regulated and politicized industry. It suffers from the full attention of federal, state and local governments, having remarkable acquiescence of the courts. Only the most naive observers would think that the outcome could be benign. We are now living in post-2007 economic train wreck that will be studied and debated for years. The very best place for everyone to start is the milestone book, Housing America. Clearly written and superbly enlightening, this comprehensive book assembles and wonderfully synthesizes an amazing amount of up-to-date research. Highly recommended.
Peter Gordon, Professor of Policy, Planning and Development, University of Southern California
. . . a timely and provocative collection of essays on the U.S. housing market. Housing America is an excellent resource for anyone with a serious concern for the future of housing today. And this superb book would provide an outstanding guide for a graduate seminar on housing economics.
G. Donald Jud, Professor Emeritus of Economics, University of North Carolina, Greensboro
. . . a welcome book by skeptics of government interventions in housing markets . . . an important counterweight to the writings of those who urge ever greater state involvement.
Robert C. Ellickson, Professor of Property and Urban Law, Yale University
Housing America . . . reveals that many of the purportedly dysfunctional features of housing market behavior are, in fact, a direct consequence of regulation, rather than native features of free markets. Of special currency are the revealing chapters that trace the causes of the current crises in mortgage and housing markets to governments heavy-handed attempts to democratize access to credit and homeownership. The policies pandered to politically important constituencies at the expense of banks, borrowers, builders and even the economy itself. It is a stark illustration of the hazards of government manipulation of markets for social-engineering purposes. The irony of government intervention in housing markets is that the very groups asserted to be beneficiaries of the intervention, in the end, suffer most. This is demonstrated amply in this fine volume with chapters on rent control, zoning, smart-growth, low-income housing and other planning and regulatory policies. In the current political environment, where greater government presence and regulation is seen as a good thing, this book is must reading.
Randall J. Pozdena, former Research Vice President, Federal Reserve Bank of San Francisco
Housing America: Building Out of a Crisis
Edited by Randall G. Holcombe and Benjamin Powell
Published by Transaction Publishers and The Independent Institute
July 2009 | Paperback $29.95 / Hardcover $59.95 | 474 pages ISBN 9781-412810463 / ISBN 9781-412810203