The Affordability Crisis - Part 3
The Free Flow of Capital and Talent
The first article in this series began with the claim that “affordability” and “crisis” are ambiguous terms. The second essay began with the claim that economic fallacies were needed for the “affordability crisis” to seem real.
This is not to say that the doubling of rents and mortgage rates since 2020 is not real. It is to say that the “crisis” cannot be solved until its causes are understood. For that, the socially coercive forces of price inflation need exposure, and eight of them were itemized in the opening essay: empowerment, giving back, servant leadership, sustainability, renewables, price gouging, billionaire greed, and stakeholder capitalism.
Because politics is downstream from cultural leadership and policy is downstream from university economics departments, the previous article itemized eight of the economic fallacies that are the natural consequence of that common wisdom: market inefficiency, externalities, consumer protection, public/private partnerships, fair competition, equilibrium, antitrust, and essential services.
As mentioned, the purpose of this exercise is to identify causation. That is important because nearly all the proposed solutions to socioeconomic problems are more public policy prescriptions. Hooey. Below are some remedies that will allow the voluntary forces of free minds and free markets to prevail:
Mobility – Because affordability is unique to everyone, solutions must begin with the individual. Not only must we rid ourselves of the notion that owning a home is a good investment but understand that it can be an anchor. One key to prosperity in a complex socioeconomic system is mobility, and no one can live their best life without the flexibility of going where the best opportunities lie.
For nearly everyone, that does not include being an expert electrician, plumber, roofer, or carpenter. And for those highly skilled tradesmen, they need mobility, too. In Bringing Adam Smith into the American Home, authors John Tamny and Jack Ryan explain it best: “Capital flows quite simply follow human flows, the flow of humans is the signal of where prosperity will be.”
Municipal Finance Reform – Property taxes account for about 70% of city and county tax collections and about 30% of general revenue. The balance comes mostly from state and federal transfers and sales tax revenue. However, according to Mark Moses, author of The Municipal Financial Crisis: A Framework for Understanding and Fixing Government Budgeting:
Rather than achieve financial stability by delimiting government’s scope, their approach resigns us to perpetual crisis. Residents and businesses then oscillate hopelessly between the taxpayer hells of unacceptable taxation and unacceptable service levels. Understanding the nature and consequences of coercive government is what is in crisis.
Privatized Education – City and county governments spend about 40% of their budgets on elementary and secondary public schools. Obviously, that is dependent on property tax revenue for teaching children the dogma of empowerment, giving back, servant leadership, sustainability, renewables, price gouging, robber barons, and stakeholder rights.
And for those that move into state funded university systems, they are taught market inefficiency, externalities, consumer protection, public/private partnerships, fair competition, equilibrium, and antitrust – if they learn any economics at all. As the morally defensible alternative, a privatized education network will eliminate the burden on bankrupt local governments, lead to an efficient price mechanism for housing, and give parents real choices for excellent schools.
Strong Dollar – One of the reasons people believe their residential property to be a good investment is because market values have soared, most of the time, over the last many decades, in dollar terms. But adjusted for monetary devaluations, the rate of return has been nil, and compared to the US stock market, far less than equities. And that doesn’t include property taxes, homeowners’ insurance, or equipment replacement costs that have also risen sharply because of the weak dollar that caused people to buy hard assets in the first place.
Repeal the 16th Amendment – Not only are income taxes an immoral law that invades the privacy of every American, the deductibility of mortgage interest and Section 1031 exchange rules for the deferment of capital gain taxes are a tool of the State to pick winners and losers. That always degrades the price mechanism, and in the case of housing, lock people into political jurisdictions that cement the power of incumbents.
That is the statist’s goal: immobility, and that regulatory authority weighs like an anchor on affordability. For a strong hint at the solution, Tamny and Ryan continued: “Housing vitality is yet again a consequence of prosperity that is a consequence of capital migrating to its highest use.” The freedom to move among jurisdictions can only lead to competitive precincts.
Eliminate HUD – As of May 2025, the department’s allocated budget was almost $90 billion, but for 2026, the appropriation request has been cut by about half. But what does it do with the billions coerced from the US economy? According to Next City – Solutions for Equitable Cities,
The U.S. Department of Housing and Urban Development, commonly known as HUD, is a federal government agency created in 1965 to manage housing, homelessness and urban development policy. Its programs include the Federal Housing Administration, Community Development Block Grants, and the Office of Fair Housing and Equal Opportunity, among many others.
The good news is that $45 billion might be returned to its most productive use - which inevitably lowers prices. The bad news is that $45 billion will be used to increase housing shortages, homelessness, and urban blight - as it has always done.
Ethical Independence – Residential real estate may be one of the largest industries in America, but it is the only one whose corporate tactics, client interactions, and pricing models have not been reformed by big data and the internet. As Tamny and co-author Jack Ryan explained from direct experience, there are no competitive threats to the National Association of Realtors. The 2025 NAR Settlement for pricing transparency related to Buyers Agent Commissions is a step in the right direction, but it does little to dismantle the cartel.
And much like The Moneyball Method encourages investors and advisors to disregard the entrenched bureaucracy, homeowners and real estate agents could and should streamline the costs and efficiency of residential transactions. The benefits would be enormous: lower fees lead to greater liquidity, which leads to more transactions, which enhances mobility, rewards specialization, increases wealth creation, maximizes gratification, and benefits everyone.
Political Independence – The Boyd Institute essentializes the housing affordability crisis well:
Over the last half-century, a sophisticated advocacy infrastructure has developed around low-income housing: nonprofit developers, tenant unions, federal grantees, and national organizations whose funding and legitimacy hinge entirely on serving the poorest households. Within that Frankensteinian ecosystem, any shift of resources toward the “merely struggling,” or “not poor but not rich” is framed as betrayal of extremely low-income (ELI) households.
To the “advocacy infrastructure” cohort, naturally occurring affordable housing (NOAH) is not their concern, yet the stock of middle-class “affordable” housing is dwindling because massive amounts of capital are being diverted to politically protected groups whose numbers are increasing. That is the goal of the Statist: dependency. And the opposite goal of this author: a Middle-Class Manifesto for Objective Investing.
The solution to the State policy makers housing fiascos begins with you discrediting “need” as a virtue and then your repudiation of tax credits, rent controls, mandatory inclusionary zones (MIZ), lending mandates, and public housing projects. When private equity and real estate investment trusts become an ever-increasing source of development and property management, mobility and liquidity will solve the affordability problem.