A Plague on All Your Houses

Three new books identify government as the culprit in our serious housing problems but fail utterly to offer appropriate solutions.


The Builders, by Martin Mayer, New York: W. W. Norton & Co. 1978. 468 pp. $15.

Housing Costs & Government Regulations, by Stephen R. Seidel, New Brunswick, NJ.: Center for Urban Policy Research. 1978. 434 pp. $15.

Zoning and Property Rights, by Robert H. Nelson, Cambridge, Mass.: MIT Press. 1977. 259 pp. $16.95.

For many years there has been a pressing need for a thorough, reliable, and readable volume that can serve to initiate the intelligent layman into the mysteries of housing, mortgage finance, and government regulation of development and construction. Martin Mayer's The Builders largely fills the bill. In fact, his book is to the American housing industry about what War and Peace was to 19th-century Russia in panoramic description.

Four hundred and twenty-three pages into The Builders, author Mayer remarks, with a slight trace of surprise, that "this whole long book turns out to be, not by design, virtually a compendium of the ways government actions have inflated housing costs." Indeed it is. For throughout the preceding pages the reader sees a ghastly procession of foolishness, venality, stupidity, incompetence, and calamity, practically all of it caused, encouraged, or demanded by one or another level of American government.


Thus we see, like hideous vignettes in a Fellini film, city code enforcement producing widespread abandonment in Chicago's Woodlawn ghetto; onerous regulation in center cities driving development to the suburbs; abandoned parcels frozen out of the market, while their scavenger owners work to persuade the urban renewal agency to buy them at inflated prices; slum arsonists given priority for occupancy of public housing units; HUD bailing out Manhattan Plaza in New York (where else?) by promising to pay a $600 per month subsidy on two-bedroom apartments over the ensuing 40 years (cost: $460 million or more); and the "moral decay of numerous middle-level federal bureaucrats" in FHA field offices.

There is more, much more: the FHA sternly prohibiting lenders from offering insured mortgages to blacks in white neighborhoods (a practice now presumably discontinued); the union electrician standing a lonely vigil over one burning light bulb while other workers do their jobs; New York City building inspectors turning away preassembled plumbing trees; landlords (again in New York) deliberately renting to criminals and undisciplined welfare families to get even with tenants who, thanks to rent controls, had been robbing the landlords for years; the madness of RESPA (the 1974 Real Estate Settlement Procedures Act), which provoked a successful revolt by realtors and bankers akin to that of car owners against seat belt interlocks; San Diego's "controlled growth" plan, through which a $5 fee for a lot map in 1972 became a $1,011 fee by 1974; and the FHA/EPA requirement in Phoenix that all insured houses have $70 water softener attachments, even though the water softeners could not be installed because disposal of the salts threatened the state's water supply.

Mayer's compendium of crimes by the government is not the only value of the book. In between a recitation of various outrages, Mayer offers a few nuggets of wisdom. He points out that the prevalence of "rapacious developers" can be traced directly to the fundamental capriciousness of zoning and environmental regulations, which make home building so risky an occupation that only high profits on successes can make up for disastrous losses on government-induced abortions. He is sharply critical of tax systems that "could be advocated only by people who believe in their hearts, as so many do in Washington, that all income really belongs to the government, which out of charity permits private persons to use some of it some of the time."

"Because the people who buy houses have a higher average income than the people who put their money into savings institutions," Mayer observes, "the ceiling on interest rates can be condemned as a subsidy from lower-income households to higher-income households." Has government housing aid helped society as a whole? Well, says Mayer, "there is a strong case for the proposition that the net impact of the programs has been negative for the population as a whole—that there would be fewer run-down neighborhoods, fewer blighted urban apartment houses, and certainly a lesser allocation of family income to housing costs if HUD had been kept on a tight leash."


Mayer puts his finger on a key point when he remarks that "the great threat to the quality of life in America is not so much the things that get all the publicity as the erosion of the doctrine of personal responsibility for individual actions." And yet, rather distressingly, Mayer does not seriously address himself to the problem of changing the system to maximize acceptance of personal responsibility. While he notes an occasional nongovernmental alternative—such as the British-inspired Home Owners Warranty system, lamentably ruled illegal by the consumer watchdog, the Federal Trade Commission—Mayer's concluding recommendations are confined to changes in governmental practice, while preserving the spirit of intervention that has caused most of the problems he so ably describes.

For instance, Mayer repeatedly shows how continual inflation has disastrous effects in a marketplace where items are purchased and built over prolonged periods of time. But instead of mounting a no-holds-barred attack on the deficit financing that causes dollar depreciation, he settles on new coercive measures to cope with inflation's baneful effects. His proposals are, first, mandatory allocation of a portion of the funds of tax-exempt institutions into the housing finance industry, and second, a national usury ceiling for mortgage loans. This combination of forced investment in specified securities and a governmentally enforced ceiling on returns would be a lamentable turn of events, reminiscent of the national plans of totalitarian nations.

Mayer also favors a land sales tax to dampen speculation in land, which he rightly sees as the action of investors seeking a hedge against inflation. He admits that this will lead to a "distasteful political struggle," akin to the one that brought down the Dutch government in 1977; but he seems unwilling to accept the proposition that when the government continues to debase the value of the currency, citizens have a right to protect their assets the best way they know how.

Some of Mayer's remaining prescriptions are much more consistent with his analysis: repeal of the Davis-Bacon "prevailing wage" price-fixing act, a shift of emphasis from rental to ownership in public housing, and opposition to so-called anti-redlining statutes, which Mayer rightly describes as "King Canute stuff."

Those who favor a free society, however, should be lenient with Mayer. For despite something of a "pragmatic collapse" in the final chapter, he has done an outstanding public service by bringing to the average reader a message well known to anyone involved in the housing industry. That message is, simply, that no matter how well-meaning it may profess to be, government is, in the last analysis, a menace to decent housing for Americans.


Whereas Martin Mayer's book is written for, and will be read by, the general public, Stephen Seidel's book is aimed at economists and public policymakers. It lacks the breadth and the entertainment qualities of The Builders, but it is nonetheless a valuable work. For what Seidel and his associates at the Rutgers Center for Urban Policy Research sought to do is to estimate just how much Americans are paying for unnecessary and foolish governmental regulation of the housing industry.

Seidel proceeded in a highly systematic way. First, he surveyed building code administrators in 100 municipalities, and zoning and subdivision control officials in another 80 cities. Then he sent questionnaires to some 33,000 land developers and home builders, yielding 2,500 responses; of these, 400 were personally contacted and interviewed. Finally, Seidel conducted an extensive literature survey and completed three case studies.

Perhaps the most dramatic finding was the rapid rise between 1969 and 1975 in governmentally caused obstacles to the creation of housing. From 1964 to 1969, according to surveys conducted by the National Association of Homebuilders, problems directly related to government regulations (codes, zoning, FHA/VA, etc.) declined in importance from 15.4 percent to 4.1 percent of responses. But Seidel's survey revealed that by 1975 government regulation had skyrocketed, being cited by 38 percent of respondents as the most significant problem for staying in business.

Seidel goes on to discuss the problems and costs caused by building codes, energy conservation regulations, subdivision controls, zoning, growth controls, environmental regulations, and financial regulations. Like Mayer's book, Seidel's volume contains numerous horror stories. The city council of St. Petersburg, Florida, in 1974 actually gave preliminary approval to an ordinance requiring the last 25,000 residents to arrive in that city to take on illegal alien status, which could be converted to citizen status only when a vacancy opened up via death or emigration. (Fortunately, the council had a last-minute change of mind.) In New York (yet again) Seidel cites a survey by an undercover investigations unit that "found virtually 100 percent of the City employees with whom we had contact were directly involved in corrupt acts or had knowledge of their existence." In that city, inspector graft was estimated at $25 million per year, enabling the average inspector to at least double his salary at the ultimate expense of housing consumers.


The principal value of Seidel's book is its systematic methodology for estimating the costs imposed on consumers by insane governmental regulation. Like Mayer, Seidel seemingly lacks the nerve to recommend slashing the Gordian knot of governmental madness. Indeed, Seidel believes that the government should even intervene more forcefully in the housing industry—an idea that, especially after Seidel's careful analysis, has about as much merit as that of drinking oneself sober. While he occasionally drops a tantalizing hint of a possible alternative—for example, the French system of insurer-enforced codes—he simply makes no effort to rethink the whole subject in the light of his depressing findings. Seidel, like Mayer, has performed a real service, but it remains to others to move ahead with a free-market policy initiative.

An author who seems to think he is doing that, in the area of zoning, is Robert H. Nelson. He is a sharp and often perceptive critic of zoning in theory and practice, and his criticism abounds with phrases to call forth libertarian excitement. Unfortunately, the starting point for Nelson's recommendations is a highly dangerous proposition: "Neighborhood zoning…creates a collective property right to the neighborhood environment that is effectively held and exercised by its residents." The problem, Nelson maintains, is that there is no legal market for the exchange of this collective property right.

What, one may inquire, is the origin of this "property right"? To allege such a right is like saying the pedestrian has a right not to be hit over the head by a mugger, where it is meant that for this "right" the innocent citizen must hand over his watch and wallet. In fact, zoning is a simple expropriation of private rights—not of "rights" to invade or injure the property of the neighbors, which are not rights at all, but of the rights to the peaceful use, enjoyment, exchange, bequest, and management of one's property. Depriving a landowner of these genuine rights is not the creation of a collective right. It is theft. A reform of zoning based on the legitimacy of theft is not the sort of "reform" that an honest person will embrace.

After a rather disjointed trip through zoning history, environmental protection, growth controls, and feudalism—a trip enlivened with numerous tributes to private enterprise and property rights that become incongruous when the author's proposal is made—Nelson unveils his plan. He calls it a new form of "private tenure"—"collective neighborhood tenure." The alleged "collective property rights" appear as the property of the "neighborhood association." This supposedly private organization would have the power to levy taxes and adopt and enforce regulations on land use and behavior. Most importantly, for Nelson's argument, the neighborhood association would collectively decide if and when any zoning reclassification should occur in its territory. It would act to rezone when the price became high enough that the great majority of members couldn't refuse. Residents, however, would continue to exert effective control over the interiors of their homes—certainly a reassuring thought.


Nelson is deceiving himself—but probably not many of his readers—by trying to portray this invention as "private tenure." His neighborhood association is a neighborhood government. While a respectable case can be made for decentralizing governmental functions to a neighborhood level, no such case can be made for trying to disguise this fish—a carp, at that—as fowl.

Nelson seems to be the first, and hopefully the last, modern commentator to advocate the resurrection of simony, branded a mortal sin by Pope Gregory VII in 1073. Simony is the sale of ecclesiastical favors, and those who practiced it were consigned by Dante to one of the lower levels of the Inferno. These favors were not property, any more than anyone's power to forbid another's peaceful use of his land is property. But the sale of favors is precisely what Nelson advocates, not as an evil to be tolerated, but as a reform to be desired.

As a means of inserting certain limited free-market devices into socialism, Nelson's "reform" might have some merit. But in an economic system purportedly built upon a widespread distribution of private property rights, Nelson's attempt to pass off "collective neighborhood tenures" as a form of private property is little more than a Trojan Horse for increased collectivism. While decentralized oppression may be preferable to centralized oppression, it does not share any moral basis with freedom.

What, then, should be government's role in the housing industry? After reading Mayer and Seidel, one is hard put to disagree with Elbert Hubbard's pungent phrase: "Keep away from that wheelbarrow! What the hell do you know about machinery?"

Mr. McClaughry, a frequent REASON contributor, is a member of the National Commission on Neighborhoods.