Housing Rights = Human Rights?

A radical proposal to eliminate the housing gap

This week has been a genuinely crazy week for America. I think it’s very clear that there is a clear wedge between two very different America’s — there is the affluent, middle class and above, mostly white group, and then there is underprivileged, poor, majority-minority America who are, for suburbanites, “out of sight, out of mind.”

While the rich live in larger and more luxurious mansions, American as a whole is in the midst of generation rent.

It goes without saying that one of these Americas is privileged over the other. This gap is only getting worse. Income inequality is rising at an increasing rate — and one of the biggest effects of this is evident in the increasing housing inequality. While the rich live in larger and more luxurious mansions, American as a whole is in the midst of generation rent. Though Covid might help some young people get on the homeowning ladder, even the work from home revolution might not be sufficient to close the gap.

If more and more people start slipping off the homeowning ladder, and housing inequality continues to rise, America will break further and further apart. Opinions will diverge further, partisanship will continue to surge, and the “us vs them” mentality will continue to fester.

This is a future that is good for no one. Not for the dispossesed, who cannot have what was a birthright to their forefathers. Not for the rich either, who will face increasing social distress, crime, and danger — all without truly emphathising with the heart of the issue.

What if I told you that there was another future? What if I told you there was a way that would could begin to claw back inequality? A way that we could make sure that everyone who worked hard, regardless of background, could own a property?

What if I told you that such a solution not only exists, but has been operating successfully for 40 years?

The Singaporean HDB initiative was founded in 1960, with the initial goal of moving people out of squaler and into housing units.

When we think of Singapore today, we think of a gleaming metropolis, a large financial centre, the jewel of South-East Asia. But it wasn’t always the case. Post World War II, over half a million Singaporeans lived in slums. In the 60s, Singapore faced racial and ethnic strife, as ethnic Malays and Chinese clashed in the street in a manner that is reminiscent of the issues in America today.

But things have changed. And the HDB initiative can take a large share of the credit.

Any Singaporean can purchase a home through this program. Emphasis on any. While there are some eligibility constraints (one of more bizarre ones is that unattached singles can’t apply until they’re 35), none of the constraints are related to family background, ethnicity, or the myriad other factors that seem to lock American’s out of home ownership.

The result is that 78% of Singaporeans live in public housing — and that 91% (91% — like literally 9 out of 10 people) of Singaporeans are homeowners.

Now I can almost feel the stern gaze of economic conservatives upon me. I can hear their strict voices telling me that this is unnecessary government intervention — that this will bastardise the free market system that has made America great.

But, let me be very clear on this, this is not a handout. HDB flats do not work like standard public housing. Most public housing are undersupplied, subsidised rentals that offer no path to home ownership. HDB flats, on the other hand, offer a clear path to ownership, through a loan (essentially a mortgage) that is taken with the Singaporean government.

HDB flats do not work like standard public housing.

I can hear you shout though: Why should the government be needed to provide a home loan? Isn’t that the role of the private market? Isn’t Fannie Mae enough?

Unfortunately not — especially for minorities. African American’s are 2.7 times as likely to be denied a home loan application than Whites. Getting a Fannie Mae requires significant credit score minimums, and at the end of the day, private corporations will optimise for profits today, not for future social harmony.

Private corporations will optimise for profits today, not for future social harmony.

Home loans are also only a small part of the equation — a bigger issue is cost. In Singapore, under the HDB scheme, houses can be bought at a lower than market price, as the government only has to cover their cost, not maximise their revenue. Having public control of an entire housing supply chain allows that first rung on the homeownership ladder to be placed at a more achievable level.

It pains me to admit and write these words, as I am an economist who was raised on the principle of Pareto Efficiency. I have taught hundreds of students that government intervention is generically inefficient — that taxation usually makes the pie smaller for everyone. However, the experience of the last 40 years has shown that private markets have failed, and the only solution to close the housing gap is through government intervention.

The experience of the last 40 years has shown that private markets have failed, and the only solution to close the housing gap is through government intervention

But — perhaps you might ask — what about the private market? What happens to our developers, our realtors, our property managers? Do they lose everything?

Of course not. I believe the government’s role is to provide base necessity, to fix market failure when it occurs. It is not the government’s job to take over entire industries.

The government’s role is to provide base necessity, to fix market failure when it occurs. It is not the government’s job to take over entire industries.

Once again, let’s look at Singapore. You might think that, given all that I’ve written, it has no private developments at all. Or maybe a very small private sector?

False.

Far East Organisation, the largest private developer in Singapore (and one of Onerent’s partners and investors), has developed over 700 large scale projects over the last 5 decades. It has an estimated revenue of 5.3 billion USD annually. A quick Google search brings up 25000 private condos for sale in Singapore (by comparison, a similar search brings up 3500 properties for sale in the Bay Area — remember Singapore has 2 million less people than the Bay Area)

How is this possible? How do we balance such strong government intervention with a robust private market?

The key is for the government to focus on necessities and allow the private market focus on the rest.

There are really three types of demand for houses — there is the basic human need for shelter, there is the “luxury” desire for a nice house, and there is housing as an investment.

My proposal is that we build a extensive and sustainable public housing system around the need for shelter— ensuring that every single person not only has access to this fundamental human right, but has a realistic dream of one day owning that shelter. This dream is one that is denied to an evergrowing proportion of Americans — and it is a trend that must be reversed.

My proposal is that we build a extensive and sustainable public housing system around the need for shelter

The luxury and investment markets for real estate should remain as free of government intervention as possible. Governments should not help people buy second, investment homes — or beautiful luxury homes. This should remain a privilege that is earnt by hard work.

Taking a step back, most of the participants in the investment and luxury homes markets have significant amounts of capital. Just because some poorer people can buy affordable housing now shouldn’t affect these markets greatly.

And even if markets are slighty affected, is that really our biggest problem? Remember that Singapore used to be a poor, third world, ethnically divided nation with frequent violence. The US is hurtling towards a bleak future — a future where rich and poor grow further and further apart, a future where people, without hope, turn to violence to make their statements.

The US is hurtling towards a bleak future — a future where rich and poor grow further and further apart, a future where people without hope turn to violence to make their statements.

I think we can avoid this future. Many steps need to be taken, many changes need to be implemented, many attitudes need to be softened. But I think a good first step is ensuring that every American can own a little space that they call their home.