Spain Tries to Solve Yesterday’s Housing Crisis

Barcelona Spain
Buildings in Barcelona, Spain, December 10, 2017 (Unsplash/Marco Da Silva)

Spain’s ruling left-wing parties have agreed various measures to make housing more affordable, including a rent cap and higher property taxes for landlords.

The proposals are unlikely to be effected in areas ruled by conservatives, and they are right to block them. The pandemic has already made housing more affordable in Spain. The country doesn’t need the government to step in. Read more “Spain Tries to Solve Yesterday’s Housing Crisis”

German Left Has Wrong Ideas for Housing Market

Berlin Germany
Houses in the Prenzlauer Berg neighborhood of Berlin, Germany, July 1, 2018 (Unsplash/Jonas Denil)

Housing is one of the top issues in the German election on Sunday. Proposals reveal a traditional left-right divide: the Social Democrats and Greens seek to rein in prices with rent controls; the Christian Democrats and liberal Free Democrats call for more construction, including by relaxing planning laws and other regulatory requirements.

Coinciding with the federal election, a referendum in Berlin will decide whether the city-state expropriates about 200,000 homes.

The proposal is for private landlords owning more than 3,000 properties to be “socialized”. Supporters argue this would lower prices, as the houses would no longer need to be profitable, but this betrays a simplistic understanding of the market. If the government makes it impossible for developers and landlords to turn a profit, they will develop and rent out fewer apartments and the housing shortage will grow, not shrink.

That’s exactly what happened when Berlin froze rents last year: the number of apartments on the market dropped 57 percent. Owners kept their flats empty while the Constitutional Court reviewed the new law. It ruled in April that the freeze was unlawful. Renters had to suddenly pay a year’s worth of missed rent increases.

Now left-wing parties want to try the same nationally. Read more “German Left Has Wrong Ideas for Housing Market”

Swedish Housing Crisis Has Similarities with Netherlands

Stockholm Sweden
Strandvägen boulevard in Stockholm, Sweden (iStock/Alexis Gonzalez)

Stefan Löfven may be Europe’s first prime minister brought down by a housing crisis, but he is unlikely to be the last.

Löfven, a social democrat, lost the support of the far left over a proposal to allow landlords to freely set rents for newly-built apartments.

Rents in Sweden are usually negotiated between landlords and tenants’ associations.

Other countries struggle to find the right balance between public and private in housing too. Berlin instituted a citywide rent freeze last year, but it was struck down as unconstitutional by Germany’s highest court. Spain’s central government is challenging a Catalan rent cap. Authorities in Barcelona want to extend a moratorium on evictions that has been in place since the beginning of the COVID-19 pandemic.

But perhaps the best comparison is with the Netherlands, which organizes public housing in much the same way as Sweden. Read more “Swedish Housing Crisis Has Similarities with Netherlands”

Be Wary of the Return of Big Government

Union Station Washington DC
South Front Entrance of Union Station in Washington DC, July 4, 2019 (Unsplash/Caleb Fisher)

Big government is back.

Massive rescue programs have prevented business failures and unemployment on the scale of the Great Depression, even though last year’s economic contraction was nearly as bad. The European Union agreed a €750 billion recovery fund, financed, for the first time, by EU-issued bonds. The money comes on top of national efforts. The United States Congress passed a $2.2 trillion stimulus, worth 10 percent of GDP, in March and added $484 billion in April. An additional $900 billion in relief was included in this year’s budget.

Joe Biden, the incoming American president, wants to spend $2 trillion more over the next four years to transition the United States to a greener economy and create a public health insurance program. Corporate tax would go up from 21 to 28 percent.

In Spain, a socialist government has introduced the biggest budget in Spanish history — partly to cope with the impact of coronavirus, but also to finance digitalization, electric cars, infrastructure, renewable energy and rural development. Taxes on income, sales and wealth are due to increase.

In the United Kingdom, the ruling Conservative Party is building more social housing and it might renationalize rail. Unlike during the last economic crisis, it does not propose to cut spending even though tax revenues are down.

Same in the Netherlands, where all the major parties agree the government needs to do more to reduce pollution and prevent people at the bottom of the social ladder from falling through the cracks.

I’m not opposed to more government per se. I’ve argued the United States should imitate policies in Northern Europe to improve child care, health care and housing.

But let’s be careful not to throw “more government” at every problem. Sometimes government is the problem. Read more “Be Wary of the Return of Big Government”

Statism Makes a Comeback in the United Kingdom

London England
The British flag flies over the Cabinet Office in London, England (Shutterstock/Willy Barton)

Two months ago, I argued Britain was once again the sick man of Europe. It had the second-highest per capita COVID death rate among major countries. Economic output had fallen 20 percent from the year before.

The crisis wasn’t lost on policymakers. The dual shock of coronavirus and Brexit — Britain formally left in 2019 but still applies EU rules and regulations this year — has led to something of a quiet revolution in Whitehall: the potential rebirth of the interventionist state.

There is still much wrong with how the British government has handled both events, the poster child for COVID being the decimation of the British aviation and travel industry as well as the arts. Not since the closing of the coal mines has an entire industry shrunk so dramatically.

Yet the seeds of a new statism have been sown — by a Conservative government. Read more “Statism Makes a Comeback in the United Kingdom”

Biden’s Housing Plan Emulates Europe

Seattle Washington
Homes in Seattle, Washington, April 21, 2011 (Harold Hollingsworth)

One of the areas in which I think America should emulate Northwestern Europe is housing.

Stagnant wages, restrictive building codes and underinvestment in construction have caused home prices to rise faster than wages in eight out of ten metro areas in the United States.

Young Americans are one-third less likely to own a home at this point in their lives than their parents and grandparents, delaying their wealth accumulation and possibly family formation. Among young black Americans, homeownership has fallen to its lowest in more than sixty years. Americans of all ages are less likely to move, which has contributed to a decline in social mobility and an increase in regional inequality.

I like the Dutch system, which is a combination of government-built social housing rented out at below-market prices and rental subsidies, which can reach up to a third of the average private rent, and for which about one in five households qualify.

Turns out that’s close to Joe Biden’s plan. Read more “Biden’s Housing Plan Emulates Europe”

The American Dream Could Use Some European Inspiration

Copenhagen Denmark
Cyclists in Copenhagen, Denmark (iStock/Leo Patrizi)

One can tell two very different stories about the American economy.

In one, growth is robust, unemployment is at its lowest in half a century and the stock market is booming. This is the story President Donald Trump likes to tell.

In the other, two in five Americans would struggle (PDF) to come up with $400 in an emergency. One in three households are classified as “financially fragile“. Annie Lowrey writes in The Atlantic that American families are being “bled dry by landlords, hospital administrators, university bursars and child-care centers.” This is the story Bernie Sanders and the Democrats tell: for millions of Americans on seemingly decent middle incomes, life has become too hard.

Sanders’ solution is to bring “democratic socialism” to America. He cites European countries like Denmark and Sweden as inspiration. They’re not bad places to imitate — but they have actually moved away from socialism and toward a mix of free markets and the welfare state. It is why they rank among the freest and most competitive (PDF) economies in the world.

Americans can learn from the Scandinavian experience, if they get the balance right. Read more “The American Dream Could Use Some European Inspiration”

Berlin Shows How Not to Do Housing Policy

Berlin Germany
The sun sets on the Saint Nicholas’ Church and town hall of Berlin, Germany, January 26, 2010 (Mika Meskanen)

If you’re trying to control housing costs in your city, don’t look to Berlin for inspiration.

The German capital is due to implement a five-year, across-the-board rent freeze in March. The measure is expected to save around 340,000 tenants money during that period, but it will come at the expense of housing affordability in the long term.

The German Economic Institute in Cologne estimates that Berlin’s policy will reduce the value of some properties by more than 40 percent.

A consequence of that will be underinvestment. The BBU, a trade association of developers in the Berlin and Brandenburg region, says its members expect to reduce investments by €5.5 billion and construction by a quarter.

Germany needs 350,000 new homes each year to keep up with demand. Only 286,000 were built in 2018. If the BBU is to be believed, that number will fall — driving up housing costs across Germany. Read more “Berlin Shows How Not to Do Housing Policy”

Cracks in California’s Progressive Model

The sun sets over the San Francisco Bay, California, September 29, 2015
The sun sets over the San Francisco Bay, California, September 29, 2015 (Thomas Hawk)

California may be the future of the Democratic Party, but the left doesn’t have everything figured out in the Golden State.

Michael Greenberg reports for The New York Review of Books that California likes to think of itself as a liberal bastion against the far-right policies of Donald Trump.

It is refusing to cooperate with the president’s anti-immigrant policies. It has enacted its own environmental and net-neutrality laws which, given the size and influence of California’s economy, could have a nationwide effect.

But California also has the highest poverty rate in America and a quarter of its homeless. Read more “Cracks in California’s Progressive Model”

EU Budget Fight, California’s Housing Crisis and Trump’s Threats

President Jean-Claude Juncker and other members of the European Commission listen to a debate in the European Parliament in Strasbourg, September 14, 2016
President Jean-Claude Juncker and other members of the European Commission listen to a debate in the European Parliament in Strasbourg, September 14, 2016 (European Parliament)

Austria, Denmark and the Netherlands are unhappy about the European Commission’s proposal to eliminate rebates in the EU’s next seven-year budget.

The commission has proposed to cut solidarity spending by 7 percent and agricultural subsidies by 5 percent to make up for the loss of Britain’s contribution.

It also wants to eliminate “correction” mechanisms that benefit the wealthier member states.

The stakes are low. The rebates add up to €6 billion. The proposed budget — €1.25 trillion — altogether represents about 8 percent of the EU economy.

Expect a big fight nevertheless. For center-right leaders in Austria, Denmark and the Netherlands, who face competition from the nativist right, this is a perfect opportunity to bolster their Euroskeptic credentials. In the end, the commission will give in a little and everybody walks away happy. Read more “EU Budget Fight, California’s Housing Crisis and Trump’s Threats”