Andy Kessler, the investor and Wall Street Journal columnist, is a perfect embodiment of what is surely the Trumpiest constituency in America: guys who have big wallets and tiny brains.
Kessler’s most recent Journal column is a rote walk-through of Hannity-level conservative talking points about why electing Kamala Harris will kill the economy. Four more years of a Democratic presidency will kill the stock market, he argues, because “The Dow Jones Industrial Average rose 3.6% for the entire decade of the 1970s.” (How has the stock market been doing under the current Democratic presidency? Kessler doesn’t say.)
The item on his list that caught my interest is his squib on Harris’s housing policy. Harris believes local zoning regulations have restricted the housing supply, causing prices to soar in cities where the supply is prevented from meeting soaring demand. Kessler’s position is that loosening these regulations to permit more construction is communism:
Federal housing control. Ms. Harris wants to add three million new homes. Does this mean blocky Soviet-style housing for everyone? There’s already a glut of homes, especially in the South. This is a progressive power grab to take away local zoning control. Ask Californians about mandatory Accessory Dwelling Units to expand housing — especially low-income housing — in neighborhoods and near train stations. The state decides, not local zoning laws.
The Harris plan also involves subsidizing homeownership with a tax credit. There is a persuasive critique that, by subsidizing demand, the tax credit will merely serve to push prices higher. Kessler could make a sound market-based attack on that aspect of the Harris plan. Instead, he ignores it and trains his anger on her proposal to increase supply by reducing regulation.
Kessler’s primary confusion here is that he cannot tell the difference between permitting the market to engage in an activity and requiring that activity. Those are very different things!
Since the distinction is crucial and Kessler does not grasp it, I will explain. In many cities, local zoning regulations forbid developers and landowners from building units people want. Say your town requires homes to occupy lots of minimum size, so you can’t put three townhomes on a single lot. Or the city won’t let you build apartments over a certain height, or at all.
Some zoning restrictions may be necessary, but the cumulative effect of all these restrictions is to make it illegal to build more housing in many cities where that housing is most desired.
Harris is proposing to give money to states that relax these local zoning regulations and allow more housing to be built. One can fairly question the lack of specificity to date in how Harris will use these incentives to lure states into loosening restrictions on housing supply, but that is not Kessler’s complaint. He is upset about the whole directional goal of allowing builders to construct more housing on land they own.
Kessler believes this will “mean blocky Soviet-style housing for everyone.” I suppose it’s possible that a huge demand exists for “blocky Soviet-style housing” that is currently being stymied by zoning regulations and that a deregulated market will lead to a huge surge in construction of these units.
If local governments allowed the construction of massive numbers of Soviet-style housing units, it would not mean developers would build them, however. They would be constructed only if people want to live in them. Developers will build the units only if they think people will pay money to inhabit them.
I don’t personally think there are millions of people eager to live in the kind of cement-block housing units Stalin was known for throwing up. It seems to me far more likely that if local governments permit more housing, developers will build units that are considerably nicer than those constructed by the U.S.S.R. in the wake of a catastrophic war.
But suppose I am wrong about this and Americans turn out to have horrendous taste in housing. The free-market answer to this problem would be to let them live with their choices. A less market-oriented answer would be to impose limited zoning restrictions — you could keep certain aesthetic standards to ensure the market doesn’t supply the massive, ugly structure Kessler seems to think it would produce without regulations.
But the Kessler solution of allowing localities to ban construction of all kinds, even very nice noncommunist styles, goes far beyond what is necessary to address this concern.
Kessler compounds the impression of his own confusion when he writes, “Ask Californians about mandatory Accessory Dwelling Units to expand housing — especially low-income housing — in neighborhoods and near train stations.” Yes, California has permitted homeowners to build accessory units in their garage or elsewhere on their property.
But it is not mandatory. Nobody is forcing homeowners to rent units to poor people. The law in California allows them to create housing units on their own land. Kessler believes big government should step in to bar these acts of capitalism between consenting adults because they will result in poor people gaining housing too close to affluent people who would rather not have to suffer their presence in the neighborhood.
Kessler then pivots to a different concern. The problem is not Soviet housing but that states will determine local building limits, rather than allowing local governments to make these decisions. Kessler thinks it is a “progressive power grab” to move the locus of decision from the city level to the state. He seems unaware that cities are generally very progressive.
Indeed, the cities that have the fiercest fights over deregulating their housing sector are almost uniformly Democratic. Their states are often Democratic as well, but the general pattern is that blue cities are bluer than blue states. San Francisco — ground zero for the housing-supply struggle — went for Joe Biden four years ago by 70 points, more than double his margin in the state overall.
A major reason progressive cities often resist housing deregulation is that progressive voters often fall for simplistic anti-market fallacies, such as the notion that permitting more housing supply will have no effect on prices. It might seem strange that Kessler wants these deep-blue cities to maintain their stranglehold on regulating such a massive sector of the American economy were it not for his inability to understand the relationship between supply, demand, and price.
As confused and confusing as this alliance between anti-market progressives and anti-market conservatives like Kessler may be, there is a level on which it makes perfect sense. The web of urban housing restrictions may impoverish the United States as a whole by driving up prices and keeping people from moving to cities with the greatest opportunities. But it enriches current homeowners, who control a restricted supply and have seen their asset soar in value.
Trumpism is not about creating new wealth; it is about protecting existing wealth. That is why Trump has attracted a ring of prospective oligarchs who anticipate using his favor to entrench their current position. And that belief is why rich men like Kessler find themselves simultaneously attracted to Trump and threatened by Harris’s plan to allow market forces to alleviate the housing-supply crunch.