This is typical of those who believe it is government’s role to manage every aspect of business and most aspects of every citizen’s life. Homelessness is a perfect example of this.

The burgeoning homelessness problem is a consequence of the supposed “smart growth” policies that have been shown to drive up housing prices nationwide. The huge impact fees and other regulations that are imposed upon homebuilders result in higher costs for housing. Fewer homes get built and those that do are going to be more expensive, pure and simple.

Everywhere it has been implemented the forced densification of smart growth has driven up housing prices. The attempt to limit “sprawl” and preserve every available square foot of open space has created more problems that it has solved. With increasing densification comes greater traffic congestion, pollution, crime, stress on infrastructure, higher taxes and higher housing prices.

The problem of homelessness on Oahu is a classic example. The demand for housing is increasing but the amount of new housing being built isn’t keeping pace primarily for one reason. The restrictions and regulations on new housing are so onerous that nowhere near enough are being built to meet demand. Slowly growing supply confronted with rapidly increasing demand means higher prices. This is a law of economics that is not going to be repealed by any act of government.

An example is the recent decision of Del Monte to close its 100-year old plantation. The immediate concern was what was going to happen to the workers who live in “sub-standard” housing there. These are houses that have stood for decades but could not be built today because they do not meet contemporary requirements. Yet most, if not all, of those in government want to keep these people in these homes.

This begs a question: If these homes are sub-standard wouldn’t it be better to move them to better homes? Aren’t they living in danger if they are living in sub-standard housing? Or are today’s standards a case of overkill? How is it that these sub-standard houses are still standing, livable and still suitable for even children to be living in? If that is the case, why couldn’t we build more of the same today?

The argument is often put forth that homebuilders only want to build high priced homes to sell at a large profit. What this argument ignores is the fact that builders want to do this because the endless permits, regulations and huge impact fees make it unprofitable to build in any other way.

The recent uproar over the proposed “affordable housing” project to be built by the St. Francis Development Corporation is a classic example. St. Francis changed the plan from having all 300 plus units as affordable housing for seniors to 171 units for seniors and the balance market-priced homes. This, the representatives of St. Francis said, was necessary because construction costs have soared and are continuing to do so. While the changes are well within its contractual obligations they have drawn the ire of many, particularly the state representative that represents that area who has introduced legislation to force St. Francis to stand by its original deal.

What is particularly interesting about these developments is that St. Francis is a non-profit. The typical arguments that the plans were changed so the builders could make increased profits cannot be used here, yet St. Francis is being treated as of that was its motivation. The project was clearly modified so that St. Francis could merely break even since it gains no advantage by making a profit.

If, as the representative wants, legislation is passed to force St. Francis to hold to the original agreement one of two things will happen. St. Francis will be forced to take a loss on the deal or they will renege altogether and whatever affordable housing could have been built won’t be built at all. In all likelihood it will be the latter since taking a large loss for a non-profit can kill it.

This whole scenario demonstrates exactly how government interference in the private sector makes things worse, makes housing more expensive and less affordable. And in this case, no one can question the motives of St. Francis. Yet government still seeks to impose its will on the non-profit and micro-manage the project anyway.

The affordable housing crisis on Oahu is not going to be solved by such measures. If St. Francis is forced to adhere to its original agreement and loses money on the project you can be assured that it will never do so again. And it will give others pause to ever agree to do something similar. This will certainly slow the construction of more affordable housing on Oahu, and probably around the state.

In economics there is the law of unintended consequences which says that every interference in the workings of the free-market will have unforeseen negative effects. This is precisely why Hawaii, and much of the nation, has an affordable housing crisis. Those in government have been interfering in the housing market for decades and the lack of affordable housing is the result.

And while a number of the homeless have only themselves to blame, or even prefer it as a lifestyle, for those that are truly on the street because they cannot find housing they can afford the solution is not to have the government get more involved. The solution is to have government stop micro-managing all development. It should reduce the number of regulations, fees and other restrictions and then get out of the way. The free-market will provide all the affordable housing needed. And those that don’t want to be homeless won’t have to be.

http://starbulletin.com/2006/04/02/editorial/editorial01.html

http://starbulletin.com/2006/03/26/editorial/commentary4.html

http://tinyurl.com/e7njd

Don Newman, senior policy analyst for the Grassroot Institute of Hawaii and can be reached at: mailto:newmand001@hawaii.rr.com