Let's do housing racism reparations

I’m currently reading Caste: The Origins of Our Discontents. It’s harrowing. And it’s got me thinking about three things. First, housing racism. Second, reparations. And third, housing and the left.

I rag on the GOP and the right in this here newsletter a good bit. And they deserve it. They’re wrong about racism, for instance. But the left is just ridiculously wrong most of the time on the topic of housing. So I’m going to do what I do best and piss both sides off with a modest proposal.

Housing racism reparations.

Hear me out.

At one point in the book, author Isabel Wilkerson discusses the wealth gap between white and Black US families. As of 2016, the typical white family had a net worth of $171,000 versus $17,150 for a Black family.

For the vast majority of American families, housing appreciation is the single biggest source of net worth increases. Around 45% of the total net worth of middle- and lower-income families comes from home equity alone.

And, as many have pointed out, various US laws and codes have effectively prevented Black Americans from taking advantage of the biggest contributor to middle-class wealth hoarding.

Whether slavery reparations in the form of cash transfers is a good idea and how to do it is way beyond my pay grade. But it makes perfect sense to me to allow housing prices to fall by building dense, affordable housing in high-opportunity cities for two main reasons.

1. It’s the right thing to do

Americans, especially white ones, love to think of America as a meritocracy. But that conflicts with the fact that the dominant caste essentially stole that wealth from the disfavored caste.

Let’s walk through it. The majority of homebuyers are white, by design. The majority of renters are BIPOC, also by design. Who benefits when housing prices increase: owners or renters? Owners. How do housing prices increase? Demand exceeds supply. How do you get demand to exceed supply? You boost demand or you restrict supply. Homeowners have done an amazing job legally restricting the supply of new homes in high-demand areas. Which means money from renters and first-time buyers goes to them.

Over the past 70 or so years the US has engaged in a massive, legally enforced transfer of wealth from relatively low-income BIPOC (renters) to relatively wealthy, white Americans (owners).

So, what would happen if high-demand cities suddenly started building large amounts of dense, affordable housing? Well, we already know. Everywhere it’s been tried the result has been the same: rents fall. Housing prices stabilize or drop.

In other words, we’d see a massive transfer of wealth from rich, white homeowners to BIPOC low-income renters.

Now, this could not possibly make up for housing racism’s decades of harm. In the US, zip code determines destiny. Housing racism has locked Black children out of opportunity. It’s forced Black families into polluted areas, resulting in literal brain damage. Those are just two examples. The damage is incalculable and irreparable.

But, it’s a step.

2. It will boost economic growth

Here’s the thing about stealing from low-income people to give to high-income people. First, it’s a dick move. But, second, it’s wildly inefficient. It destroys wealth.

What I’m suggesting ends up acting like a transfer, yes. But there’s absolutely no stealing involved. There’s no locking anyone out of anything. It’s opening up opportunity for everyone to be able to afford to live wherever they want to.

And guess what happens when you let people live where they want? Billions of dollars in economic growth. Not a wealth redistribution or transfer. NEW WEALTH.

In fact, two economists have estimated allowing developers to build dense housing in high-demand areas would boost GDP by 2%.

Why? Labor allocation, mostly. The best person for each job could do that job. That, plus agglomeration. Cities with a lot of talent tend to attract more talent, resulting in exponential innovation and economic growth.

Now, there’s something for the right and left to hate here, sure. The right would have to acknowledge the existence and ongoing effects of systemic racism. Plus, many homeowners would see their stolen wealth (home equity gains) decrease. And the left would have to acknowledge the existence and ongoing effects of supply and demand on prices and access.

But there’s even more to love for both sides here. The right gets private property, in the right to build what you want on your own land. They also get economic growth, smaller government, and a move toward actual, rather than theoretical, meritocratic norms.

The left gets a transfer of wealth from wealthy, white landowners to low-income BIPOC.

No one has to steal from anyone else in any way to get this done. And the average American unquestionably benefits.

I say we do it.