The fundamental cause of Colorado’s soaring housing costs is government restrictions on the supply of housing in the context of an influx of new residents. Other things matter too, but that’s most important. It’s simple economics: When more people want something of limited supply, they bid up the price. The long-term solution is, in theory, equally simple: If we want cheaper housing, we need more houses.
So Colorado politicians have taken a clear-eyed look at the problem and proposed solutions that will actually work, right? Ha! This is politics! Instead, various Colorado Democrats, led by central-planner wannabe Attorney General Phil Weiser, have declared war on the law of supply and demand, scapegoated property owners with rentals, and discouraged the efficient use of housing, thereby making the problem they pretend to care about worse.
Broad trends
First notice the broad trends. As the Colorado Sun reported last Summer, “Colorado’s population grew at nearly twice the rate of the rest of the nation between 2010 and 2020, putting it among the fastest-growing states. . . . While the nation’s population grew only 7.4% over that period, Colorado saw nearly 15% growth.” Meanwhile, census data suggest that housing units in Colorado went up only from around 2,215,000 in 2010 to 2,464,000 in 2019, an 11% increase, clearly not enough to prevent sharp price increases. And with the pandemic more people want work-at-home space.
The housing market already was super-tight. And then the Marshall Fire wiped out 1,084 homes in one small area. Obviously when a lot more people compete for a restricted supply of housing, that drives up prices.
Let us pause to note that some individuals offered temporary free housing to their displaced neighbors, and some hotels offered reduced rates. People raised more than $25 million for fire victims. And of course insurance companies play a major role in helping people recover.
In the short term, though, the basic problem of restricted housing remains. Sure, eventually contractors will rebuild the lost houses, but that will take years given supply and labor shortages. When more people want something than is available, something has to give. We can rely on the price system to encourage economic use of available housing, or we can force people to rely on luck or personal connections to get housing. Paying less money for a house that does not exist doesn’t help.
When people are free to negotiate use by price when there is an emergency-driven shortage, that encourages some people to supply more and other people to consume less. We cannot pull houses out of the air. But, insofar as the practice is legal or people are willing to ignore local prohibitions, some people can sublet part of their existing homes.
Some people already thinking of moving somewhere else, perhaps to live closer to family or to work from home, might be pushed by higher prices to sell out. Some people likely will move out of their houses to convert them to rentals. For a brief moment I considered that I probably could sell my house for a premium right now—I could see the flames of the fire a few miles north from my window—but my family is well-settled in the area. But some people are not as geographically tied.
Central planning brigade
But many Democrats, ever suspicious of “capitalist acts between consenting adults,” seek to inhibit voluntary negotiations of price, and thereby exacerbate the very shortages they claim to help people navigate. They passed a so-called “price-gouging” law a couple years ago to substitute the whims of politicians and bureaucrats for the consensual relations of citizens.
Recently Weiser pronounced, “We have had some complaints come in about price gouging and unfair treatment that potentially could run afoul of our laws that say, ‘during an emergency, it’s not OK to take vulnerable people’s time, money and effort by engaging in what would be unreasonable and unfair pricing.'”
In other words, Weiser holds that Colorado adults cannot be reasonable in negotiating prices on their own, without his “help.” He alone, with his army of bureaucrats and prosecutors, serves as the final arbiter regarding what constitutes a “reasonable” price. His position is arrogant, yes, and condescending, and patronizing. But “reasonable” it is not. Weiser’s position is the antithesis of reason, as he seeks to substitute for the reasoned negotiations of free citizens his own arbitrary whims and prejudices.
I was pleased to see, however, that another Democrat, Governor Jared Polis, has to a degree remained in touch with his libertarian side. “Polis says he encourages towns and cities near the Marshall Fire to ‘waive occupancy limits or other restrictions’ that would make rehousing affected people more difficult,” Alex Burness reports.
Of course high housing costs affect people across Colorado. I personally know people who have moved out of the state, and who are considering doing so, because of housing costs. And such costs are a major cause of regional homelessness.
The left’s response to high housing costs usually consists of some combination of mandates that developers build some lower-cost units and subsidies for people buying or renting homes. What we really need is a genuinely free market in housing. People should be free to sublet rooms in their homes, build new houses and multi-family units on their property, and better-integrate business and residential use. We don’t need more government “help,” we need government to get the hell out of the way. Build, baby, build! Yes in my back yard! Weiser’s arrogant intimidation cannot give people shelter. Free producers can.
Ari Armstrong writes regularly for Complete Colorado and is the author of books about Ayn Rand, Harry Potter, and classical liberalism. He can be reached at ari at ariarmstrong dot com.
