Opinion | Morgan Liddick: Colorado housing looks like a duck and quacks like a duck
On your right
Now another lesson in basic economics, this one from the thriving metropolis of Duckburg.
Duckburg is a fine place to live, on the whole. Beautiful scenery, nice layout, vibrant cultural life, bustling economy, decent schools, healthy lifestyles on all sides. People are excited to move there, so it is home to a rapidly growing population – which began to create trouble in paradise.
No, it wasn’t water, although Duckburg has a dry climate, and its residents – being ducks – like the stuff. But there is lots of water in nearby mountains, and, since there are more ducks in Duckburg than in mountains, well … The needs of the many, right?
The problem was, as housing was thrown up to meet the voracious demand caused by population growth, construction defects began to appear. There were scandals. Lawyer ducks smelled money. Political ducks smelled opportunity. Both blamed the evil builder ducks and practically pushed each other off the stage in a rush to announce new construction-defects laws that would, essentially, make those bloodsucking cheapskate builder ducks fix any problem with anything they built, forever. The political ducks quacked up a storm about how they were “protecting the little ducks” and preened mightily over the good deed they had done for all the residents of the State of Calisota, including those of Duckburg. A boon it was, too – just not for those they thought.
A few years back, an investor duck – let’s call him Donald – was looking to put a few dollars to work. He was neither as well-heeled nor as farsighted as his eccentric uncle Scrooge McDuck, but he had an opportunity to buy a couple of apartments at knock-down prices due to recent unpleasant housing-price collapse caused by too many ducks buying properties they couldn’t afford because the political ducks thought it would be good to pretend that they “deserved” more and forced banks to pretend, too. It made everyone feel good about themselves. So Donald bought foreclosed apartments, fixed them up and rented them out.
He soon noticed something: Both the value of his little apartments and the rents he could charge for them grew very rapidly. He discovered why: After the new defect law passed to protect the little ducks, builders had simply stopped building smaller, less expensive condominiums like his. There simply wasn’t enough profit in them to justify the risk of a legion of class-action lawsuits over leaky windows. So entry-level construction stopped. Rents soared. Rental units became scarce. The little ducks suffered because of the actions of those who said they only wanted to protect them.
After a couple years, there was panic in Duckburg and elsewhere over the high price of housing. There was much quacking about “reform” in the Calisota legislature. But nothing was done. A small group of political ducks, backed by deep-pocketed lawyer ducks, were fine with the way things were. It made the pols look like heroes to the ducks who didn’t stop to think about what was behind the shortage of real estate in the first place, and it kept the lawyer ducks in the chips.
True, some towns around Duckburg took matters into their own hands, passing local ordinances to chip away at the worst parts of the defects law. But builders weren’t stupid: As long as the state law remained, they knew any conflict would eventually be interpreted in its favor. So, no new construction.
The Calisota legislature proposed price supports and even loans. Nothing.
Even tax credits for builders who put up affordable housing. Nothing.
What might have had an effect — drastically overhauling the construction-defects law — was the one thing they wouldn’t do. So construction languished. Prices rose. But that was okay. As one of the chief political ducks explained, the little ducks still needed protection, and she feared reform would “let builders off the hook for shabby work.”
“We have to be very careful that we don’t interfere with the rights of ducks who are making one of the very biggest investments they will ever make — their home — that they wouldn’t have the ability to get redress if there are serious concerns.” Far better that they be consigned to the scarce, aging, increasingly expensive housing units her good intentions — and those of her similar-minded colleagues — have made the only opinion in Duckburg for those of modest means.
What is the moral of the story? Over-regulation, excessive legislation and odious restriction, even in service to the best intentions, creates shortage. Of anything. And shortage increases prices — quickly and inevitably. Anyone who pretends this is not the case is ignoring reality while preparing Duck Soup. You and your prosperity, present and future, are the main ingredients of that brew.
Morgan Liddick writes a weekly column for the Summit Daily.
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