With a new bill before the Legislature, Utah can take one small step toward ensuring the American Dream.
The housing crisis facing the United States is not just about housing stock, zoning, mortgage rates or government regulations. The ability of Americans to buy their own home is at the foundation of family formation and wealth accumulation sufficient to create a middle class. It also provides the material foundation of the American conception of freedom. As President Franklin D. Roosevelt put it, “A nation of homeowners, of people who own a real share in their land, is unconquerable.” Dispersed property ownership is one key hallmark of democracy.
But we’ve seen that foundation eroded by what some have called the “new feudalism.” Young families have been forced to become a type of serf, where they will stand very little chance of getting on the property ladder, and where the wealth they might otherwise have built for their family’s future goes to high rents instead. Neighborhoods and communities are weakened in the new feudalism, for property-holding is associated with greater emotional and economic investment by families. Fertility rates are also affected by the ability to own housing, as young families prefer less dense housing, cost stability and the ability to build equity to help meet the family’s needs.
In addition, to whom a young family’s rent is paid has also changed dramatically. Investment firms have robustly moved into the single-family housing market, in addition to their traditional interest in multiple-family dwellings. Approximately 1 in 5 homes is bought by an investment firm now (in some areas, it’s 1 in 3), and homeownership rates are dropping. In the 1970s, homeownership stood at about 63%; among young adults, it’s now down to 37%, and that’s not necessarily by choice. Investment bidding on housing has driven up prices dramatically.
These powerful landlords have raised rents by an average of 23% nationwide in the past year, and up to 40% in some locales, as well as tacked on numerous new fees (some patently extortionate), not to mention the euphemistically called practice of “re-tenanting.” Repairs are now typically made the responsibility of tenants. One renter described her Wall Street landlord as “a huge, billion-dollar slumlord.”
In short, there are profound costs not only to families, but also to our entire society, from this shift in the housing market. Many counties and municipalities are taking action to limit the worst excesses. In an earlier article, I survey many different approaches, which center around coming up with ways to restrict sales of housing to corporations and investment firms, and also devising ways to incentivize corporations and investment firms to sell housing stock they already own to ordinary buyers.
How to take the first step? I have been heartened to learn there is a bill being proposed in the Utah Legislature at this time that endeavors to do just that: HB0511. This bill would mandate that owners of single-family rental units, not to include apartments, must identify themselves and also how many such units they own. It is important to be able to know whether the owner is a corporation, an individual or a “pass through entity” (an intermediary for another entity).
It’s also important to know whether such an owner owns 10-50 such units, or more than 50 such units. Without this knowledge, to what degree the Utah housing market has been bought up by investment firms or foreign-owned firms cannot be known. Knowledge is power, and this knowledge is the first step for Utah to tackle the situation.
This same logic is echoed in another bill proposed in this legislative session, HB516, that would prohibit sales of Utah land to foreign entities. The bill mandates county recorders report any such proposed to the Utah Department of Public Safety. Land is very important, but equally important are the single-family residences that Utah’s families must live in as renters. We need to know ownership of both.
But it’s also important for the Utah Legislature to begin to disincentivize build-to-rent schemes, and incentivize instead build-to-rent-to-own. In Utah, many new build-to-rent developments are cropping up on what was once farmland. While we may applaud the addition to Utah’s housing stock, it’s important for all the reasons outlined here to enable renters to eventually become owners of this housing over time. Indeed, rent-to-own is one of the most promising avenues to enable young families to get on the property ladder in a time of high interest rates and high housing prices. Not just the Legislature, then, but municipalities, developers and those who sell land to developers should consider how they can add their efforts to this worthy goal.
The housing secretary for the U.K., Michael Gove, recently noted that “the expectation young people had 30 years ago, that they would work hard and get a foot on the housing ladder, was no longer there.” He explained the significance of that dashed expectation: “It’s a barrier to young people feeling that democracy and capitalism are working for them … If people think that markets are rigged and a democracy isn’t listening to them, then you get — and this is the worrying thing to me — an increasing number of young people saying, ‘I don’t believe in democracy, I don’t believe in markets.’”
In sum, housing is more than housing. Housing is about many things we as a society wish to preserve, such as family formation, family assets, a thriving middle class, and yes, freedom to be more than serfs to lords of investment. Truth be told, housing is about the viability of democracy. This tiny first step forward, HB0511, is the right thing to do now, for Utah and its future.
