When Bribery doesn’t Work, Try Compulsion

A Senate committee in Florida recently held a hearing about the state’s lack of low-income housing. They are concerned because nearly 900,000 Floridian households pay 50 percent of their income for housing (the standard for housing to be affordable is 30 percent of income).

The committee heard testimony blaming several different groups. One blamed out-of-state investors, erroneously implying that investors are causing a shortage of low-income housing. Another claimed that some residents can afford more expensive housing but choose lower cost housing options. This, the argument goes, creates more competition for lower priced housing and drives up the price. While this may play a small role, the crucial fact is that Florida, like virtually every state, has a severe shortage of low-income housing.

The committee chairman said,

We’re gonna have to start thinking outside the box and really encouraging, you know, finding some carrots and sticks with the local governments to make it happen.

In other words, we’ll try bribery, but if that doesn’t work, we’ll try compulsion. Compulsion does have a way of “encouraging” people to act as you desire.

Bribery has been a part of government’s housing policy for more than a century, though the government has preferred to use terms like “tax credits” and “subsidies.” Both tax credits and subsidies are used to encourage desired actions. For example, tax credits are used to incentivize developers to include below market rate housing in their projects. Subsidies have been used to incentivize home ownership. Low down payments, low interest rates, and similar enticements are used to encourage individuals to purchase a home. Bribery, such as tax credits and subsidies, is used to incentivize actions that individuals would otherwise avoid.

When government can’t get the results it desires through bribery, it will resort to compulsion. Compulsion has also been a part of government’s housing policy for more than a century. As one example, single-family zoning prohibits multi-family housing on as much of 75 percent of the land in the nation’s cities. Inclusionary zoning is used to compel developers to include below market-rate housing in their projects.

These policies have been an abject failure. We don’t need more bribery and compulsion in housing. What we need is more freedom in housing.