665. Should The Government Tell You Who You Can Sell Your Home To?

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Hello, everybody. Welcome back to another episode of The Way the World Works. Today I want to talk a little bit about the housing shortage that's going on in the country, but specifically the bad solutions that politicians propose to fix the problem.

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President Trump recently said that he would like to ban investment corporations from buying up houses that are for sale on the market. The reason is, he's saying, when it's not families who are going to live in the homes, when it's these big corporations just buying up homes so that they can rent them out or maybe sell them, then now people don't have access to housing because maybe they don't want to be renters. They want to buy.

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Now you're taking away homes on the market that people could buy, or it's forcing people to perpetually rent houses instead of being house owners. They're jacking up the prices. They're making it harder and blah, blah, blah, blah, blah.

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It's easy to see it this way. I always want us to look at that a lot of times when there are these proposals that don't make true economic sense or they're even harmful to individual liberty, sometimes they come from a good place. There is an old saying that the road to hell is paved with good intentions.

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That's basically what that means, that sometimes people have solutions that come from a really good, really caring place, but they don't understand that that's not logically how you fix the problem. And so this is one of these situations. All right, so let's dive in.

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Let's say your family is moving and so they are selling their house, they are putting their house on the market, and some people come to look at it and they have a choice. They can either sell to a family that wants to move in or they can sell to an investment corporation, somebody who wants to buy the house and then they're using it as an investment, meaning they're not going to live in it. They're using it to make money, which is fine.

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We're OK with making money here. So let's say you're torn because on the one hand, you know, maybe your parents really loved that they raised, you know, their family there and they want to see another young family have those same opportunities and investment corporations. They seem kind of cold, right? Like when I said family and you heard that word, you probably you probably had some images in your head of maybe like a playing fetch with a dog in a backyard or a family riding bikes or doing something.

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Then you hear the word corporation. I always just think of like a person in a suit with no face, not like scary, but like the face is kind of a shadow or it's too dark to see it like they're not human, right? We think of corporations as these shadowy big business type of type of situations where one, that's not always the case. There are investors that are small time investors who want to flip houses and whatnot.

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But also we're forgetting that corporations are also turning around and either renting this home to maybe a family who can't afford to buy a home or they're selling it to a family, right? It's not just because a corporation is buying it does not mean that it's not also your home is not also going to be someplace where people get to raise their kids and have important memories happen. So we that's the first problem is I think we're thinking of corporations is really bad here and we hear that and automatically our minds start saying this is bad. Let's protect, you know, the American family.

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But there's another part to this too. So your family is trying to sell their house. They've got these two entities they're choosing between, but the family can't really afford as much as the house is worth.

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But the corporation or the, you know, the investor, whether it's a big corporation or a small, small time investing firm, or even a person, uh, they're able to offer a lot more and your family's moving. They could use this money. Obviously when it comes down to certain things, making, making more money is good.

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So as the buyer, as the person who owns that property, because right now that's your family's home, they own it, they're paying the mortgage on it for them to have the option to make a lot more by selling it to an investor. That's that's a great opportunity for you. And maybe it's what you need to be able to pay off some debt and move into a new house.

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And so it's like the perfect solution for your family. It could really save you. And because you are the property owner, it is your right to choose who you sell your home to.

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So you go with the investor and everything turns out great. There's good scenarios to this. Let's say you live in a home that you put on the market that no individual families are looking at.

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Maybe it's in a bad area. Maybe it's in an area that is going to be re-gentrified soon. Like it's going to have a, it's like not great right now, but younger people are moving in and trying to clean up the neighborhood.

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So right now there's no appeal, but there might be later and you would like to move, but nobody's coming to look at your house and an investor comes and finally is like, we will pay you this much for your house because we want to develop new houses here, whatever it may be. That's a great opportunity for you. And as the property owner, you should be allowed to sell to whoever you want, to whomever you want.

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And that's going to do a lot for you. That's going to help you get ahead in life. And so I'm focusing now on the buyer part of it or the seller part of it, excuse me.

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But that's very, very important that you are able as an individual property owner to sell your property to whomever you want. That is economic Liberty. That is a property rights that should be allowed to happen.

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Now if there are bans placed on, on corporations buying homes, that's not even just a ban on the corporations. That's a ban on you. That's a ban on the property owner.

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So that's not a win for individual Liberty. Even if you don't like the idea of investors buying home, I mean as the property owner, you might say, I don't want more money. I would rather sell to a family and you have that right because it's your property.

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And so this ban isn't just punishing big corporations who will probably fine. It's hurting the property owner by telling them who they can do business with, and that's not okay. Now let's talk about before we get into how this is bad for people who, who need housing.

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Let's talk about why people don't like the idea of investors buying a properties. For one, you know, they're scared that these investors have more money and can outbid people who, you know, families that want to buy homes. And so that is a little bit scary to people who really want to see families have the opportunity at home ownership.

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Then there's another concern of people, of these investors coming in, buying the property and then making the entire neighborhood rentals and property owners who own their homes don't like that because that could cause the value of their homes to go down. And there's also this idea that people demonize renting a home, forgetting that not everybody wants to own a home, that it is something that you have to choose to do. It is something that more and more people are not able to do.

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And whether that's because the economy is bad or because they just have other preferences. A lot of people like to be nomads. They don't want to own a home.

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Some people don't want to have to deal with their own repairs. There are numerous reasons people might want rentals. And another big reason is some people just simply, again, can't afford to buy a home.

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And so having an opportunity, a good rental, not just like a small crummy rental is a really good opportunity for them. So there's all this fuss right now about, again, corporations owning so many homes and they're going to, you know, they're maybe they'll jack up rent and just they're hurting the little guy. That's what you always hear when you hear the word corporation investors are going to hurt the little guy.

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But here's the thing. Reason Magazine, they dug into this a little bit and they found out that large, like institutional, these big corporation, the investors only own like I think it was something like three percent of what they call the single family home. So not apartment buildings, but the homes where a family will live.

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They only own three percent. That is a very small number. So even generally speaking, even if you don't want to get into the nitty gritty of what this means for buyers and sellers, three percent is a small enough number where you have to wonder is this even a big enough deal that they're saying it is.

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Is this really contributing to a big problem? One thing we know for absolute sure is that our country is in the midst of a really bad housing shortage right now. There are not enough housing opportunities or affordable housing opportunities for the people who need them. And that is creating a problem.

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But blaming it all on investors because they're buying homes and not living in them is is one placing way too much blame on a problem that, as we said, was a three percent number is very, very small. It neglects the fact that when the investors are buying these homes, they do have more power to fix them up and flip them and rent them out. And so they are actually contributing to to more housing on the market, which is actually helping to fix the problem.

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But it's also ignoring the many other housing issues that we have in this country. I think one of the biggest ones being that there are so many hurdles, so many barriers to actually being able to build a home because there are zoning laws and permit laws and licensing laws. And these things add up very quickly.

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And it's making it harder for people who want to build more homes to build them. And that's a government problem. That's a problem where we need government to to put their hands up and say, we don't want to do this anymore.

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We don't want to force people to do this. So there's so many other problems involved in the housing problem that blaming it all here is just kind of ridiculous. And it's also harming those that it's protecting, that it's claiming to protect.

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And what I mean by that is there are a lot of people who can't afford to buy homes and they need homes that they can rent. They need affordable homes that that that are accessible to them. And when you're telling investors not to buy these homes and rent them out, you're taking away opportunities from people who who aren't looking to buy a home.

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We need options for everybody. And the best way to do that, the best way to make sure that needs are met is to make sure that individuals have the choice, the freedom to choose who to buy to who to sell from, who to who to buy from, who to sell to. I got my prepositions wrong and making sure that the market is responsible for these interactions and not the government telling you what you can do.

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And so that is the big takeaway in almost everything we talk about, right? The government does not and should not play a role here. It should be between buyers and consumers, whether that be a family selling a house or a corporation selling a house, whatever it may be. So when you're hearing this this narrative in the news about how this is such a big problem, really stop and think about it and say, is this a big problem? And what would more laws, what would creating policy do to harm individualism and individual liberty? We will leave it there.

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As always, don't forget to like and subscribe to the podcast. And until next time, I will talk to you later.