In a recent Bloomberg opinion piece, Karl Smith, professor of economics at the University of North Carolina, concluded that individual homeownership should decline and “America Should Become a Nation of Renters.” This assertion is the opposite of that put forward by San Francisco-based libertarian Robert Wenzel in his book Foundation of Private Property Society Theory: Anarchism for the Civilized Person. In Liberty Nation’s three-part interview with Wenzel, Andrew Moran explored the logical extension of Wenzel’s thesis. As Wenzel explained:
“The idea behind a PPS [Private Property Society] is that there would be a society where people respect private property – all property – specifically land property would be most significant. The idea would be whoever controls the property sets the rules for that property. There are no overriding governments that set the rules.”
Wenzel appears to be solidly in the “possession is nine-tenths of the law” camp. There is support for that point of view in the legal community. In a report for his law firm Fredrikson and Byron, Mark Vyvyon wrote, “While modern courts do not formally observe the ‘nine-tenths of the law’ principle, possession still matters today.”
On the other hand, contrast Wenzel’s perspective with Smith’s notion that:
“Rising real-estate prices are stoking fears that homeownership, long considered a core component of the American dream, is slipping out of reach for low- and moderate-income Americans. That may be so — but a nation of renters is not something to fear. In fact, it’s the opposite. The numbers paint a stark picture. After peaking at 69% in 2004, the homeownership rate fell every year until 2016, when it was 64.3% — its lowest level since the Census Bureau started keeping track in 1984. The rate rebounded in Donald Trump’s presidency, hitting 66% in 2020, but that trend is likely to be arrested by a housing market that is desperately short on supply.”
Smith is saying that owning a house is not a matter of philosophical or political point of view but is driven by market forces. The market has peaks and valleys, and consequently homeownership generally varies between affordable or less affordable. Smith departs from a strict market-pressure home sales model because he asserts that the market will continue to disadvantage first-time or less-affluent home buyers. In other words, Smith discounts what entrepreneurial, creative builders might come up with to make housing more affordable.
Nonetheless, Moran discussed the better home-buying conditions in Austin, TX, that paint a more optimistic picture. “While real estate prices are spiking rapidly, demand is stripping supply and eating away at available inventory for detached and semi-detached properties. Local industry observers forecast that it would take at least two years for the market to catch up to current trends.” People are seeking homeownership, at least in Austin.
As an alternative, Smith recommended single-family housing where “institutional investors enter the housing market” and provide a greater number of houses for rent, arguing that “[l]arge investors can expand or redevelop their properties themselves, because they benefit from a greater number of overall tenants, even if rents themselves dip.” This thinking reduces to “it’s better to have one large, clinically dispassionate landlord owning numerous single-family dwellings rather than individual homeownership.”
Both Wenzel’s and Smith’s perspectives lack a broader grasp of why people want to own property. Wenzel’s notion property ownership is essential for the libertarian social and governmental system to work takes advantage of the first rule of economics, “Imagine a perfect world where my concept works.” For Wenzel’s ideas to be implemented, the whole U.S. economy would require radical restructuring. That is not likely.
Smith’s point of view, on the other hand, may have merit from a clinical economic perspective, but it fails to consider peoples’ desires, dreams, and personal embrace of the idea of “owning your own home.” David Upham, in his award-winning essay “The Primacy of Property Rights and the American Founding,” published by the Foundation for Economic Education in 1998, makes the point: “Private ownership of property provides real power and instills self-reliance and self-government.”
Upham draws on the Founding Fathers’ emphasis on the importance of private property and by extension individual homeownership. He explained, “A reading of the important founding documents, however, shows clearly that the Founders held property rights to be as important as other human rights. In fact, at times they insisted that the right to acquire and possess private property was in some ways the most important of individual rights.”
James Madison made this point in Federalist No. 54, attempting to persuade the people of New York in 1788 to ratify the newly prepared U.S. Constitution. Madison explained, “Government is instituted no less for protection of the property than of the persons, of individuals.”
Additionally, when homeownership is held by a few institutional investors, municipal government mischief is possible. As Jose Backer reported in his Liberty Nation article “One Step Closer to Government Property Seizure?” there is a potential for the city of Los Angeles to “‘commandeer’ private hotels to house the city’s homeless population.” It is not a stretch to imagine a progressive city government seeing rental homes owned by large institutions as “detached modular hotel suites” to be expropriated for whatever purpose. Such local government overreach would be unlikely with individually privately owned homes.
Homeownership is not the answer for every American. Property ownership should not be mandated, as Wenzel would advocate. Nor should renting a house be the preferred billeting solution for all Americans as Smith advises. Let the market rule.
The views expressed are those of the author and not of any other affiliation.
Read more from Dave Patterson.
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