There is an industry whose interests are solidly Republican, whose actions could derail both the technology industry and democracy itself.
That’s the real estate industry.
Real estate is the most inefficient industry we have. It’s all rent seeking, from plotting with government on what to build, through construction techniques that are a century ago, to a transaction model that’s as efficient as paying alimony with pennies.
A pro-business government would make sure housing was where the jobs were. A pro-business government would encourage new building technologies. A pro-business government would minimize real estate transaction costs.
We don’t have a pro-business government. We have a government in the pocket of the real estate industry.
The reason housing costs are so high is because, in league with government, the real estate industry makes certain of it. Everything is regulated locally, meaning it’s easy to lock-out affordable housing, which thus has a bad name everywhere else. Local building codes mandate that most homes and apartments be made of sticks and separates land uses with strict zoning laws. State regulators, working on behalf of the industry, create mountains of paperwork on every real estate transaction, driving up costs and creating artificial scarcity.
Once you buy a house it will cost 15% of the house’s value for you to move. That’s 6% for the purchase, 6% for the sale, and 3% for moving your stuff. Small wonder that renting is cheaper for anyone not already on the merry go round.
Real estate is one of our largest employers, the largest industry offering middle class salaries. Sell a house a month and you’re in the upper-middle class. Even a small housing project can be worth several million, and lead to several hundred thousand in profit. Brokers, agents, mortgage bankers, construction workers – they’re all in on the grift (except for those construction workers who are here illegally).
No industry funnels as much money into government, at every level, as real estate. In no area is the gulf between the control people have and that they can exercise so wide.
Georgia, where I live, is run entirely on behalf of the real estate industry. Roads are built to sell land. There’s no real oversight, and the new homeowners are stuck with the costs of turning whatever the developers want to build into communities. Once the community is established, real estate interests run it, using graft to control land use and to maintain segregation, both racial and economic.
Technology is trying to rein in these costs. Zillow can buy or sell real estate for far less than the old system. Computers can cut the cost of planning. Fintech can cut the costs of transactions. Margins are contracting, slowly.
Just, perhaps, not fast enough to save our system. Because, as I said, Republicans are in the pocket of real estate. They create the inefficiency the real estate industry thrives on. Even many Democrats are in the industry’s pocket. Technology has a tough time finding a way in.
What’s needed is a revolt by the market against our real estate overlords. Those priced out of the market by this inefficiency should be leading the way.
