To Help Families, Loosen Up the Housing Market

With American fertility rates in decline, ideas have emerged from both the right and the left about how governments can incentivize having children, or at the very least reduce some of the costs. Patrick T. Brown observes that the steady increase in the price of housing may be leading people to delay starting families, and argues that, as is so often the case, well-intended government interventions are the culprit:

In the wake of World War II, the United States adopted a type of industrial policy for housing—favorable tax treatment, federal assistance, a rejuvenated homebuilding industry, and easier financing led to exploding homeownership rates (of course, not every group benefited equally). . . . But by the 1970s, the great engine that had been powering the growth of the housing supply began to peter out. Two factors are of particular interest to our story: a regulatory climate that shifted from favoring development to protecting the environment, and the rise of what the Dartmouth economist William Fischel calls the “homevoters.”

First, the passage of the National Environmental Policy Act and state-level equivalents made it more cumbersome for developers to build. These laws were arguably well-intentioned, but the added years of environmental and legal review are inevitably capitalized into the price of a home. . . . Funnily enough, in the context of today’s concerns over the climate, the environmental laws championed by 1970s activists may be making it harder to fight carbon emissions. For example, in today’s legal climate, it’s easier for developers to build in Arizona or Nevada than the San Francisco Bay Area. As a result, more people move to hot, sunny areas that require intensive use of air conditioning rather than staying in more temperate areas like the Bay Area.

Second, the high-inflation environment of the 1970s, combined with the record-high rates of ownership, changed the mental framework around housing. For most people, a single-family home is the single largest purchase they will ever make. If a home continues to rise in value after its purchase, a homeowner can see the value of the house as both consumption (in the form of a place to live, make memories, etc.) and as investment. That means that homeowners have a rational, vested interest in seeing the value of the home maintain (if not improve).

A new road, apartment, or housing development changes the status quo, and even the most open-minded homeowner might be worried about taking a risk, even a small one, that his house could end up worth much less than what he paid for it.

Read more at Public Discourse

More about: American family, Economics, Family policy


Recognizing a Palestinian State Won’t Help Palestinians, or Even Make Palestinian Statehood More Likely

While Shira Efron and Michael Koplow are more sanguine about the possibility of a two-state solution to the Israel-Palestinian conflict, and more critical of Israel’s policies in the West Bank, than I am, I found much worth considering in their recent article on the condition of the Palestinian Authority (PA). Particularly perceptive are their comments on the drive to grant diplomatic recognition to a fictive Palestinian state, a step taken by nine countries in the past few months, and almost as many in total as recognize Israel.

Efron and Koplow argue that this move isn’t a mere empty gesture, but one that would actually make things worse, while providing “no tangible benefits for Palestinians.”

In areas under its direct control—Areas A and B of the West Bank, comprising 40 percent of the territory—the PA struggles severely to provide services, livelihoods, and dignity to inhabitants. This is only partly due to its budgetary woes; it has also never established a properly functioning West Bank economy. President Mahmoud Abbas, who will turn ninety next year, administers the PA almost exclusively by executive decrees, with little transparency or oversight. Security is a particular problem, as militants from different factions now openly defy the underfunded and undermotivated PA security forces in cities such as Jenin, Nablus, and Tulkarm.

Turning the Palestinian Authority (PA) from a transitional authority into a permanent state with the stroke of a pen will not make [its] litany of problems go away. The risk that the state of Palestine would become a failed state is very real given the PA’s dysfunctional, insolvent status and its dearth of public legitimacy. Further declines in its ability to provide social services and maintain law and order could yield a situation in which warlords and gangs become de-facto rulers in some areas of the West Bank.

Otherwise, any steps toward realizing two states will be fanciful, built atop a crumbling foundation—and likely to help turn the West Bank into a third front in the current war.

Read more at Foreign Affairs

More about: Palestinian Authority, Palestinian statehood