EDITORIAL: Proposed housing bill takes aim at the wrong target

The latest progressive bogeyman for high housing costs is an array of the usual suspects: Wall Street and capitalism.

On Thursday, state Sen. Dina Neal, a North Las Vegas Democrat, announced that she would introduce legislation in Carson City “cracking down on corporate takeover of housing market.” Congressional Democrats have also sponsored legislation to limit “institutional investors” who buy housing stock.

Ms. Neal’s bill would ban anyone from buying more than 100 single-family homes in a calendar year. The proposal got a thumbs up from Maurice Page, executive director of the Nevada Housing Coalition. “When corporate entities dominate the housing market,” he said in a news release, “it not only inflates home prices ... but it also exacerbates rising rents, pushing affordability further out of reach.”

Listening to critics of “corporate investors,” one might think that purchasers buy residential homes for the purpose of idling the property and taking it off the market. But they make purchases in order to resell or rent homes to make a profit. Just like “non-corporate” landlords.

Railing against Wall Street may make for great sound bites in certain circles, but additional government meddling has the potential to unleash myriad unintended consequences, potentially exacerbating shortages. An August 2023 study by Joshua Coven of the New York University’s Stern School of Business examined the “effects of institutional investors ... in the suburbs of U.S. cities.” He found that such “investors decreased the housing available for owner-occupancy” and slightly “raised the price of housing” but also “increased the supply of homes available for renter occupancy” while lowering rents.

Other studies show that institutional investors typically purchase lower-cost properties and make upgrades in order to make them more attractive to renters or buyers. This can increase property values and stabilize struggling neighborhoods.

In fact, the “corporate takeover of the housing market” — a massive overstatement of reality — is a symptom of the actual problem.

“In a world with abundant housing,” Vanessa Brown Calder of the Cato Institute wrote last year, “regular folks would not need to go head-to-head with investors in bidding wars because there would be plenty of housing to go around. In fact, reporting indicates that investors focus purchases on markets with strong job growth and limited housing supply. Therefore, the solution is to radically overhaul the local regulatory landscape in which housing purchases exist.”

If Ms. Neal wants to do something useful on housing, she should embrace calls for the feds to unlock more Nevada land for development. Then she should advocate a review of regulations that drive up prices. More government intervention won’t solve anything. Building more apartments and houses will.