by Justin Owen
Nearly every city across the country is experiencing some of the highest home prices and rents in decades. And in Tennessee, a recent statewide listening tour by the Beacon Center confirmed that housing remains the top concern among voters. So it’s no surprise that politicians on the left and right—from Vice President Kamala Harris to Tennessee’s attorney general—are talking quite a bit about housing prices.
Unfortunately, the solutions many of these leaders are touting are wrong for America and wrong for Tennessee. Consistent with her ideas to usher in Soviet-style price controls on groceries, Harris likewise wants to control rent prices. Since it’s unlikely Congress would go along with her extreme idea, the Department of Justice recently took the next best step. It sued a private company, arguing its algorithm informing landlords of a suggested amount to charge for rent amounts to price fixing. Surprisingly, Tennessee Attorney General Jonathan Skrmetti joined the suit, becoming the only Republican state attorney general to do so.
The crux of the DOJ’s allegation is that massive corporate overlords are driving us out of our homes. But that argument is not even close to true. According to the U.S. Census Bureau, more than 70% of rental properties are owned by individuals. Another 15% are owned by LLCs, many of which are just those same individuals who own more than one rental property. A minuscule 1% are corporately owned properties. Yet so much of the government’s efforts are aimed at blaming that 1% for our societal issues.
This is just like politicians blaming corporate food producers for inflationary food prices and offering failed policies like price controls in response. Price controls are the laughingstock of economists everywhere. Even left-leaning economists agree that the government trying to set prices doesn’t work. Similarly, when the federal government either directly or indirectly (as with the recent DOJ case) tries to control rent prices, there will be unintended consequences. And much of the burden will fall on mom-and-pop landlords, not the corporate conglomerates that everyone has come to hate.
We indeed have a housing shortage in America and here in Tennessee. But the proposed “solutions” we’re currently seeing will make the problem worse. So what will work? Nothing from the federal government.
State and local governments, on the other hand, can help. First, the only real solution to combat high housing costs is to build more homes. Nashville alone needs 54,000 new housing units by 2030. One of the biggest barriers to new homes is arcane and restrictive zoning laws imposed by local governments. These local governments should make it easier to build smaller and more affordable homes like starter homes.
Second, rising property taxes are driving up the cost of homeownership across the state. Because Tennessee is one of only four states without a limit on property tax hikes, these taxes are eroding home values and putting the dream of homeownership out of reach for many. And it impacts those who don’t own homes, too. Property tax increases are also almost always passed on to renters. The state legislature should cap local property tax hikes, or at least require large tax increases to be voted on by residents.
While it may be politically popular, laying blame at the feet of corporate America won’t actually solve our housing shortage. We need good, forward-thinking solutions, not the failed policies of the past.
 – – –
Justin Owen is president & CEO of Beacon Impact, the advocacy partner of the Beacon Center of Tennessee, the state’s premier free market think tank.
