If we truly want to solve the affordable housing crisis, then we cannot look at each issue in isolation. We must consider the full context. The affordability of housing involves more than simply the cost of housing. It also includes an individual’s income. And, just as there are many restrictions on housing producers to build or provide housing, there are many restrictions on the economic freedom of individuals to earn higher incomes. The two primary restrictions are minimum wage laws and occupational licensing.
It may seem counterintuitive that minimum wage laws restrict an individual’s earning potential. After all, such laws provide individuals with a higher income than they might otherwise earn. However, because minimum wage laws are founded on the group—low-income workers—as the standard of value, those laws are ultimately harmful to individuals.
Minimum wage laws force businesses to pay employees more than the owner believes a job is worth. If the owner thinks that a job is worth $15 an hour, he will voluntarily pay that wage. But if the owner must pay that wage for a job that is only worth $7.50, he will reduce the number of available jobs, often through automation. With fewer jobs available, low-skilled workers have a lower supply of jobs available. Many will simply be unable to find work. Minimum wage laws benefit those low-skilled workers who are fortunate to have a job, but they harm those who don’t. Individuals suffer when the group is the standard of value.
Low paying jobs certainly make it difficult to obtain affordable housing. However, low paying jobs provide experience and help an individual develop skills that will enable him to earn a higher wage in the future. But he will not gain experience or develop skills if he cannot obtain a job. Similarly, occupational licensing restricts the earning potential of individuals.
Licensing requires individuals to obtain government permission before entering certain professions. Such laws allegedly protect the group—consumers—from unscrupulous and incompetent practitioners. But those laws do harm to those individuals who desire to start a business but lack the resources to obtain a license, as well and the individuals who would like to hire them.
When the group is the standard of value, the individual is subordinate to that group. The individual’s own choices are irrelevant. He must sacrifice his judgment and values to those of the group. Zoning and similar regulations prevent an individual from using his property as he thinks best in deference to the interests of the group—the community. Minimum wage laws prevent some low-skilled workers from obtaining a job so that other low-skilled workers can benefit. Occupational licensing prevents ambitious individuals from starting a business for the alleged benefit of the group—consumers.
The restrictions on housing producers and housing consumers make housing less affordable for many individuals and families. Controls and regulations drive up the cost of housing, and make it more difficult for individuals to obtain job skills or start a business to earn more money.
If we want to solve the affordable housing crisis, we must look at all of the factors involved. A growing number of individuals are calling for cities to relax their zoning regulations—provide more economic freedom for housing producers. We must do the same for housing consumers.