In the early twentieth century the Good Roads movement successfully framed improved roads as a “public good.” Better roads, the movement argued, would enable food and manufactured products to be more easily distributed and everyone would benefit. Therefore, free, improved roads should be provided by government. Today, housing advocates are making a similar argument. If successful, the results will be the same as we see today on our roads.
Free roads are subsidized roads—users are not bearing the full cost of their transportation. Registration fees, gasoline taxes, and other user fees pay only a portion of the cost of building and maintaining roads. Because their road usage is subsidized, motorists have little reason to economize.
It has long been known that if something is subsidized, the demand will increase. For example, when government offers subsidies for solar panels, more property owners are willing to install them. Without subsidies, the price of solar panels generally exceeds the cost savings. With subsidies, property owners are willing to take actions that they would have previously avoided. The same is true of America’s roads.
Because roads are subsidized, demand is increased. The results are congested freeways, crumbling roads and bridges, and constant construction to widen and improve highways.
Housing activists are calling for more subsidized housing. They want the housing voucher program to be expanded. They want more publicly owned housing. They want housing to be treated like a “public good.” The more that housing is subsidized, the more the demand will increase.
America already faces a severe shortage of affordable low- and moderate-income housing. Subsidies do nothing to address that shortage. But they do drive up the demand. Increased demand without a comparable increase in supply leads to higher prices.
Subsidies are destructive. They encourage actions that otherwise would not have occurred. Those actions would not have occurred because they make little economic sense. At the end of the day, subsidies incentivize behavior that doesn’t make economic sense. It is true of roads, and it is true of housing.