Housing as a Human Right

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Something happened the other day that really got me thinking. I drove downtown for a meeting of the Angeleno Project, a civic activist initiative you’ll be hearing a lot more about in the coming weeks. It was a Monday afternoon and I was dragging a bit, tired out from a long weekend of kids’ activities. All the parent readers here know what I’m talking about! When I walked into the room and noticed the smell of fresh coffee, I was so thankful. But as good as it tasted, it wasn’t really working. I found myself struggling through the meeting until I heard something that shocked me awake.

One of the things we are working on for the Angeleno Project is developing a set of housing policy priorities we want to pursue. One of my colleagues, an incredibly dedicated non-profit leader and public servant, surprised us all by inviting someone from the UN to brief us on the idea of housing as a human right. This is an idea that has been on my radar for a few years as local politicians here in LA keep talking about it, but until this meeting, I’ve never really given it much thought.

As the conversation started, I found myself agreeing with much of what was said. The thought that maybe we should start thinking about housing from a more serious perspective resonates. Can we really argue with the idea that housing is fundamental to the human experience? I think not. Modern life, in the absence of the absence of dignified, secure housing is no life at all.

What’s interesting about framing things with a human rights perspective is that it completely changes the decision-making calculus. The analysis becomes, not “what can we do to help with housing,” but rather “we must protect the right to housing with our maximum available resources.” It shifts the conversation from prioritization to moral imperative.

Maybe it was just the coffee finally kicking-in but I started feeling energized and found myself thinking, “Wow, this is something I can get behind!” But when we stopped talking about the noble, moral philosophical background for human rights and started talking about how this translates into real world policy, things took a decidedly different turn. I heard something that literally shocked me awake.

The representative from the UN picked on Blackstone, of course, and started to explain how the basic real estate investment business model—where investors seek to produce financial returns by improving properties—is, by its very nature, “predatory.” I found myself thinking “Wait, what? Did I just mishear that?” Sadly, I did not. Their theory is that real estate investing is predatory, not so much because of bad intent—there’s nothing wrong with seeking financial returns (at least for now!)—but rather because it produces bad outcomes like higher home prices, rents going-up, displacement, and gentrification.

Interesting perspective, right? 🤔

Well, it took me a minute to process all this. As someone who has been a real estate investor for basically my entire working life and earned all my income and wealth from it, this radical hypothesis presented as an existential challenge. To be sure, there are bad apples out there but they are the exception, not the rule. There is a sense in which real estate investing can produce unfavorable outcomes for some, but I just don’t think it’s true that it’s predatory per se. It’s just not that simple.

What about the positives here? This activity produces more and better living spaces for people and improves neighborhoods and communities. It also provides some very necessary financial returns for pension funds, endowments and other big investors. If the “real estate is predatory” mantra takes hold, these investors are going to have a serious ESG problem. No one likes to admit that they need Blackstone and their 15% IRR’s but they do, especially the world’s under-funded pensions. Real estate is the biggest asset class in the world, take that away and pensions have no chance.

What I find so dangerous about this line of thinking is that it ignores the truth that it’s the potential for financial returns that drives our whole system. Without it, houses and apartments just don’t get built let alone renovated. By starting the conversation here, you open the door to the continuation of policy responses that just don’t work. And, like we talked about last week, it clouds over the immense potential of other solutions—e.g. how about a robust rental subsidy program?

Lest you think this is all some remote risk, consider this. There’s a bill on the floor of California Assembly right now (SB 567) that supports the view that real estate investing is predatory. Among other restrictions—like reducing the rent increase cap from 10% to 5%—the law would give tenants the right to return to renovated units without a rent increase. Yes, you heard that right. Not only, are we going to try to control rental prices, we are going to regulate investment returns to zero.

To get a sense for how bad of an idea this really is, just look at what’s happening in New York today. You see, they passed a similar law years ago and lo and behold, what happened? Property owners simply stopped making investments in their properties. Why make an investment if you cannot make any returns, right? Fast forward to today and now the problem in New York is that severely rent controlled properties are in disrepair and the city is offering to give property owners up to $25K to make repairs.

This is logical insanity. Think about this for a second. Instead of giving struggling people a flexible rental subsidy, we are going to pass rent control laws that force some private citizens to subsidize others and completely disincentivize capital improvements, then when things get bad enough out there, we are going to tax everyone so that we can give money back to property owners to do what they would have done anyways if there wasn’t a rent control law! This makes absolutely no sense.

I, for one, am willing to support the idea of housing as a human right but we need to start the conversation from a better place. Instead of mischaracterizing one of capitalism’s OG business models, let’s gather the courage to declare our support for housing as a human right and design policies and allocate the necessary resources to protect it as such. The short-term move is obvious—provide a bridge for the current generation of Americans struggling with housing affordable via a flexible rental subsidy. Then focus on creating a world where those subsidies will no longer be needed by radically rethinking local political control over zoning and adjusting the regulatory overlay to make producing housing as easy as possible.

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