Some time ago I posted an article to this blog describing how Denver Mayor Hancock wants to create a massive public housing development with money the city does not have. That article can be found here. In the course of describing the alleged problem that exists with the housing market in Denver I referenced the economic maxim of supply and demand. Housing in Denver is some of the most expensive in the Socialist Democracy of Amerika. Depending upon whom you consult you will find Denver housing costs, for both rentals and new homes, on lists of the top five most expensive metropolitan areas in the country. I have no reason to doubt those statistics as they are prepared by profit seeking real estate professionals rather than government bureaucrats.
In that earlier post I argued that Denver has seen an influx of new citizens while, at the same time, little to no new housing creation. That combination of circumstances has created the dramatic rise in housing costs for the folks living in the Denver area. I argued that eventually profit seeking businessmen would come to Denver and build all sorts of new housing developments, thus reliving the supply side problem and causing rents and new home prices to stabilize or perhaps even decline. As it turns out, my prediction for the future is dead wrong. There is another player in the Denver real estate market that I was not aware of at the time. That new player is the source of the problem. Let me tell you about that today.
I was sitting on the deck of the eight floor of a luxurious downtown condominium complex on Easter Sunday afternoon, talking with the owner, who also happens to be a man who lives and works downtown. Across the street from his condominium was a very large residential building under construction. I asked him if he expected the new building to create a parking problem for him since I expressed doubt that the new building would have sufficient underground parking to handle all the new residents. He agreed that it could be a good idea for some entrepreneur to build a multi-story parking garage in order to exploit the situation of a serious lack of downtown parking. Then he told me something I did not know. It changed my entire understanding of the alleged problem with Denver housing costs.
Apparently the Denver city council passed a law a couple of years back designed to protect condominium purchasers from evil, profit seeking condominium builders. In a high profile case, that I vaguely remember, a large condominium complex had been constructed with substandard materials, resulting in numerous problems for the people who purchased the units. As I recall the situation had been resolved when the condo owners sued the builders in court, winning judgements in their favor and resolving the issues between them. Career politicians, ever vigilant in looking for a situation to interject themselves into, decided that the citizens of Denver were dangerously unprotected from unscrupulous profit seeking businessmen and that a series of new laws needed to be created.
I do not know the specifics of the new laws but the fellow I was sitting with on the deck a week or so ago informed me that any condominium builder who makes the foolish decision to build in Denver is subjected to a series of new rules and regulations that essentially guarantee he will be sued by the purchasers of his building. From the time construction is completed until exactly seven years later, when the new rules expire, the contractor and anyone even remotely related to him can be sued into oblivion by new owners disgruntled by even the most minor problems with their new homes. As you would expect, building contractors have made the reasonable decision to stop condominium construction in Denver. That lack of new construction, coupled with an increase in demand, is what has created the alleged problem of "too high" costs for housing in Denver.
Rather than admit that the creation of a housing-destructive series of laws are responsible for what we now know is an artificially inflated cost for housing in Denver, the career politicians who created the problem refuse to apologize or even acknowledge what they have done to Denver's housing-hungry residents. On the contrary, Denver's economically challenged mayor has proposed to construct, with money the city does not have, an enormous complex of public housing which, we all know, will be doomed to devolve into slums in very short order.
This is government action at its finest. Meddling in the business activities of people in search of votes and the potential to create a large victim class which will be obliged to vote for them, career politicians craft laws with dozens of unintentional consequences. When those consequences come home to roost they propose new laws and more spending to solve the problems they create. The economically ignorant citizens of Denver continue to blindly believe that career politicians are good men and women out to protect them from evil businessmen. Faith in government is strong in this land. Envy-filled hatred for men and women who are only guilty of producing things that we want to purchase for a price we are willing to pay is also strong. What a strange world we live in.