What If We Made Housing Free

Imagine we made housing free in Kirkwood for everyone. Kirkwood has good schools, low crime, and a quaint Downtown with lots of good restaurants and shops, so I imagine our free homes would be quite popular. Actually, even if it didn’t have all those things, it’d be quite popular; where the hell else are you going to find a free house? Imagine all the people who’d take that deal: Many Kirkwood residents would ditch their mortgage if given the option, but people from Webster and Des Peres and Chesterfield and St. Charles would line up for that deal too. I think people from across the county would take our free homes if we offered them! Across the world even! And imagine how excited the Kirkwood Gadlfy and his crew would be! His life’s work accomplished. Housing for all. The dream realized.

At some point, though, we’d probably start running short on free houses. Our housing would still technically be free, but there wouldn’t be any available and the private market wouldn’t be incentivized to build any more at a $0 profit. Eventually, people would give up and stop coming to Kirkwood in search of their free house and while the handful of lucky people who got a spot might be glad, everyone else would be kinda pissed.

And Kirkwood could end up with some really inefficient outcome as well: What if my mom, dad, brother, and I all entered the lottery separately and all won our own homes? We’d obviously never buy four separate homes, but if they’re free, we might as well! That would be great for us, but bad for a family of six who can’t live in Kirkwood because us Pences are taking up four on our own. This would be bad for the city too which would lose out on sales tax revenue due to this inefficient allotment (a six person household probably buys more things than a one person household) and lose out on property tax revenue because they had decided to artificially price their land at $0.

Eventually some enterprising person suggests: why don’t we just build some more of these free homes? Sure, it’d cost Kirkwood a lot of money to build all those homes, but Kirkwood promised free homes and they should deliver! So we spend a bunch of money and build double the number of free homes we previously had and the issue is solved. But now even more people want to come! And we need to build even more! And we need more money to do it! And around and around we go.

Bad Idea Right?

If all of this sounds a bit ridiculous to you, I agree. While it sounds nice in theory, in practice free housing would be a terrible idea. Unpriced markets generate over-demand and under-supply which leaves everyone worse off. We know this intuitively.

Now I want you to replace “free housing” in the paragraphs above with “free parking”. Whereas the former was a cautionary thought experiment, the latter is an exact description of current policy.

Kirkwood, the thinking goes, has a parking problem. The problem is that there’s not enough of it and what parking we do have is inequitably distributed. But when is this not the case for something priced at $0? When something valuable costs money, people consume more than they need to. The Pences drive separately leaving no spots for the family of six that values it most highly. Businesses get fewer patrons, Kirkwood gets less tax revenue, and we burn lots and lots of money trying to marginally increase parking supply (Kirkwood has spent at least $720k to repave the City hall parking lot and add a hand full of spots) only for that additional supply to immediately get eaten up by additional demand.

Everything else valuable has a price because the market is the most efficient way we’ve found to distribute scarce resources. Whether the items and services are necessary (water, homes, food) or superfluous (art, entertainment, an Amigos margarita), they have a price because if they didn’t, some people would consume way more of them than they needed, and others, who placed a high value on them, would be left wanting.

Such is the case with parking in Kirkwood. So in the run-up to November’s Transit Development District referendum, I want to try and tackle the issue of parking policy from multiple directions and make the case that the reform will leave all of us —and Kirkwood— better off than the current irrational status quo.