A few years ago, John Myers, Sam Bowman, and Ben Southwood published a piece in Works in Progress called “The Housing Theory of Everything.” Their claim was that a surprising number of modern troubles trace back to one quiet failure: we have stopped building enough homes where people want to live. Obesity, because we zoned away the walkable city. Stalled productivity, because workers cannot move to the cities where they would be most productive. Unjustified inequality, because the gap between those who own and those who rent keeps widening. Delayed families, slower growth… pull on the thread of housing scarcity, and a lot of seemingly unrelated problems start to come loose together.
I want to add a companion thesis. Call it the housing theory of socialism.
When housing stops being affordable, something happens below the level of argument. Folk economics takes over. I have written before about these intuitions, the ones our primitive brain hands us for free: that wealth is a fixed pie, that one person’s gain must be another’s loss, that the world is zero-sum. They feel like common sense precisely because they are ancient. And when a young person cannot picture ever owning a home, the zero-sum instinct does not stay still. It looks for someone to blame. It turns against the people who already own.
That instinct was the engine behind New York mayor Zohran Mamdani. He won City Hall on the promise to freeze the rent, and as mayor he has stacked the Rent Guidelines Board with a majority of appointees who can deliver it. A rent freeze feels like justice to our zero-sum brain, but it is one of the most studied mistakes in all of economics.
In FEE’s very first year, 1946, Milton Friedman and George Stigler published a short essay on exactly this temptation, “Roofs or Ceilings?” Their diagnosis has held up for 80 years. Rent control pulls units off the market. It lets the existing stock decay, because there is no return on maintaining what you cannot price. It strangles new construction, because no one builds what the law forbids him to charge for. And by handing owners far more applicants than apartments, it invites them to sort tenants by prejudice instead of by price. Every one of these effects makes housing scarcer. A policy sold as protection for renters ends up shrinking the very thing renters need.
That kind of reasoning is simply not reaching young minds anymore. What reaches them instead is what is happening in Germany. Die Linke, the hard-left party that looked finished a couple of years ago, is now surging. It is polling around 11% nationally and has become the single most popular party among Germans under 24. It tripled its support in a matter of weeks, more than doubled its membership, and remade itself into something younger, more female, and more online, with a politics its own members describe as borrowed from America. Its signature proposal in Berlin is the expropriation of residential buildings from corporate landlords. Some of the country’s largest housing owners are, understandably, worried.
Expropriation is one of the worst ideas on the table. The trouble with America and Germany is not that they have too much corporate housing. It is that they have too little. This might sound backward to those used to thinking of corporate landlords as part of the problem, so let me be concrete. Housing has been strangely resistant to the productivity gains that have made so much of modern life cheaper. One reason is lack of scale.
Scalability reduces costs, but it also requires standardization, specialization, professional management, and access to capital. A build-to-rent operator developing hundreds of homes can repeat floor plans, buy materials in bulk, standardize appliances and parts, use the same crews across a whole community, and schedule maintenance routes instead of treating every repair as a one-off emergency. That is how productivity shows up in housing, with fewer bespoke decisions, less idle labor, lower procurement costs, and faster repairs. Large operators can finance build-to-rent communities, spread costs and risks across many units, and manage repairs more efficiently than a landlord with one building ever could. One recent study found that “institutional landlords’ expansion achieved a 60.03% reduction in maintenance cost from economies of scope and density.”
Even the Urban Institute, no friend of the free market, states that “Large institutional investors are too small a share of the market to be the main problem.” Partially because they only own “about 3% of single-family rentals and less than 0.5% of total single-family housing stock nationwide.” But also because large institutional investors may be better positioned than most market participants to add supply, especially through build-to-rent.
Seizing corporate landlords makes housing less efficient and more expensive. And it tells every investor watching that property rights in Germany are negotiable. Less investment, less confidence, less building. All of it falls hardest on the generation that was promised affordability in the first place.
And yet the anger is not wrong. Affordability is a real crisis. Young people in the United States and abroad are watching a fairly conservative dream, a home, a family, a future you can actually plan, recede until it is barely visible. They are right to be angry. What they have wrong is the cause and the cure. The urge to seize and freeze and cap feels like fighting back. It is in fact an assault on the one engine that has made life cheaper for more than a century: building, markets, enterprise.
So the task is not to scold the rising generation for its sympathies. The task is to teach it. To make the case, patiently and in language it will actually hear, that housing needs more construction and more competition and more entrepreneurship, not less. Die Linke is not reading FEE, but the young people drifting toward it still might.
That is why FEE is taking the housing theory of socialism seriously, and the broader affordability crisis behind it. It is also why we are betting a million dollars that we can change the conversation.
What young people hate is not markets. It is scarcity. Socialist policies will only make scarcity worse. We need to focus the power of markets on building more, and building faster. And we need to put sound economic thinking back in front of the generation that needs to understand the difference between a society where the future is rationed and a society where the future can still be built.
