March 10, 2023 | OPINION | By Zoraiz Zafar

There is a higher chance of you, the average Colorado College student, knowing that I am an avid advocate for free markets than there is of you knowing my middle name. Yet, as soulless as that may sound, there are certain ethical lines that I believe all economic agents must adhere to.

Investing in certain fossil fuel corporations that are genuinely interested in developing renewable energy sources? Fine by me, as long as you are using your proxy voting power for good. Outbidding a young family for a single-family home that you see as an “investment”? To this, I must ask, how do you sleep at night?

With the onset of the COVID-19 pandemic in March 2020, the Federal Reserve slashed interest rates to record-low levels, making once expensive mortgages seem a lot more affordable. However, unemployment levels in the economy, particularly within the middle class, skyrocketed due to the nationwide lockdowns imposed to curb the spread of COVID-19. This meant that the only people who could benefit from the unusually low mortgage rates were institutional investors and the already-rich.

Inexpensive mortgage loans, an unemployed middle class, and an investing class loaded with government bailouts: What could possibly happen next? Well, if you recall, Murphy’s law states that “Anything that can go wrong, will go wrong.” In this case, Murphy’s law can add yet another tally to its list of real-world examples.

Just as the post-pandemic housing market started to take shape, investors, in the form of both individuals and institutions, swept in like vultures and grabbed whatever property they could dig their claws into. At times, these investors paid significantly higher than the property’s market value, just because they could.

These actions were particularly detrimental to the backbone of our economy: the middle class. They especially hindered young families, millennials, and those from poorer socioeconomic backgrounds from becoming homeowners, leaving them at the mercy of their landlords in an age of astronomical rents. All of this only exacerbated existing intergenerationally persistent inequities.

So what changes are required to effectively deal with this market failure? I believe that any strategy that America undertakes must have two distinct aspects: an institutional aspect and an individual aspect.

From an institutional perspective, it is imperative that the United States Congress introduces and implements bold legislation that restricts the ability of large hedge funds to invest in the housing market. It must give the Securities and Exchange Commission the prerogative to enforce such rules and prevent Wall Street from encroaching on Main Street’s home territory.

Furthermore, Congress should expand on subsidized mortgage loans and tax credits for first-time homebuyers. Plus, local and state governments should consider branching out property taxes to tax institutional homeowners at a higher rate than individual homeowners.

On an individual level, appealing to the morality of investors can address the problem. Leading progressive think tanks, such as the Brookings Institute, have been relatively quiet on the issue and can lead the charge in pointing out the unethical aspects of investing in the housing market. As Socrates argued in Plato’s “The Immoralist Challenge” from “The Republic”, the fear of punishment is not the only reason people are moral, and living a just and moral life is inherently fulfilling and leads to a sense of inner harmony and happiness.

If a free marketeer like myself can argue for restrictions on institutional investing in the housing market, any rational voter and their neighbor’s dog can get behind supporting first-time homebuyers. After all, helping people make these groundbreaking strides in their quest for the American Dream is an integral part of pursuing the Dream yourself. And, by the way, in case you didn’t know, I don’t have a middle name.

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