More Immigration can Increase Housing Affordability

The housing affordability crisis is a global problem that is affecting many countries. The crisis is caused by a number of factors, including low interest rates, rising house prices, lack of supply, and investor demand. The crisis has a number of negative consequences, including homelessness, inequality, and economic growth. There are a number of things that can be done to address the crisis, including raising interest rates, building more housing, and providing more affordable housing.

However, there are many who believe that immigrants cause problems with housing affordability by increasing the demand for housing.

However, if there is an increase in demand for housing due to immigration or natural births, there can be no price impact if there is enough supply to keep up with demand. This involves increasing density as well as increasing urban growth boundaries. It is not hard to do this. Government just need to legislate it. Furthermore, there are many tax policies that can be amended to make housing more affordable. All that is needed is amendments to legislation. Amendments to legislation will occur if governments make the change. The government will make the change if they believe the people will support it and vote for it.

This is the main barrier to housing affordability. The reality is that many voters want house prices to increase, especially in countries where most people own homes e.g. Australia. A good case study is the Australian 2019 election when Bill Shorten lost due to policy suggestions to remove negative gearing, which is a tax break primarily exploited by property investors. Overall this would have a modest effect on house prices because housing affordability is caused by many other policies other than negative gearing. However, the results of this election show that it is not immigrants that are making housing less affordable. It is the Australian people. One third of Australians own their own home outright, one third own it with a mortgage, and one third are renters. Renters are outnumbered.

If immigration were increased, it is highly likely they will become renters. If they are then given citizenship then they will be able to vote. If we increased immigration such that a very large number become citizens who rent, this can push the number of renters to over 50% thereby giving renters a majority which allows policies that promote housing affordability to be progressed. However as migrants and young Australians transition from renters to owners, they will likely vote to make housing less affordability, and so immigration must be increased significantly in a short period of time in order to boost the numbers of the renter voting bloc. Once immigrants become Australian home owners then it is likely they will vote like Australian home owners, so there need to be a sudden and steep increase in immigration.

Gillard Pushes for Sustainable Immigration Policy

Some some weird reason, Blogger won't allow me to post URLs on my blog posts!

Australia's Prime Minister Julia Gillard has now called for an election only having been in the job for a few months. One of her main advertised policies is that Australia's population growth should be slowed so that it is sustainable.

The Australian government already pays around $5000 for citizens to produce babies. This was seen as necessary because of Australia's ageing population. An ageing population would result in a massive public fiscal imbalance as government expenditure on hospitals to treat the old soars while tax revenue to fund these programs fall because working-age young people are retiring. It's questionable whether the baby bonus has much impact on birth rates because many of those who are paid to have babies were going to have babies anyway. Increasing immigration could help with the ageing population, but its impact is limited because immigration brings in not only young people but also old people. If the immigration program were tweaked so that it favors younger people (e.g. the older you are, the more you have to pay to get in) then immigration can help significantly with the ageing population.

However, both Labor and Liberal want to pull back immigration citing lack of infrastructure and yet the Baby Bonus policy exists simultaneously? That makes no sense.

It is true that sending more people in will crowd the country. I can see more and more crowding on the roads and trains already. But this problem is easily fixed. If more people come, simply build more. Where will the money come from to build these roads? It will come from taxes. It need not come from income taxes or value-added tax (called the GST in Australia) but infrastructure can easily be funded by applying an infrastructure levy whenever land is sold in an area that has no infrastructure. Suppose building infrastructure (roads, train lines, lighting, sewarage, and so forth) costs $10,000 per square kilometer. To make a city bigger to fit more people, the state government can simply extend the urban growth boundary and auction the extra land to property developers or even to individuals. When the government sells the land, it adds a $10,000 per square kilometer infrastructure levy that is used to fund infrastructure.

Some people argue that this continuous release of land at the urban fringes won't solve the overcrowding problem because people who live in the outer suburbs still need to commute to the city. Many people in Melbourne argue this because Melbourne city is marked by one central business district (CBD) with suburbs sprawling all around it. Many argue that if immigrants come to Melbourne and go to the city to go to work, they will clog up roads and trains. But this need not be the case. When government extends the urban growth boundary at the fringes, it releases not only residential-zoned land but also land that is designated for industrial and commerical use. Businesses can then take advantage of lower rent in these areas and move. This will divert traffic so that a significant amount travels from the central business district rather than towards the central business district.

Ross Gittens: Destroy the Economy to Stop Climate Change

In a Brisbane Times article titled An Inconvenient Truth about Rising Immigration, economics editor says that high immigration in Australia from the Howard and Rudd Governments is leading to a crisis of housing affordability as well as rising climate change. Gittens says the following:

Emissions of greenhouse gases are caused by economic activity, but the bigger your population, the more activity. So the faster your population is growing the faster your emissions grow.

Our immigration program is so big it now accounts for more than half the rate of growth in our population.

It's obvious that one of the quickest and easiest ways to reduce the growth in our emissions - and make our efforts to cut emissions more effective overall - would be to reduce immigration.

Of course, you could argue that, were we to leave more of our immigrants where they were, they'd still be contributing to the emissions of their home country. True. But because people migrate to better their economic circumstances, it's a safe bet they'd be emitting more in prosperous Australia than they were before.

Let's assume that economic activity does spur emissions, as Gittens says. He claims that because immigrants move to better their economic circumstances, they will be emitting more.

However, let's take this idea to the extreme so we can apply reductio ad absurdum. If every morning you travel to the city via car or train, you are an immigrant. You are an immigrant because you move to perform economic activity outside some imaginary line. This imaginary line can be political borders or it can be your household. It doesn't matter where we draw this imaginary line. Suppose you could not leave your house because you were allergic to outside air. Then you cannot move and all trade must be done inside your home. Your economic opportunities would be diminished greatly. However, because you are not trapped in your house, because you can search for opportunities outside your house, you are more prosperous. The same idea applies to immigrations from other countries as it does for those from other households. If Gittens wants to stop immigration among people from different countries then using the exact same logic we must therefore ban movement of all people from their houses since movement of people from their houses to go to work is done to better their economic circumstances, which leads to emissions. So if Government banned trade among households then you will become unemployed, you won't travel to work, and then emissions will drop. That must be what Gittens wants if we are to apply his logic consistently.

Criticisms of Thomas Sowell on EconTalk

Link: Sowell on Economic Facts and Fallacies

I have just listened to a podcast featuring Thomas Sowell. The podcast can be downloaded from the link above. The link also has a text summary of what was said.

I think there are a number of problems with what Sowell says. I especially have issues with what he says on the topic of immigration. He makes many logically inconsistent statements.

Sowell says society does not have a say on what CEOs are paid because there is no such thing as a society. There is no person named "society." The CEO is just paid by the person who hires him. Then when Sowell talks about immigration he talks about what is "best for us." When he says "us" he means "society." Society doesn't hire the CEO. Likewise, under a pure Libertarian immigration system society does not hire immigrants. Rather, employers employ them. It is inconsistent for Sowell to criticize the immigrant who works yet praise the CEO.

One moment Sowell says he is against central planning, saying that knowledge is dispersed and that the elites don't know what is best for all. Then when he talks about immigration he talks about how "we" should select "good" citizens? In other words, he wants immigration to be centrally planned. Instead of letting employers and immigrants get together voluntarily for free exchange, he wants the Federal Government to centrally decide who comes in based on a imaginary notion of a "society" or a fantasy idea of "citizenship."

Sowell does a good job arguing against central planning and socialism, yet when the issue is immigration, he turns socialist himself.

If you go to EconTalk website link above you'll see I have put these criticisms in the comments section, so be sure to read that to see how the argument progresses, if it does progress at all.

Population and Environment

In Australia at the moment, the immigration rate is about 150,000 new people per year. Under the leadership of conservative prime minister John Howard, this is the highest rate of immigration we have seen, and it is done mainly for economic reasons.

In addition to the increase in immigration there is also a government incentive for Australians to produce more babies, which is expected to increase the birth rate. Australian couples who produce babies will be paid about $2000 per baby.

Australia at the moment is going through water shortages and drought. Some say that government policies to increase population will only make problems worse. Australia cannot afford more people.

I would like to focus on population growth at the moment. First of all, we need to look at the differences in population growth between rich countries and poor countries or developed countries and developing countries. If you've watched Al Gore's An Inconvenient Truth, he claims that population growth is increasing food demand, which increases the need for land clearing, etc, which leads to environmental degradation. He shows that most of the population growth happens in developing countries, not developed countries.

The reason why developing countries have higher birth rates can be explained by economics. If you are rich and you earn $100 per hour from working, if you have a child and spend, say, five hours per week looking after this kid, then because you are playing with your kid instead of working you waste $500 (5 times $100) per week. If you are a poor person who earns $5 per hour, if you have a child and spend five hours a week looking after that child you will only waste $25 (5 times $5). Obviously, the greater your earning potential, the more costly it is for you to take care of your own child. Couple this with the fact that in most developing countries children can be used for labor whereas in most developed countries that sort of activity would see you in imprisoned then it's no wonder why there is such high birth rates in places like Africa and such low birth rates in Italy, France, Japan, etc. For a professional upper-middle class family, it is estimated that the overall cost of one child over the lifetime of the family is about $1,000,000. As Leon Gettler says, "Not only are there more women in the workforce, they are more skilled. And because people are living longer and having fewer children, far fewer years are spent raising children than working. It is now more costly for women to stay out of the workforce."

It is no wonder then why government incentives to procreate are not very effective. They may work among the poor and the sexually impulsive, but among richer, more careful, and more forward-looking people couple of thousand dollars is nothing compared to a million dollars.

According to statistics, about two thirds of the people migrating into Australia at the moment come from developing countries. In many poor countries, citizens are poor because of poor and corrupt government. If people remain poor, then population growth remains high. If these people instead migrated to developed countries where we will assume (rightly or wrongly) that governments there are not as corrupt and opportunities for wealth creation are better, then as these people get wealthier and wealthier, population growth will decrease.

Immigration of people for economic development can then be positive for the environment in the long run because it increases wealth and increases in wealth will lower worldwide birth rate, which lowers population growth, which decreases environmental degradation.

The argument can be made however that with higher wealth comes higher environmental degradation because richer people tend to drive bigger cars, have bigger houses, and so on.

John Howard's Immigration Policies

John Howard won the election after the children overboard incident because he was able to attract many working class votes away from Labor.

With recent controversy over IR, the working class seems to have turned their backs on Howard whose popularity has plummeted. When the working class think of themselves as working class people fighting against big business they will align themselves against Liberal, which is the political party of the ruling class.

John Howard's biggest challenge then is shifting perceptions of the working class, making them think on events not as a conflict between economics classes but a conflict between locals and foreigners. If John Howard makes a big deal about Muslims, boat people, and Aborigines, the working class of Australia will perceive the ruling class of Australia not as an opposing economic group but as a united team of Australians. The working class will embrace the ruling class.

It seems, however, that Sydney Morning Herald Editor Ross Gittens has caught onto Howard's games. In a piece titled Back-Scratching at a National Level, Gittens says the following:

There's a saying among journalists that news is anything someone doesn't want you to know. So let me tell you all about John Howard's immigration program. It's a key part of the Government's economic policy, but one it rarely talks about.

Why? Because Howard wants his Battlers to think he shares their dislike and distrust of foreigners, especially boat people. And it wouldn't help his image for people to know he's running the biggest immigration program we've ever had.

The fact is, however, that immigration is playing a big part in keeping the economy growing strongly, preventing shortages of skilled labour from causing a wages blowout, keeping inflation under control, limiting the rise in interest rates and keeping house prices rising rather than falling.

When Howard was elected in 1996 he cut the planned immigrant intake to 68,000, but by last financial year he'd more than doubled it. His planned intake for next financial year is almost 153,000 - plus 13,000 under the humanitarian program. To that you can add about 24,000 New Zealanders - who don't need visas and will be arriving to join the 470,000 of their fellow countrypersons who are here.

Last calendar year was the eighth straight year of net immigration (that is, net of permanent departures) in excess of 100,000.

Actually, thanks to a burst of high migration in the late 1980s, net immigration has exceeded 100,000 a year in 12 of the past 20 years, having exceeded 100,000 only 12 times in the previous two centuries. Another way to put it is that the program is running at a lot more than a million immigrants a decade.

The reality is that Howard is playing a tricky game. While he has to pretend dislike foreigners for the sake of the working class he has to also boost immigration for the ruling class who care about money and therefore want more workers.

Further Reading: Marxist Theory of Racism and Racial Inequality

Protecting Freedom by Destroying Freedom

Inspired by Maddy McCann's kidnapping, Alan Burkhart wrote a piece in the National Ledger detailing many atrocities done to children. He then suggests some solutions to the problem:

Draconian enforcement of drug and immigration laws is desperately needed. Tons of illegal drugs and thousands of sexual predators cross our border with Mexico each year. Research by "Americans for Legal Immigration" shows that as many as 240,000 illegal alien sex offenders currently reside in the USA. Could your gardener be one of them?

[...]

Most importantly, Americans must return to the moral and societal norms of past decades. Our proud nation survived a brutal civil war and broke the chains of slavery. We fought and won two major wars against totalitarianism and later broke the back of the Soviet Union. But in our quest to become the freest nation on Earth, we have also freed those among us who would do harm to some of our nation's most vulnerable citizens, and we have lost the sense of personal responsibility that governs the actions of otherwise good people. It is not a loss of freedom or civil rights to penalize irresponsible behavior. It is not "cruel and unusual" to lock sex offenders and drug dealers away for the rest of their lives. By keeping repeat offenders in prison, we are protecting the rights of those who might otherwise perish in the dead of night while their families try in vain to find them.

We are constantly told by our so-called leaders that we must be tolerant and understanding of those who behave or believe differently from the rest of us. To a point, I agree. But when our young people become targets of opportunity, the line must be drawn.

Tolerance is a two-edged sword. The more tolerant we become, the more we will be expected to tolerate in the future. I don't know about you, but I'm done with being tolerant. I want my country back.

To Alan Burkhart,

Your article Madeleine McCann Mystery Highlights Modern Day Barbarism was very well written. All those cases of children being abused is sad, but your solutions seem very lacking. First of all you say that immigration needs to be tightened, e.g. the US-Mexico border. Automatically you suggest that American children are more important than Mexican children because, if sexual predators can't move from Mexico to America then they will stay and abuse children in Mexico. This would only be preferable if Mexican children are worth less than American children. Secondly, this solution suggests that Mexicans are more likely to harm children than Americans are. It is certainly possible that a Mexican migrant crossing the border may be a child molestor, but it is also possible that a baby born in the US will grow up to be a child molestor as well. So why stop at banning immigration, why not ban childbirth altogether?

You also say that America must return to the moral and societal norms of the past. You say, "Our proud nation survived a brutal civil war and broke the chains of slavery. We fought and won two major wars against totalitarianism and later broke the back of the Soviet Union." In other words, this country emerged as a force against dictatorship to preserve freedom. Child molestation and pedophilia occur because of too much freedom. In most countries, stories involving children being raped is illegal, but in America it is protected by the constitution. Pedophiles are allowed to organize, spread their views, and do anything they please so long as they don't actually have sex with children. All this is protected by the Supreme Court.

You want a society of morality and social norms, but in order to enforce and maintain morality and social norms you need force, you need totalitarianism. You needs cameras monitoring children 24 hours a day. Yet this is exactly the things that America was formed to prevent. You can't have your cake and eat it too.

How Immigration Connects with Standard Economics

I said the following to a friend: "Thinking abstractly, you moving out of your house to go shopping is immigration since nation-states are mere legal entities that have no effect on the economics."

He didn't understand me, so now I will explain this idea more clearly in this post.

Firstly, think about you going out to the mall or a shop and buying something. Why do you do this? Why buy an apple from the mall instead of growing your own apples? The answer is because of the law of comparative advantage. If I grew my own apple then it's too expensive. It's better to let someone else specialize in making apples. You buy the apply using money you get form specializing in something else, whether it's being a doctor, lawyer, accountant, etc.

This is why existence of barriers to trade can be harmful. Suppose there is a wall or border around your house preventing you from buying apples. Then the cost of getting apples from someone else rises and it becomes cheaper for you to make your own apples. Then you do something you are not specialized in, which damages your production of your core tasks. E.g. if I am an accountant then all the time I put into growing my own apples will mean I have to work less as an accountant which means my overall wealth decreases.

Just scale this concept up a bit and it applies to immigration and outsourcing. Banning immigration means drawing a line somewhere and stopping people moving.

Many people argue that immigration can cause certain groups of people to lose and this is true. Wages can change, but this is all part of the free trade process. For example, today we see many car companies, Ford, GM, Toyota, Honda, etc. Suppose only one existed. Suppose only Ford existed. Because Ford has no competition, it can lower quality and increase prices with little effect on profitability. If the Government created cars then this is communism. Now suppose other companies were allowed to compete. Will this lower wages? Yes, those working for Ford will suffer from lower wages. The same applies for immigration or outsourcing except we think not about cars as commodities but human labor as the commodity. Immigration restriction is a form of protectionism.