Oh Bernie, We Need To Chat.

If you listen to some of the election rhetoric coming out of the most left leaning candidates, you might be alarmed. And you should be.

I don’t have any party affiliation. I don’t even get to vote in the US election. I’m not a US citizen.

I’ve read through Bernie Sander’s election platform to understand what the core items that are being proposed. I don’t want someone else’s interpretation or spin. I wanted to read the document first hand and make my own assessment.

If you’re going to be opinionated, I encourage you to form your own opinions. Sure it’s easier and less effort to adopt someone else’s opinion. After all, they’ve gone through the effort to form an opinion.

There are a lot of elements and it’s hard to determine which parts he would ultimately be successful in implementing. Politicians rarely get the chance to fully implement their agenda.

Bernie's entire platform contains too many items to cover in a 5 minute podcast. Of particular interest to real estate investors are some of the items related to housing.

He says in his platform and I quote:

“In America today, corrupt real estate developers are gentrifying neighborhoods and forcing working families out of the homes and apartments where they have lived their entire lives and replacing them with fancy condominiums and hotels that only the very rich can afford.”

He then goes on to say several paragraphs later..

If we are serious about addressing the affordable housing crisis, we need to build millions of apartments and homes throughout the country that will remain affordable in perpetuity to prevent displacement and serve future generations. And when we do that, we will create millions of good-paying jobs in the process.

These are in no particular order.

Invest $1.48 trillion over 10 years in the National Affordable Housing Trust Fund to build, rehabilitate, and preserve the 7.4 million quality, affordable and accessible housing units necessary to eliminate the affordable housing gap, which will remain affordable in perpetuity. Units constructed with this funding will be eligible to be located in mixed-income developments.

Use federal preemption laws to ensure these new units are not segregated or excluded by local zoning ordinances.

Invest an additional $400 billion to build 2 million mixed-income social housing units to be administered through the National Affordable Housing Trust Fund, which will help desegregate and integrate communities.

Bernie proposed a 25 percent "House Flipping tax" that would be levied against people who sell a non-owner occupied property at a profit within five years of purchase.

OK. There’s a lot to discuss in his platform. Way more than we could realistically cover on today’s show.

Here’s the thing. Property pricing follows the laws of supply and demand. When a property is listed for sale on the market, there is nothing compelling a buyer to pay the asking price. It is being offered for sale at that price. If there is no demand at a given price, then those properties don’t sell, they don’t rent and they remain vacant.

When someone who makes it their business to renovate homes and put them back into the market, they’re improving the housing stock. They’re taking the risk that there will be demand at a profitable price point. They’re taking properties that in many cases were not in livable condition.

The only solution would be to demolish them and start again. If a 25% flipping tax were to be instituted, I can predict with great certainty that historic buildings in low income areas would not be repaired. I’ve personally played a role in salvaging some beautiful buildings.

Saying that it’s the fault of the flippers that we don’t have affordable housing is a failure to understand the cause and effect relationships that are at play in our markets. Reducing the price of Tylenol won’t eradicate head-aches.