The assumptions and beliefs, in short the vision, that drives housing policy have weathered the crisis unscathed. One aspect of the prevailing vision is that "unaffordable housing prices are produced by the free market and that making housing affordable requires government intervention." This belief has withstood countless failed experiments with government housing projects, and the like. "Even after many public housing projects had become such social disaster areas that they have been demolished with explosives, what was not demolished were the assumptions that had led to such hugely costly failures in the first place. When that particular way of trying to change people's behavior by moving them into better housing failed, it simply led to other ways of attempting to do the same thing..." Politically, the beauty of a vision is that its power doesn't reside in hard evidence, empirical verification or logical analysis. Neither does it need these things to survive. Rhetoric will suffice.
Current "affordable housing" rhetoric rests on "a widespread belief that lenders' existing standards and practices discriminated against non-white applicants," systemically if not intentionally. A 1991 Federal Reserve System study provided the spark for a nationwide outcry against lending discrimination. What fiery denunciations declined to mention, however, was that the vast majority of applicants of any race were approved. Also omitted in media accounts was that the same data indicated preference to Asian borrowers over whites. There was, however, no corresponding outcry against Asian racism in lending practices. Moreover, the study simply compared income figures with approval rates. It did not consider the myriad other factors upon which loans are granted, e.g., "the proportion of the consumer's income that will need to be dedicated to the repayment of the proposed loan plus other outstanding debts, the level of equity (through the down payment) that the consumer is able and willing to put into the property, the consumer's employment experience and prospects, and the consumer's history of repaying debts." Wealth and net worth are also factors. Thus, the data did not support the conclusions drawn. Consider also that if 98% of one group had their mortgages approved, while another had 99% approved, it would be true that group-one applicants were rejected at twice the rate of group-two applicants. It would also be irrelevant, and deeply misleading to present the data straight up.
The legal case against "lending discrimination" was easy to make--and groups like ACORN lived by making it--because the mere existence of statistical disparities sufficed for plaintiffs to establish their prima facie case, with the burden of proof shifting onto the accused. Defending oneself from such a charge can be very expensive in terms of dollar cost and negative publicity. Moreover, banks are heavily regulated and must get approval from regulatory agencies in order to make business decisions such as merging, acquiring another company, or expanding. Government has many levers over financial institutions, and used them heavily in the 1990s.
The rhetoric of housing always favors proponents of "open space" and "smart growth" laws that promise to "protect the environment" or "preserve farmland." Yet, despite the universal economic problem of allocating scarce resources among alternative uses, the fundamental question of "why the government should intervene to direct those resources to one citizen rather than another" is never asked. Besides driving prices higher, land use restrictions also have the practical affect of keeping neighborhoods segregated by income, and race. "Upscale communities ... that keep moderate-income or low-income people from moving in, by such things as requiring several acres of land per house, would never gain public support by saying that they want to keep out the masses to protect the elite."
Sowell ends the chapter with a contrast between "the market" and "social programs." The term "market" connotes the impression of an impersonal mechanism, but actually denotes "many people competing with one another, and making voluntary transactions with each other, on such terms as are mutually agreeable." It is social programs that eliminate the aspect of voluntariness, and require "following government orders." The virtue of economic decisions is that costs in the real world must always be considered. Not so of political decisions, which often ignore such costs and consequently shift them onto others than those who advocate particular policies. One such cost: "smart growth" policies, which one study indicated added costs of $100,000 per home in 50 metropolitan areas. In a community of only 10,000 families, such policies impose $1 billion worth of extra housing cost.