Gabriela is a body on my drywall crew at Ridgeline, the 427-lot development I hold in Maricopa County. She runs primer and finish coat at $12.50 an hour, breathing the dust that settles on her mask before the HVAC gets commissioned — which it doesn’t, on my schedule, until the buyer is already moving in, because the commissioning inspection costs money and the coat goes on either way. You’re shopping for a home in Scottsdale. You’re looking at one of my units right now. I kept 13,000 homes from being built in this county, and the price of the one you want reflects that number with precision. The same permits that made your mortgage expensive made Gabriela cheap, and I kept both margins. Hold still. Read the next part slowly.
Jon Riches, in National Review, calls it administrative overreach. Governor Hobbs’s administration blocked new construction permits in most of Maricopa County in 2024 by adopting an “unmet demand” groundwater standard — 13,000 homes went unbuilt in one of the fastest-growing markets in the country. Riches is right about the overreach. He is wrong about the direction. The court struck the policy. The permits will reopen. The homes will be built. My question is simpler and more profitable: whose permits, whose margin, whose construction crew? I already have mine. The 13,000 that didn’t get built are competition that didn’t arrive. The price of the 427 I did build reflects the 13,000 that didn’t. Riches wants to restore the democratic process. I want to thank the governor for holding the inventory line while I closed my lots.
Let me put the numbers where you can see them. Gabriela earns $12.50 an hour. That is $26,000 a year — roughly $2,167 a month before the state takes its share. The homes she primes list at $445,000. At current rates, with 20% down, the mortgage runs $2,340 a month; add insurance and taxes and the monthly nut is $2,790. Gabriela would need to earn $111,600 a year — at the thirty-percent ratio her broker’s underwriter uses — to qualify for the loan on the home she just finished coating. She earns $26,000. She will not live in Ridgeline. She will drive 40 minutes from a rental she splits with her sister, and she will paint the next unit, and the next, and the arithmetic will hold.
Now watch the second lever. The published rate for skilled drywall finishers in the Phoenix metro area runs $24 an hour — PayScale, the Bureau of Labor Statistics, the job boards, they all land within a dollar of the same number. I don’t pay $24. I pay Gabriela $12.50. The permits closed. Building stopped. The labor pool swelled with framers and finishers who were earning that rate and now compete for the 3 jobs I post. $24 minus $12.50 is $11.50 an hour. Across the 160 hours of paint labor I budget per home, that is $1,840 per unit in wages I do not pay. Across 427 lots, that is $785,680. Say it back to me. Not from innovation. Not from efficiency. From scarcity — the same scarcity that made your mortgage payment $2,790 instead of the $2,100 it would be in a market where the 13,000 had been built.
I don’t drill the deep wells either. My permits authorize the shallow aquifer — 400 feet, the cheap stratum. The deeper wells, 700 feet, the permanent water table, cost $42,000 per lot. I don’t drill them. The shallow wells deplete faster. The buyers won’t notice for 15 years. I will have sold the lots by then. The per-lot savings from not drilling deep: $42,000. Across 427 lots, that is $17,934,000 in capital I do not deploy. I deploy Gabriela instead. She costs $12.50 an hour. The well costs $42,000 once. The well doesn’t show up on Tuesday with a shoulder that’s going out.
The margin on a $445,000 home in Ridgeline, with the suppressed wages and the shallow wells and the supply constraint that keeps the listing price at $445,000 instead of the $380,000 it would reach in a market with 13,000 more homes, is — hold still — $74,000 per unit. Before the permits, in an open market, that margin would be $41,000. The permits gave me $33,000 per home in margin I did not earn, across 427 lots. That is $14,091,000 in margin the permits manufactured. The manufactured margin is the clean money. I owe it to the governor. The quarterly report does not distinguish between the two columns, and I have not asked it to.
Now turn the page. Leticia, unit 207, is a Colombian housekeeper at a resort on Camelback Road — late thirties, two daughters, a back that has already started to complain from the laundry cart. I charge her $1,200 a month for a two-bedroom near Indian School and 19th. In April, I charged her $1,150. The extra $50 is not a fee for anything I improved; the carpet has not been replaced since 2019, the air conditioner is repaired only after it fails, and I can count on one hand the times I have answered her maintenance request before the statutory window closed. The $50 is a fee for the 13,000 homes that were supposed to break ground in Maricopa County last year and never did, because the state of Arizona stopped processing the permits.
$50 per unit, across the 23 units I hold in that complex, is $1,150 a month. $13,800 a year, incremental, no capital outlay, indefinitely, for as long as the administrative error persists. The bureaucrat in Phoenix did not write me a check. She did not have to. She simply removed her arm from the machinery that would have produced a competitor for my renter’s dollar. The act of removal was free. The yield is ours. The tenants pay it. The resort pays Leticia’s wage, the wage flows to us, and we keep the increase. Hold that number.
Leticia’s back hurts because the resort will not buy lighter carts, and I will not replace the carpet until she trips on it, and she will not complain because any complaint is a reason to start the eviction clock — 30 days in this county, and 30 days after that she would be competing with every hospitality worker in a city where the vacancy rate does not rise. I did not create the shortage. The state created it. Our books received the benefit, and I keep it, and I would keep it again.
Now lift your eyes off the one body for a moment. The same policy that gave me Gabriela at $12.50 gave me Leticia at $1,200. The same policy that suppressed the wage raised the rent. The same policy that cut the labor cost inflated the asset price. The permit clerk is a line item in a ledger that was written before she was hired. The administrative state is not the enemy of our yield; it is the most reliable partner we have. A legislature might be persuaded to pass a housing bill — there was one in the House last month, 396 votes, a whole barge of incentive programs and union-wage mandates — but a legislature answers to voters. A single deputy administrator in the Department of Water Resources answers to an appointment, and an appointment is not a constituency. The deletion of one phone-book-sized rule can unwind a decade of supply, and I did not have to lobby for it. I merely watched it occur and re-priced the unit.
George Fitzhugh identified the mechanism in 1857, in Cannibals All! He argued that the slaveholder was the one actually enslaved — shackled by the obligation to feed, house, and maintain the body across the whole lifespan. The employer, Fitzhugh wrote, was “really free” — freed from the property-interest in keeping the body alive. The water permit does the same work on a different body: the developer who owns the allocation owes the buyer nothing when the aquifer drops, owes the worker nothing when the building stops, and owes the county nothing when the wells run dry. The permit is Fitzhugh’s freedom, extended from the body to the land. The developer is, for the first time, really free.
“The rich ruleth over the poor, and the borrower is servant to the lender.” That is Proverbs 22:7, and I have always read “servant to the lender” as the bond that keeps Leticia signing the check for $1,200 instead of packing a box. The state of Arizona, by removing the competition, tightened that bond for us without charging a single basis point. The bureaucrat made us rentiers whose scarcity is guaranteed by the government, and the government asked nothing in exchange. It was not a transaction. It was a gift, and we accepted. The mortgage contract, the HOA covenant, the water-service agreement — each one is a leash, and I hold all three. The buyer who signs the loan is a servant to the lender for 30 years. The lender is a servant to the appraiser. The appraiser is a servant to the comparable sales. The comparable sales are a servant to the supply. And the supply is a servant to the permits. I sit at the top of that chain. The chain runs through every unit in Ridgeline, and the monthly payment is $2,790, and the servant writes the check.
The swimming pools in Ridgeline’s model homes recirculate 12,000 gallons a month. The landscaping draws 40,000 gallons a month across the common areas. The plumbing in 427 homes, at 300 gallons per household per day, is 3,843,000 gallons a month. All of it from the same declining aquifer. All of it from the same permits. Gabriela’s children will need water when they are born. The wells will be shallower by then. The allocation will still be mine.
The contractor’s estimate came Friday. I haven’t read it. The quarter closes Thursday, and the rent increase is already booked.
Sterling A. Varice holds the Hayek-Friedman Chair and serves as Dean of Instruction at Warden University’s College of Business and Economics in Richmond, Virginia. He is the author of three textbooks: Divine Mandates for Labor Utilization, Social Obligations for Profit Maximization, and Calibrated Deprivation: A Manager’s Guide to Employee Motivation.