To be fair to Trump, it is true that lower interest rates likely would 1) raise home values, 2) make home ownership cheaper (as measured by monthly payments) and 3) increase financial incentives for developers to increase housing supply. There are, of course, other considerations, but it is unfortunate that we needed to restrain inflation through monetary tightening (something that works primarily by inhibiting the production of long term assets such as housing) at precisely the moment when we urgently needed more housing.
"The single biggest investment most Canadian households will ever make is in their home. Housing represents almost 40 per cent of the average family’s total assets, roughly equivalent to their investments in the stock market, insurance and pension plans combined. In recent years, housing has proved a very good investment indeed. The value of residential real estate holdings in Canada has climbed more than 250 per cent in the past 20 years, vastly outpacing increases in consumer prices and disposable income over that period.
"However, Canada is arguably no better off because of it. That’s because while homeowners may feel wealthier because of this rise in prices, housing is not net national wealth. **Some Canadians are long housing; others are short**. Housing developments can have important implications for equality both across and between generations. Though some people in this room may have been enriched, their children and neighbours may have been relatively impoverished."
It's a measurement problem. When prices and rents go up, it's easy to measure the benefit for existing property owners, compared to measuring the increased liability for renters and future homebuyers.
Regarding Matt's observation that with greater density, land in a desirable location will keep its value or even increase, Ryan Greenaway-McGrevy made a similar observation prior to Auckland's 2016 upzoning. There's data from Auckland showing that this is in fact what happened. https://morehousing.ca/win-win
This is a good article. It is worth pointing out that it is very similar to an article from a couple years ago written in response to a mailbag question I asked (https://www.slowboring.com/p/homeowner-nimby).
In practice you can access the value trapped in your house without selling it -- mortgages and reverse mortgages (plus the ability to sell it and downsize). And that's what actually makes this dangerous. If it didn't really benefit the homeowners it wouldn't be that hard to at least get policies creating new communities passed.
Instead, this allows boomers to essentially use their voting power to impose a massive government enforced transfer from younger people to them without having to confront the fact that this is what they are doing.
What does Matt think about the ROAD to Housing Act? I'm surprised this never gets mentioned as a positive or immaterial effort? It seems to at least be positive momentum towards bi-partisan effort to reform housing policy.
Little Donny watched papa Fred build a vast real estate empire, the success of which largely relied on artificial restrictions on housing supply. The notion that this path to inherited, unearned wealth might be closed off to other talentless progeny is deeply troubling to Little Donny.
Trump's intuitions on housing supply are bad for growth, sure, but are they politically damaging?
The dynamic Trump doesn't want to break is a one time baby Boomer thing. The boomers bought their houses cheaply, saw them appreciate in value and are nominally sitting on gains they could exchange not for another cheaper home (since there are no cheap homes) but for hospital care expenses or alternatively for a windfall inheritance to their kids.
Boomers Vote and they presumably do not want to see their elder/hospice care funds currently embodied as their home, fall in value due to new massive housing supply.
I guess if you want to find a group to blame, boomers are a popular and often deserving choice. I don't see much or prevailing evidence in my acquaintances of the mindset you presume . My fellow boomers I know worry about their kids and grandkids affording homes. I do think they value the potential inheritance for their kids, but are more interested in their kids current circumstances.
I am not judging boomers. It is rational from their perspective to not want home prices to go down but if you say even boomers want prices to go down then Trump's intuition is bad for him politically as almost every other cohort also wants prices to drop. Let's hope that is the case.
I agree, let's hope. The one group I see that might like Trump's rhetoric are homeowners of any age that see the outsized growth in home values over the past 5 years as redemption. They now at least feel they are wealthy for maybe the first time.
One thing that would increase the supply of housing that the “Abundance” movement seems to overlook is to support sprawl. Now in America’s largest metropolitan areas, the physical growth has probably reached its limits. In somewhat smaller metros, such as Austin in which I live, building of new expressways and commuter rail would allow the building of homes that had access to the city in areas that are still farmland. Infill is great because the infrastructure is already there. But sprawl has permitted many cities in the South to thrive.
Sort of, but I think Austin has built itself into a bit of a corner here. I-35 is way overcrowded, and building more sprawl is going to put even more pressure on that. Houston I think has better geography for expansion of both highways and rail both as infill and connection to sprawl, while Austin has limits because of the north-south orientation that has been so deeply built in, as well as the topography on its west that has partly explained why it built that way. (And Houston’s local street grid is much more favorable for infill.)
It’s one degree worse than this. The idea that mortgages are federally protected appreciating assets is baked deeply into our financial system, and that system is what funds development. So if and when we remove explicit supply constraints, the next problem will be that if house prices go down the financial system sees that as a crisis, and the federal government historically always intervenes to keep prices stable or going up.
If widespread YIMBY in major metros is not politically viable, the alternative is to move jobs and housing to lower cost regions that would welcome the growth. This is happening already, for example the exit of movie and TV production from Los Angeles. “Agglomeration” has its merits, but even the most generous studio can’t afford to pay a stagehand a wage that lets him spend a million dollars for a modest home in LA.
Lower cost regions don't in fact welcome the growth though. Actually the alternative is the whole country being slightly poorer and more miserable than they would otherwise be, which is what actually has been happening for decades. I don't see how movie and studio production is even a little bit analogous to this issue, it's a total non-sequitur
We don’t have to speculate about what high levels of housing scarcity does to an economy. You see versions of it in many developing countries that lack the infrastructure to add supply fast enough. Housing becomes the safest store of value, wealth concentrates in the shrinking share who already own, and money that could have gone into businesses gets pulled into property.
Richer countries can’t escape that same dynamic once scarcity is severe enough. Blocking new housing in productive places keeps people away from better jobs, creating a drag on overall economic output. Economists call this Spatial Misallocation. Scarcity also distorts capital allocation, pushing resources toward real estate instead of productive investment.
The result is a transfer plus a growth tax. A quasi-rentier class of home-owning nobility becomes more prominent, raising barriers to mobility and family formation.
Success becomes even more linked to asset ownership than it already is.
You’d think that if there is one area that Trump has knowledge and competence, it would be housing and land development. Is DJT really this stupid about basic housing economics, or is he simply pandering to what he sees as his constituencies?
What if we did a sort of "too-big-to-fail" financial bailout as part of a grand generational bargain in housing?
(Yes I know this will never realistically happen, but let's just play pretend for a second)
Let's say that, for any homeowner who has lived in their current home at least 10 years, the government agrees to purchase it for current market value plus a few percent. They then turn around and sell it to first-time homeowners for something far below current market value. They then institute price controls on housing prices, plus a wide range of tools to encourage new housing builds. The idea would be that, in the *short* term, older homeowners get a bailout and a nice chunk of change for retirement, but in the long term, housing should shift to a consumption good like a car instead of an investment good.
As I understand it, this is how it works in much of Japan. People buy a new house built from scratch for a relatively low price, with the expectatioin that it will steadily deprecate because no one wants a used house. Over time it just gradually depreciates, and when they die it just gets torn down and they build a new house from scratch. Only the land is worth a long-term investment, and you're not allowed to own too much land unless you're a farmer. That seems like a much saner system than trying to preserve antique houses as if they're rare baseball cards.
If New York or Los Angeles required a permit to own a car, the optimal price/quantity of permits would probably be one that prevents congestion (and therefore deters many would-be drivers and depresses the value of the automotive and energy industries) rather than one that results in universal car ownership and commute traffic slower than a brisk walk.
Parking is a huge issue. If you needed $5/month parking placard on every street it would make a difference. Really small interventions can go a long way
EDIT: My instinct is that the best way to charge for parking is with meters. I also like the idea of cities auctioning off monthly or annual leases for street parking spots and allowing non-parking uses like food trucks or outdoor restaurant seating.
Auctioning off annual/monthly leases for individual parking spots seems pretty ideal for residents; with a leased spot they don't have to waste time hunting for parking.
I suspect that the current way parking works in a lot of dense residential areas (free-for-all, or passes that are oversold) actually benefits people who use their cars infrequently because they can find a desirable parking spot at a non-busy time and leave the car there for long periods of time.
If you auction off permits, that means people are “owed” a specific spot and expect to be reserved for them 100% of the time, liked a deeded spot in a garage. This creates a wasted space every time the permit holder drives somewhere else.
To be fair to Trump, it is true that lower interest rates likely would 1) raise home values, 2) make home ownership cheaper (as measured by monthly payments) and 3) increase financial incentives for developers to increase housing supply. There are, of course, other considerations, but it is unfortunate that we needed to restrain inflation through monetary tightening (something that works primarily by inhibiting the production of long term assets such as housing) at precisely the moment when we urgently needed more housing.
Mark Carney, speaking in 2011:
"The single biggest investment most Canadian households will ever make is in their home. Housing represents almost 40 per cent of the average family’s total assets, roughly equivalent to their investments in the stock market, insurance and pension plans combined. In recent years, housing has proved a very good investment indeed. The value of residential real estate holdings in Canada has climbed more than 250 per cent in the past 20 years, vastly outpacing increases in consumer prices and disposable income over that period.
"However, Canada is arguably no better off because of it. That’s because while homeowners may feel wealthier because of this rise in prices, housing is not net national wealth. **Some Canadians are long housing; others are short**. Housing developments can have important implications for equality both across and between generations. Though some people in this room may have been enriched, their children and neighbours may have been relatively impoverished."
It's a measurement problem. When prices and rents go up, it's easy to measure the benefit for existing property owners, compared to measuring the increased liability for renters and future homebuyers.
Regarding Matt's observation that with greater density, land in a desirable location will keep its value or even increase, Ryan Greenaway-McGrevy made a similar observation prior to Auckland's 2016 upzoning. There's data from Auckland showing that this is in fact what happened. https://morehousing.ca/win-win
This is a good article. It is worth pointing out that it is very similar to an article from a couple years ago written in response to a mailbag question I asked (https://www.slowboring.com/p/homeowner-nimby).
In practice you can access the value trapped in your house without selling it -- mortgages and reverse mortgages (plus the ability to sell it and downsize). And that's what actually makes this dangerous. If it didn't really benefit the homeowners it wouldn't be that hard to at least get policies creating new communities passed.
Instead, this allows boomers to essentially use their voting power to impose a massive government enforced transfer from younger people to them without having to confront the fact that this is what they are doing.
What does Matt think about the ROAD to Housing Act? I'm surprised this never gets mentioned as a positive or immaterial effort? It seems to at least be positive momentum towards bi-partisan effort to reform housing policy.
Little Donny watched papa Fred build a vast real estate empire, the success of which largely relied on artificial restrictions on housing supply. The notion that this path to inherited, unearned wealth might be closed off to other talentless progeny is deeply troubling to Little Donny.
Trump's intuitions on housing supply are bad for growth, sure, but are they politically damaging?
The dynamic Trump doesn't want to break is a one time baby Boomer thing. The boomers bought their houses cheaply, saw them appreciate in value and are nominally sitting on gains they could exchange not for another cheaper home (since there are no cheap homes) but for hospital care expenses or alternatively for a windfall inheritance to their kids.
Boomers Vote and they presumably do not want to see their elder/hospice care funds currently embodied as their home, fall in value due to new massive housing supply.
I guess if you want to find a group to blame, boomers are a popular and often deserving choice. I don't see much or prevailing evidence in my acquaintances of the mindset you presume . My fellow boomers I know worry about their kids and grandkids affording homes. I do think they value the potential inheritance for their kids, but are more interested in their kids current circumstances.
I am not judging boomers. It is rational from their perspective to not want home prices to go down but if you say even boomers want prices to go down then Trump's intuition is bad for him politically as almost every other cohort also wants prices to drop. Let's hope that is the case.
I agree, let's hope. The one group I see that might like Trump's rhetoric are homeowners of any age that see the outsized growth in home values over the past 5 years as redemption. They now at least feel they are wealthy for maybe the first time.
One thing that would increase the supply of housing that the “Abundance” movement seems to overlook is to support sprawl. Now in America’s largest metropolitan areas, the physical growth has probably reached its limits. In somewhat smaller metros, such as Austin in which I live, building of new expressways and commuter rail would allow the building of homes that had access to the city in areas that are still farmland. Infill is great because the infrastructure is already there. But sprawl has permitted many cities in the South to thrive.
Sort of, but I think Austin has built itself into a bit of a corner here. I-35 is way overcrowded, and building more sprawl is going to put even more pressure on that. Houston I think has better geography for expansion of both highways and rail both as infill and connection to sprawl, while Austin has limits because of the north-south orientation that has been so deeply built in, as well as the topography on its west that has partly explained why it built that way. (And Houston’s local street grid is much more favorable for infill.)
It’s one degree worse than this. The idea that mortgages are federally protected appreciating assets is baked deeply into our financial system, and that system is what funds development. So if and when we remove explicit supply constraints, the next problem will be that if house prices go down the financial system sees that as a crisis, and the federal government historically always intervenes to keep prices stable or going up.
This is all true but a bit too obvious. if you have an appetite for smart solutions, take a look at my "NIMBY Buyout Plan" :) https://boydinstitute.org/p/the-nimby-buyout-plan-grand-prize
If widespread YIMBY in major metros is not politically viable, the alternative is to move jobs and housing to lower cost regions that would welcome the growth. This is happening already, for example the exit of movie and TV production from Los Angeles. “Agglomeration” has its merits, but even the most generous studio can’t afford to pay a stagehand a wage that lets him spend a million dollars for a modest home in LA.
Lower cost regions don't in fact welcome the growth though. Actually the alternative is the whole country being slightly poorer and more miserable than they would otherwise be, which is what actually has been happening for decades. I don't see how movie and studio production is even a little bit analogous to this issue, it's a total non-sequitur
We don’t have to speculate about what high levels of housing scarcity does to an economy. You see versions of it in many developing countries that lack the infrastructure to add supply fast enough. Housing becomes the safest store of value, wealth concentrates in the shrinking share who already own, and money that could have gone into businesses gets pulled into property.
Richer countries can’t escape that same dynamic once scarcity is severe enough. Blocking new housing in productive places keeps people away from better jobs, creating a drag on overall economic output. Economists call this Spatial Misallocation. Scarcity also distorts capital allocation, pushing resources toward real estate instead of productive investment.
The result is a transfer plus a growth tax. A quasi-rentier class of home-owning nobility becomes more prominent, raising barriers to mobility and family formation.
Success becomes even more linked to asset ownership than it already is.
You’d think that if there is one area that Trump has knowledge and competence, it would be housing and land development. Is DJT really this stupid about basic housing economics, or is he simply pandering to what he sees as his constituencies?
What if we did a sort of "too-big-to-fail" financial bailout as part of a grand generational bargain in housing?
(Yes I know this will never realistically happen, but let's just play pretend for a second)
Let's say that, for any homeowner who has lived in their current home at least 10 years, the government agrees to purchase it for current market value plus a few percent. They then turn around and sell it to first-time homeowners for something far below current market value. They then institute price controls on housing prices, plus a wide range of tools to encourage new housing builds. The idea would be that, in the *short* term, older homeowners get a bailout and a nice chunk of change for retirement, but in the long term, housing should shift to a consumption good like a car instead of an investment good.
As I understand it, this is how it works in much of Japan. People buy a new house built from scratch for a relatively low price, with the expectatioin that it will steadily deprecate because no one wants a used house. Over time it just gradually depreciates, and when they die it just gets torn down and they build a new house from scratch. Only the land is worth a long-term investment, and you're not allowed to own too much land unless you're a farmer. That seems like a much saner system than trying to preserve antique houses as if they're rare baseball cards.
Once we have banned all tools, we shall begin to amputate hands, so that people with hands can earn more!
If New York or Los Angeles required a permit to own a car, the optimal price/quantity of permits would probably be one that prevents congestion (and therefore deters many would-be drivers and depresses the value of the automotive and energy industries) rather than one that results in universal car ownership and commute traffic slower than a brisk walk.
It would be better for NYC and LA to not require permits to own a car, and instead just charge tolls to drive in congested areas.
Parking is a huge issue. If you needed $5/month parking placard on every street it would make a difference. Really small interventions can go a long way
I'm all in favor of charging for parking.
EDIT: My instinct is that the best way to charge for parking is with meters. I also like the idea of cities auctioning off monthly or annual leases for street parking spots and allowing non-parking uses like food trucks or outdoor restaurant seating.
Auctioning off annual/monthly leases for individual parking spots seems pretty ideal for residents; with a leased spot they don't have to waste time hunting for parking.
I suspect that the current way parking works in a lot of dense residential areas (free-for-all, or passes that are oversold) actually benefits people who use their cars infrequently because they can find a desirable parking spot at a non-busy time and leave the car there for long periods of time.
If you auction off permits, that means people are “owed” a specific spot and expect to be reserved for them 100% of the time, liked a deeded spot in a garage. This creates a wasted space every time the permit holder drives somewhere else.