214 Comments

As another analogy. Europe currently has an energy shortage, particularly natural gas. The Guardian proposed a "windfall" tax on gas producers, and subsidies for energy users. So in the face of a shortage, they want the government to act to *reduce supply* and *increase demand*.

People have very counter-productive reactions to shortages of goods.

Expand full comment

> Nobody blames “speculators” even though it’s true that there are middlemen who make a living buying and selling used cars.

Honestly, we should take this opportunity to blame the legally mandated dealership sales model.

Expand full comment

Hectic work day ahead but just wanted to say I love this analogy and will use it. My friends who are not land use policy nerds (ie, most of them) tend to find left-NIMBY arguments persuasive, and this framing device is a great way to think through the issues.

This substack greatly interferes with my productivity, but I love it anyway...

Expand full comment

Another aspect of this story is that automakers are doing the rational thing during the chip shortage and prioritizing the production of the most expensive models. VW Group not only makes Jettas, but also the marques Porsche and Bentley:

"Bentley sold 14,659 cars last year, an increase of 31% from the year before and a record for the company. Porsche, also owned by VW, sold 301,915 cars, an increase of 11% world-wide."

BMW is had a good year as well, but has ensured that no Rolls Royce falls victim to the chip shortage:

"Rolls-Royce, owned by Bayerische Motoren Werke AG BMW -2.02% , whose tailor-made superluxury cars have starting prices of more than $300,000, sold a record 5,586 cars last year, up 49% from the year before."

https://www.wsj.com/articles/rolls-royce-bentley-bmw-sales-surge-as-cheaper-brands-lag-behind-11642415402?mod=Searchresults_pos1&page=1

Good luck finding a new Jetta at a reasonable price (or at all) at the moment, but look on the bright side: In a few years the world will be awash with pre-owned Bentleys, Porsches, and Rolls Royces.

Expand full comment

In a truly just society, Matt would be paying a tax on the unrealized gain in the value of his 2014 Prius.

Expand full comment
founding

I'm just going to remark that this should be one of your public posts. We need concise statements of how _dumb_ left-NIMBY housing talking points are that can be shared out regularly, to help immunize low-info people who aren't bought in to any political line yet.

Expand full comment

"In the housing context, left-NIMBYs often deride the idea that adding supply of new upscale housing will impact the affordability of older units as “trickle-down economics.”

I have a self-awarded PHD in debating left-NIMBYs on this topic. And the explanation above is wrong in that it attributes some rational disagreement. There is none... and the real explanation for the basis of the left-NIMBY position on housing growth transcends this topic and explains almost everything else.

Left-NUMBYs are elites. They are the most insecure and selfish people in the community that, given the astounding quality of our education system and economic opportunity, have manged to rise to positions of high economic and social status. They then use their education achievement to manufacture a web of face-saving virtue-signaling excuses for their positions that are always 100% based on their own selfish interests.

They block housing because it keeps their real estate values high and they also like their exclusive white gated communities.

Expand full comment

I live in a town with an engineered housing shortage - in that almost all of the land the town intends to use for residential construction is zoned for single family and is built, so the ability to add more housing (measured in terms of humans with roofs) is basically nil.

Housing prices keep going up, which isn't astonishing, and one of the side effects is that people keep super-sizing their houses. My neighbor is doubling his square footage by turning ihs 50's 3-bedroom ranch into a two story house - it's a total redo, so this will be close to creating "new" housing stock.

I'm still scratching my head on how to think about this economically. Clearly the root problem is a shortage of plots zoned for adequate occupancy - if we don't do one of (1) allow duplexes and apartments or (2) build in the town's preserved forests/wetlands or (3) somehow wreck demand prices will go up.

But the secondary effect is that the buildings _on_ the plots are steadily being upgraded, to the point where there won't be any starter homes left if trend continues.

I guess to put this in the car analogy, if the automotive shortage went on long enough, would the used car market be "mostly BMW's" because, in face of a shortage, that's where production has focused to maximize profit on limited input resources? If the automotive shortage lasted that long and then ended normalized, that would be a weird place to be, where the old car stock, which is supposed to be affordable, would be "overbuilt."

Is it possible to reach a point where housing prices can't be normalized because the structures themselves have become too expensive due to past land prices being too high? Given how unpopular a political agenda to crater housing values would be, the whole question seems almost too hypothetical to reason about.

Expand full comment

Certainly not the first good SB article I've read, by a long shot, but I think this is the first one that had me actually laughing out loud multiple times through the read.

Most SB subjects would not take well to this tone, but when one does, I appreciate the occasional shift.

Expand full comment

Adding onto the crowd loving this analogy and I plan to use it frequently in the future. Just yesterday, I let a friend know about a nice multifamily development announced just a few blocks away from where she's renting in a neighborhood that she really wants to buy property in some day--and she was ambivalent about it, at best, even as I was trying to explain how it could possibly help in her goal. I don't think she'd ever go full NIMBY but it is telling how easy people can be allured into their talking points. I'll have this article in mind the next time things like this come up anywhere.

Expand full comment
Jan 20, 2022·edited Jan 20, 2022

So as someone who is pre-sold on the YIMBY side of this debate, I think you need to do a bit of (sigh, I hate this term) steelmanning here. It’s a good analogy as far as it goes, but it doesn’t anticipate a really obvious objection: building a Mercedes for your neighbor does not require demolishing your Prius and leaving you car-less or forcing you to drive a substantially worse car for an indefinite amount of time.

And I think that really is the ugly part of the housing argument: at least in our big cities, we’ve dug ourselves a hole that is genuinely difficult to fill in. Coming back to the car analogy, it’s also pretty clear that if the supply shortfall goes on for another few years, when the chip shortage does finally ease, production lines will concentrate on the highest-margin models: if they’re guaranteed to sell every Lexus they make because of pent up demand, why would Toyota build any Corollas in 2023?

The nice thing about cars is that we don’t really have to care: people will grumble about having to nurse their old cars along for another couple of years, but for most people it won’t be felt as a major disruption. Whereas having your rental razed to the ground to be redeveloped into units your family can’t afford is the sort of thing that people notice and get understandably surly about.

Expand full comment

Liberal progressives, as a species, are anxious scarcity mindset people. They are really quite broken in that they never can walk the full fact pattern on the consequences of their policy actions. They stop at the point that the policy makes them feel less anxious, and then demand the action to enact it. Then the consequences are ugly, and they just do the same thing... come up with the next scarcity idea to try and address the problems caused by the previous.

So it is the uncontrolled anxiety of the liberal species that results in this constant spiral downward into dystopia.

The correct mindset is one of abundance.

Let's use an example. There are some that say we should tax the crap out of wealth people to reduce the wage and wealth gap. That is scarcity policy.

The abundance policy would be tax incentives for small business and start-ups, and incentives for capital holders to make investments in industries with high paying jobs.

Global Warming is a giant scarcity policy enabler. It gives the anxious liberal progressive backing to push even more scarcity policy.

COVID has been a scarcity policy enabler.

Liberal progressives are made anxious with change and progress. They don't feel that they can compete well in the abundance space. It is not virtue that causes them to push scarcity, it is their own selfish interest to wreck the abundance and progress train to hobble the free competitive world and slow it down so they, the anxious liberal progressive, can feel more confident in their ability for looting more resources.

Expand full comment

I don't typically comment but I liked this a lot. One way to think about housing is the only truly scarce resource w/r/t housing is land in built-up cities. Lumber isn't typically scarce, nor concrete, nor steel, nor appliances. Skilled and unskilled labor might be. The constraints like permitting and NIMBYs and land use requirements. You can buy cheap cookies from a grocery store bakery or cheaper cookies from shelves at Dollar General, or you can buy expensive bougie cookies from a gourmet bakery or Milk Bar, or you can make cookies at home, but because cookie production isn't limited by quotas or caps, there's fundamentally a tether there that cookie costs don't have to exceed the input costs.

Expand full comment

Off topic, but it's worth pointing out that IF the Fed had already credibly established that it was NOT going to allow the supply shock of the pandemic to lead to insufficiency of demand, automakers would not have cut back their demand for chips. What the Fed DID was pretty close to optimum (sooner would have been better, of course) but this was a huge surprise. Markets still expected a (possibly mitigated) repeat of the 2008-2000 disaster. [Look at the fall in inflation expectations in March 2020. If markets had expected the Fed to maintain aggregate demand, inflation expectations would have risen.]

Expand full comment

"Unearthing a huge cache of unused homes in in-demand areas would have the same effect. Of course, we are very unlikely to find such a cache."

In Canada, Mike Moffatt has a suggestion to add rental housing quickly in expensive markets: Build more student residences. https://www.tvo.org/article/the-quick-fix-part-1-how-ontario-can-improve-its-housing-situation-now

Expand full comment

Thinking about this car analogy a bit more, I'm intrigued about comparing it to *parking* for cars, and that is striking me as the inverse of the housing analogy. There is a genuine scarcity of parking on on-street public corridors, the consensus typically is overwhelming that that scarcity is bad, and the standing policy to address this is not to artificially reduce demand by *banning* production of more cars so there's more space for the incumbent car owners, but to artificially increase the supply by *requiring* parking to be build off-street.

Now, I wouldn't make this observation outside this site, because it would be an easy way to try to justify mandatory parking minimums (which are very bad!), but it struck me as another example as to how people don't clearly think through aspects of scarcity and supply/demand.

Expand full comment