The dubious case for a 50-year mortgage

Plus “affordability” & abundance, unions & construction costs, and Democrats & schools

“American Gothic” by Grant Wood. With Trump’s 50-year mortgage, you would be the age those farmers are before you owned your home outright.

I wish I had a good Epstein take in me this week, but honestly at this point I’m just curious what we’re going to learn.

Anna: You (and the abundance movement broadly) have written extensively about how costs for public works projects are often 5-10x their costs in Europe. One of the culprits you have cited are unions, eg the crane workers union in New York. My understanding is that unions are very strong in Europe. What is the difference between unions here and in Europe that leads the US to adopt rules that balloon prices, and the same apparently doesnt happen in Europe?

In Sweden, 90 percent of workers are covered by collective bargaining agreements. So while I’m sure lots of Swedish labor unions push for various bad ideas, there is no reason for “unions” as such to lobby really forcefully in favor of overstaffing of tunnel boring machines or against port automation or for or against any other particular configuration of labor. If one occupation in Sweden shrinks and another occupation grows, there is no net loss of union jobs.

In America, very few workers are in labor unions and organizing new workplaces is very difficult. As a result, a huge share of labor-union political activity goes into trying to specifically bolster employment in the tiny minority of workplaces that are unionized. If you automate ports and that creates jobs on net through economic growth (which I think it almost certainly would) that’s still a loss of union jobs. If featherbedding on public works slows economic growth throughout a given city, that’s still an increase in union jobs.

So I think that if you’re just doing takes, it’s easy to say that in a sense America’s high construction costs are downstream of unions being too weak rather than too strong, and there is zero contradiction between wanting a Nordic-style collective bargaining framework and wanting Nordic-style construction costs. The problem is that in the real world, an American politician who wants to be seen as “pro-union” is, in practice, going to need to sign off on a lot of bad giveaways to stationary bandits.

Sean O: Are 50-year mortgages a good idea? Would allowing mortgage carry-over to new houses and increasing the tax-exempt gains on house sales be a better way to make homebuying more affordable to more people?

I get why this appeals to Trump and some people in his administration — they would desperately like to do something to help make homeownership more affordable, and a 50-year mortgage would theoretically have a lower monthly payment so there is some non-zero quantity of people who today feel they cannot afford to buy a house who could do so with a 50-year mortgage.

Is this actually a good idea?

To think about it, it’s good to start with the fundamentals.