Regulatory capture across the country is a huge impediment to improving people's lives. Matt highlights one area in this post (essay?, blog?, I never know how to describe a substack writing), but it extends into almost every part of our lives. Licensing rules for everything from hairdressers to car dealerships to real estate brokers inhibit competition and act as a hidden tax on consumers while protecting entrenched interests.
President Biden's recent executive orders are a good step, but they are limited in scope. The battle against these silly regulations - is it really necessary to require 2,000 hours of training to be a barber? - happens primarily at the state level. This should be an area where conservatives and progressives come together - more competition, enabling a pathway for lower-income people to improve their lives and a shrinking the regulatory state. Entrenched interests, though, have captured so many of the licensing bodies, it will take dedicated people working the details. I'd love to know how to find and support anyone who is working in this area.
I agree that there's an excess of regulation. But the tendency to regulate is not driven only by cartels and incumbents. It is also driven by what happens in the absence of regulation: scammers, incompetents, and horror stories.
True, when someone pretends to be a plumber and screws up your pipes, the damage is not as severe as when someone pretends to be a cardiologist. But it can be bad enough to create a lot of news stories and irate voters. When you deregulate, there will be abuses: you can count on it.
So, while I agree that the pendulum has swung too far towards regulation in many areas, I also think that unregulated caveat emptor is a bad system as well, which will bring calls for regulation in its wake.
Deregulate slowly, incrementally, carefully, watching the effects as you go. Seems like the Chestertonian approach, no?
I think the point was about regulation of activities other than skilled trades like plumbing (or cardiology). Licensing requirements are often ridiculous and harmful to consumers as well as actual and potential workers.
"...skilled trades like plumbing (or cardiology)..."
That may seem like a bright line, but it isn't. Good barbers are skilled; good nail salon workers are skilled. Many people would say that plumbers are more like barbers than like cardiologists. The line between skilled and unskilled is not uncontroversial; if there is a line at all, then it takes skill to find it.
So there's no simple response of saying, "sure, the skilled trades should be regulated, but not the unskilled ones."
"...when someone pretends to be a plumber and screws up your pipes, the damage is not as severe as when someone pretends to be a cardiologist."
"Many people would say that plumbers are more like barbers than like cardiologists."
Cardiologists are concerned with pumps ("hearts") and pipes ("blood vessels"); they just happen to be our favorite pumps and pipes. They are the plumbers of the medical world. (Orthopedists are the carpenters.)
It’s not a bright line but there is a line IMO. A bad haircut isn’t equivalent to a flood, and I don’t think it’s very likely that a bad haircut or manicure would include flesh wounds. The concept of 10th Amendment-related health, safety, and welfare as a justification for regulation has been overstretched to great harm, including very much in my own profession of land use planning.
Well, I did have a barber draw blood once. But I came here to make roughly the same point: the justification for licensing isn't the level of skill involved in a profession, it's the harm that follows a lack of skill. A bad cardiologist can get you killed. A bad lawyer can land you in jail when you didn't do it. A bad barber took a little skin off my neck once, but that really seems like about a 7-sigma event, and I survived. A bad nail salon worker seems even less likely to cause significant harm.
spoken like someone who has never or almost never had a manicure or especially pedicure. the work can verge on podiatry. look up callous shavers sometime. they’re, oh, marginally less dangerous than straight razors. and even incompetent cuticle trimming can lead to infections and potentially serious sequelae. some techniques involve UV burn risk. overall i would put it on par with or quite likely a bit more dangerous than barbers.
… okay, but is it overregulated? hell yeah! the solution for callous shavers being kinda dangerous is not to outlaw callous shaving during a pedicure! it absolutely belongs in this discussion. just, don’t lump nail salon work in with or make it the poster child example of Low Skilled Benign Bullshit that would be fine if it were completely unregulated.
I've thought about this a bit and I suspect where most people would draw the line is if the professional/tradesperson's negligence is likely to seriously impact your life/health, your freedom, or your wealth/property. Like, if a doctor screws up, you either die or are in pain. A lawyer screws up, and you may end up in jail or losing a lot of money. A plumber screws up, and you stand a good chance of paying a massive repair bill. A barber screws up, and...I dunno. If you're unlucky, your bad haircut *might* cost you a job if you just happen to have an interview immediately afterward with an employer who cares about these things, or if you're *really* unlucky maybe they nick you with the same razor as they nicked someone with HepC and now you have it too, but most likely you just look like crap for a few days/weeks.
with lawyers screwing up, the effects really depend upon the case. screw up a traffic ticket and your client gets points that maybe he shouldn’t have. screw up a murder where the client was obviously guilty and there are zero consequences because the client would have gotten life even with a great lawyer. screw up a divorce without children, and the consequences will be a small or moderate fraction of your clients’s net worth. i like handling misdemeanors because they aren’t stressful. got a client out of jail between slow boring posts this morning and earned a $3k fee in about 4 hours total work. that case actually took erudition and politesse and i feel like i earned the $750 an hour. but pleading out a dui client who was visibly drunk is only semi skilled work, it’s not worth any more than carpentry.
I'm a lawyer myself, so I know how vast the differences are within the profession. The issue is that the law license that lets you take on DWIs, childless divorces, and piddling small-claims cases is the same one as lets you take on contested murders, removal actions, and multi-million-dollar contract and tort claims. And the value of stuff can vary; I spend a lot of time prosecuting fairly small claims (amounting in the thousands or tens of thousands) that aren't huge as an absolute proportion of my client's revenues (which amount in the hundreds of millions)...but because my client is the City of Philadelphia, these small cases are valuable even individually because this is the public's money. (I am the Philadelphia equivalent of the tax police MY keeps talking about funding.)
The HepC thing to me is an argument to minimal barber regulation, more similar to a food handlers card than what currently exists. Food handlers cards don’t seem to be an issue for American restaurants.
Yeah, that's about the right level there. Honestly, I suspect most people think that's about the level of certification needed, not hours and hours of training on how to style hair "correctly."
The best haircuts I ever had were when I was studying abroad in Egypt. The barber was a guy who had no licensing or training (those not being required) and actually cut hair as a side-gig to supplement his income from a white-collar job at the university admissions office that paid way too little. (I talked to him a little about his background, since we took the same microbus to campus every morning.) (Admittedly, the quality of the cut for me is mostly because the guy was used to working with my Arab/Middle Eastern hair, which is a somewhat unusual texture for most American barbers.) The only thing that worried me was hygiene, but he kept all his tools in cleaner or under UV (as applicable) and always used a new blade for his razor for each customer. Still, a formal certification of *that* would've eased my mind a bit further.
It seems like the time since regulations are enacted is an important dimension here. You might get a regulation through because of a few scams or bad actors and a moment of public outrage, but over time people will stop paying attention and incumbents can capture the rule for their own advantage. The question is less about wether or not you can have a good regulations but instead if you can keep regulations from having unintended consequences in the long run. For my money its probably important to stir the pot every now and then (get new regulations, bust up old and tired out ones) to keep incumbents from capturing system.
I agree that a sunset is a good idea when regulations are necessary; I do wonder how much capture would still be an issue since, as you rightly note, the public tends to not pay a lot of attention.
The following video clip argues that the cost of hair dressers' screwing up is not nil. It also argues that the cost is less than some people think. I find both arguments powerfully convincing!
My pet idea: let social workers who take a couple courses in family law and civil procedure handle low asset divorces. Most family law is distorted by attorneys fees. Few separating people with kids can pay me $300 an hour, and none of them want to pay for my understanding of constitutional history and federal jurisdiction.
"...none of them want to pay for my understanding of constitutional history and federal jurisdiction."
I got the same problem. I blame it on the over-regulated lawyering business, which won't let me charge money for my understanding of constitutional history and federal jurisdiction without jumping through all sorts of bullshit hoops like law school, passing the bar, CE courses, and got knows what else.
Instead, I'm stuck giving it all away for free on SlowBoring.
So I am a licensed lawyer I don’t practice anymore. But low end divorces are hard taking family law isn’t enough, criminal complaints come up all the time. People will saw whatever they need to stop the spouse from seeing their kid. And if the divorce isn’t nasty like then you don’t need any lawyer. Also, immigration issues come up
In those cases as well. And people trying to avoid paying a baby moma will comment fraud to hid a job etc. it is a lot of work across 4-5 practice areas. And the pay sucks do I am a teacher now.
My understanding is that a similar dynamic exists between doctors and nurses. The latter, I believe, are perfectly well qualified to directly provide a lot of medical care, but they are prevented from doing so in many jurisdictions by doctors’ groups.
I think it was Dickens who said that all professions are conspiracies against the laity.
"I think it was Dickens who said that all professions are conspiracies against the laity."
'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices.'
But that quote's not Dickens; it's from that filthy communist, Adam Smith.
If I had to guess, I'd say this is one area where my own political tribe, liberals, are likely a bit more problematic in terms of impeding reform, than folks on the right. Mind you I think their concerns -- elevating the wage floor -- aren't frivolous. But nonetheless, it's abundantly clear excessive occupational licensing requirements hurt both workers and consumers.
Overregulation is just a tough nut to crack. Whether you're adding or cutting regulations, the people most invested in any given regulation are interested parties, and so either adding or cutting can lead to unfair outcomes that (usually) benefit incumbents.
I have mixed thoughts on deregulation as a whole, but I certainly agree with things like barbers or other aesthetic professions. If the harm from a bad experience is minimal, it is very easy to just try someone new the next time. A bad pedicure, haircut, or massage seems pretty easy to shake off and move in. Bad plumbers/electricians are a bit more questionable but perhaps some deregulation is reasonable.
Some jobs are safety-critical and people should be required to have a safety certification. Doctors, plumbers, electricians, anyone using dangerous chemicals (exterminators, some of the bleaches and dyes used on hair, etc.) are all obvious examples.
For others, where the question is skill that isn't easy to determine in advance (if it's easy to tell whether someone is good or not, then caveat emptor is fine), then creating a narrow antitrust exemption (if needed) for private certification schemes, which would allow the market to segment as it chooses (e.g. separate certifications for styling black and white hair could form) and no legal requirement to possess a certification at all.
Lawyers are harder, as you do need to be admitted to practice before a specific court (for good reasons, the court needs to be able to sanction people and not to be filled with uneducated timewasters). For non-litigators, the risks of a bad contract can only be mitigated by mandatory negligence insurance, at which point the insurers are going to require a certification anyway, so restructuring seems remarkably pointless.
I write the newsletter Construction Physics, which is what Austin based most of his post on, and have written about this issue a lot.
First, a bit of a clarification. Manufactured homes are homes that don't meet local building codes, but instead meet the HUD code for manufactured homes (which, among other things, requires the permanent chassis). But there's nothing stopping anyone from building a home in a factory that meets local building codes, and putting it up on a normal site just like a normal house. The reason this isn't more popular is that it tends to be more expensive than traditional construction.
The main issue preventing returns to scale in home construction is shipping and logistics. Homes are so big that to prefabricate them you have to either break them into panels (adding a lot of upfront complexity and still having significant site work) or ship them as large modules that require carefully planned routes, follow cars, large cranes to set, etc. The result is that you tend to see prefabricated homes (and other buildings) shipped relatively short distances, generally less than 500 miles. This fundamentally limits how big a market you can serve and what sort of scale you can achieve.
Even manufactured homes don't really get around this. Clayton has something like 17 factories around the country to deliver a relatively small number of homes (in the neighborhood of 50,000).
Many, many companies have tried and failed to overcome this, Katerra (a 2B-dollar prefab construction startup that just went bankrupt) being the latest.
Also, I think Matt is overstating the importance of high land cost. The vast majority of population growth (and thus new construction) occurs in the south and the southwest, places where the land cost is very low and the cost of a new house often approaches the cost of construction. You actually see a fairly strong correlation between cost of construction and population growth, but NOT any correlation between home cost with the price of land and population growth. So lowering the cost of construction would have fairly enormous effects if you could figure out how to do it.
For manufactured homes, I think the larger issue than zoning is the way they're financed. These are almost never financed as real estate, but as personal property. So the loans for them have higher interest rates, and they don't maintain their value over time the way a traditional home does. But there's a new type of manufactured home called a "CrossMod" that's advertised as built like a manufactured home but financed like a traditional home - we'll see how that does.
California recently allowed backyard cottages in every back yard. Some builders are offering prefab cottages: they build them in a factory and drop them in your backyard with a crane. They're cheaper, but mostly because they're standardized I think.
Finding an, eg, 12' x 28' spot for a small abodu, isn't always easy, and not everyone has a garage to convert into a JADU. But for those who can find a spot and want an ADU, the new laws have been great.
"The vast majority of population growth (and thus new construction) occurs in the south and the southwest, places where the land cost is very low and the cost of a new house often approaches the cost of construction."
What's the direction of cause and effect there? I know lots of people who have moved south *because* costs of living are lower, and the only people I know who have moved into more expensive cities have done so because they have to for work, or because they're willing to pay more to be near family and friends who are already there.
The biggest driver of low end housing costs is the illiquidity of poor people and the transactions costs of rent default.
When I was a public defender in Hall County, I was up for an adventure and I looked at a few single wides in the country. The rent wasn’t much cheaper than the ($815/month in 2005) apartment I ended up leasing. The difference is rent was due weekly rather than monthly and the deposit was only one week’s rent. You could move in for $375, but it still cost $675 a month to rent a trailer that cost ~$32k new and was on a quarter acre of rural land that might have been worth $2k. The annual rent was 24% of the cost of the trailer and land.
Decreasing the cost of that single wide by 15% would not have decreased the rent by anywhere near 15%, because much of the rent covered the landlord’s risk in renting to people with spotty credit and evicting them if they didn’t pay and fixing the place up if it got trashed.
This problem extends further up the market. In my exurb (Peachtree City, GA) a 815 sf apartment goes for about $1550 a month, plus utilities. At a discount rate of 6%, that implies a value of $310k per unit. Conversely, you can buy a 2100 square foot home for $370k. Obviously, the apartments are cheaper to build per square foot than houses because they are built on top of each other, share walls, share plumbing and utilities and use less land. Yet houses sell for $176 a square foot while apartments rent for the equivalent of $380 a square foot.
Thanks for bringing facts. That's interesting both about how exploitative the trailer-rental market is, and also why the risks for owners go some way towards justifying the exploitation.
Cheaper construction won't change the rental system much. But could that plus the change to mortgage regulations turn some renters into owners?
Then you might have some portion of those low-end renters succeed in becoming owners outright after four or five years.
That’s absolutely correct. If the federal government offered mortgages at 2% for trailers, the payments would be minimal, eg $200 a month for a double wide. With payments that low, I think the risk of default wouldn’t be too great, certainly less than it is on unsecured loans for shitty, fir-profit colleges.
There could also be low interest loans to turn apartments into condos.
The trailers you can’t get a loan for are the ones you rent in a trailer park. I was able to get a low-down payment loan on a early 90s double wide because I also bought the land.
"... the risk of default wouldn’t be too great..."
Suppose that half of them default. Bad, but you might accept that cost for the benefit of turning half of the former renters into owners.
I mean, for the target population, that increase in wealth and reduction in ongoing expenses would be huge -- not just life-changing but legacy-changing as it affected their kids.
And, sure, these units are never going to sky-rocket in value. Resale value may not create millionaires. But not paying rent is a huge improvement in finances.
if someone misses a few $200 payments and then gets a job, they could get current pretty quickly. additionally, stable housing helps create more stable workers.
It's not 'exploitative'. People who rent trailers are generally the absolute bottom tier of credit & personal finance, and have volatile personal lives. The landlords are probably not even earning enough return to take on the credit risk of renting to that type of person, I doubt it makes any financial sense. Evictions take time, and you certainly can't sue the person for whatever rent they didn't pay or damage they did- they don't have any assets
"It's not 'exploitative'...landlords are probably not even earning enough return to take on the credit risk...."
Meh. Every exploiter has a story. Every pay-day loan shark will tell you about the risks that they are taking, and why it justifies usurious interest rates. Every slave owner talked about the ingratitude of their property.
I agree that trailer-park owners face some risks. That does not show that they are not engaged in exploitation. Are the tenants being exploited? Then the owners are probably engaged in exploitation.
i intentionally split the difference. Of course a corporate investor can borrow at 4 or 5%, so the return to equity and be over 6% even if the return on capital is only 6%. change the discount rate to 5% or 7% and the point stands.
"When factories are running at capacity, unit costs are lower. When demand is sufficient to open more factories, shipping costs fall. So you can have a flywheel of falling costs and higher quality."
It's generally pointless to rail against idioms, and this one may be too entrenched to eradicate, but may I point out that actual flywheels do not do anything like what your metaphor wants them to do?
You're imagining some sort of accelerating virtuous circle here, where every complete rotation makes the next rotation faster.
In fact, adding a flywheel to a system does just the opposite: it stabilizes the rotational speed and increases the rotational inertia. It smooths out small deviations, so that the output shaft tends to keep rotating at the same speed even if there are deviations in the power pumped into it.
What adding a flywheel to a system will never do is to increase the speed of the system, or increase the acceleration of the rotation. Of course, you can also make a system with a flywheel accelerate, but it will accelerate despite the flywheel, not because of it.
I don't know what the right metaphor for a virtuous circle of accelerating rotation might be, but a flywheel ain't it.
This cracked me up quite a bit when I first read it, so thank you, but on a second read I can't tell whether Matt implies an accelerating cycle or just a self-perpetuating one. Considering how "momentum" is commonly used, however, it strikes me that the eliding of the distinction between motion and accelerating motion is par for course --- punditry is a pre-Newtonian world!
"I can't tell whether Matt implies an accelerating cycle or just a self-perpetuating one"
Well, he says, "falling costs and higher quality," so I think he wants acceleration.
"...punditry is a pre-Newtonian world..." -- Pre-Copernican, I'd say. The best of them think that the universe revolves around the earth; most of them think it revolves around punditry.
Maybe it’s a runaway train of price competition that results in ever increasing pressure on wages until the workers are so immiserated that it derails.
I think the right metaphor is superchargers in cars. The engine has to get up to a certain output before diverting some of its power to compress the input air with the supercharger is worth it.
My understanding is that Amazon loves the flywheel metaphor, and they like it for a reason that doesn't really apply here: they build out an individual line of business that has "flywheels" so they can stop investing in that line of business and move on to conquer new markets. Their idea is that the business keeps going on its own momentum while its headcount costs are reduced. It kind of fits the metaphor.
Thing is, as done by Amazon, the flywheel metaphor is perhaps a bit more accurate than they would hope: areas where Amazon has stopped investing have proven to become flea markets filled with knock-offs and scams.
My wife project-managed an affordable housing project which was essentially buying and renovating a mobile home park that was dilapidated.
It was insanely complicated because a whole bunch of the existing... I'm not sure what to call them. There are sort of modular pieces of business process that you apply to affordable housing. Ways to get money for certain kinds of activities, processes that apply to people you have to displace because they're units are unsafe and must be condemned, etc. They're like components of a piece of machinery, but they aren't real, they're business processes. And they're based on regulations.
A huge number of these standard business processes were regulatorily excluded from her project because they didn't apply to manufactured homes. They couldn't help the residents get the kind of loans they normally could, because those loans don't apply to manufactured housing. They had insane relocation costs because two laws interacted in ways probably nobody anticipated when it came to manufactured homes. Etc.
My wife was fond of saying when she did the project that nobody has ever done this kind of project before (she found it interesting trying to problem solve it without, as it were, the rails and guides). But my takeaway is that nobody is likely to do that kind of project again because of the headache. And none of it is "real." We could make all those problems go away just by cutting through some of the regulatory barriers.
Good post. I’m sorry if you addressed this in the article and I missed it but do manufactured homes appreciate in value over time like regular homes or do they lose value over time like cars? One argument I’ve heard against manufactured homes is that consumers view them as poor long term investments when compared to regular homes. Lots of home buyers take comfort in the fact that they can (barring another housing crisis) sell their homes at a price more than what they paid for originally and use the funds to pay for retirement whereas with a manufactured home there’s a bigger risk of losing money on it.
Your house per se depreciates in value over time, it does not appreciate (unless you have one of a very small number of architecturally valuable houses that are essentially art). Its depreciation is slow, it's a durable asset, but steady. People just don't notice that because their house is packaged up with their land.
If you have a mobile home on a lot you own, it will usually work the same way as a normal house. If you have a mobile home on a lot you rent, as is the case with trailer parks, you don't have the appreciating asset, just the depreciating one.
In Tokyo, where they have sane land use policies, lots of new construction, and housing prices have been flat, when someone buys a house they typically demolish it and rebuild to their taste. We have a different homeowner culture in the U.S., but it illustrates that there's no "real world" reason to think that a structure should appreciate in value. I live in a 100-year-old house and it's a pain in the ass because it feels like it needs constant maintenance; I"m sure most people would prefer to live in a house built using modern methods. If we stopped building or importing new cars, existing cars would start appreciating in value over time instead of depreciating, but that would be a perverse state of affairs.
That's an uncomfortable thing for YIMBYs to talk about because Mike G is right that homeownership is treated in the U.S. like a forced investment plan, so anything that messes with the mental model of homeownership as an "investment" is scary, but we really would be better off in a world where a house is a consumption good and not the ticket to a middle-class retirement.
Yeah, definitely. And there are real disadvantages to old structures in the US. For example, I had a house from the 40s that had frankly scary wiring.
I've never looked into it closely, but I assume a lot of what prevents people from demolishing and rebuilding houses in the US is regulation. Getting a permit to tear down a house is very hard in a lot of jurisdictions.
Yes, and you can’t always build to the dimensions of the demolished structure. Plus, as discussed in the post, the cost of construction is high in many parts of the country.
It could also be masked because people tend to do things like renovations and additions that counteract the structure’s depreciation. Structures depreciate if left alone but we don’t normally leave them alone.
I bought a double wide and the land it sat on, and made a killing when I had to sell it last fall to move. The property was eligible for FHA-backed loans. It was in a neighborhood full of fairly upscale if older manufactured homes that was zoned as such, though prices were still moderately low for the area. There were two companies that sold manufactured homes within a mile of the neighborhood, so it was a fairly common type of less-expensive housing.
I'd also point out that it is hard to disentangle the asset (house) from the land as they are a bundle. My guess (and its pure guesswork) is that the appreciation is almost all (or maybe more than all!) tied to the land. Since manufactured homes can easily be removed and you mostly rent a spot in a trailer park, the asset and the land are totally unbundled.
I haven’t seen this addressed here or in Matt’s piece but the big difference between most “mobile” homes and site-built homes is that “mobile” homes (no doubt due to some of the problematic regulation Matt cites) are generally in parks where they are on rented land rather than on a fee simple plot, so that even if one owns the house they don’t own the land under it and can be evicted when the park owner decides to sell the land. Of course if your home (which is not really mobile) can be evicted from its site it’s going to be worth a lot less.
Not quite. The way trailer parks work is that the landlord owns the dirt, and the 'tenants' own the trailers & move them on there themselves. The number of places where you can just park your trailer is pretty restricted by zoning codes/local town snobbery, so the more restricted it is, the more the landlord can charge for basically just renting dirt. People who own their own trailers tend to be a bit better off/more organized, an older crowd, lots of retirees, etc.
No one is just buying trailers and renting them. As I mentioned elsewhere, people who rent the trailers themselves are just the bottom of the barrel in terms of personal finance & personal lives, sorry. There's no way you could charge them enough to make up for the credit & damage risk. They could have a meth lab in there, etc.
I’m no expert, but it seems like this is a loophole exploited by slumlords which will make properly classifying mobile homes as real estate difficult. They’re making money by charging people ground rent for immobile homes. They push the cost of the house onto renters but then repossess the house if the renter can’t pay the ground the rent. They aren’t going to be happy if we fix the law to properly account for the homes as stationary. So it will take political will to defeat them.
It's not *that* different from how condos work. It's on a smaller scale so one person can often manage the finances, but shitty/corrupt condo boards exist too.
In England (and Wales, but not Scotland), flats have a freeholder who owns the land and the building and then you buy the flat, but not the overall structure, and then rent the structure. This is like a condo, but worse, and there's lots of "leasehold abuse" where the "ground rent" goes up and up and up and you end up paying both a mortgage and rent on the same home.
It really depends upon the quality of the construction. Cheap manufacture homes don’t last 30 years. Because of building codes, there aren’t many cheap, site built homes. Still, try selling a site built home with mold and a leaky roof and you won’t get much return.
Eh, this is not the best take. Matt leaves out one of the main points of Austin's piece, which is the transportation costs. If you build a home or parts of a home in factory, you have to then transport that to the customer site- I think we've all seen these huge flatbeds on the highway. This transportation mostly eats up any cost advantage. You can try to have a bunch of factories scattered all over the country to cut the transport down, but that gets mega-expensive, and there's still some transport. If you use a modular/assemble on site type of construction, you have to transport & house the construction crew to the site while they put it together. These kinds of costs just make the low end of housing financially impossible.
Austin has a quip about how every generation thinks they invented sex & modular housing for the first time.
I'm definitely open to this chassis deregulation thing, but in general I wouldn't look to manufactured housing as much of a solution. You can't pack them very close together because of the fire hazard, so you still get single family density. Trailers tend to age very poorly and become substandard housing for the very poor within a few decades (Matt you're in Maine, drive around some of the more rural parts for an afternoon and see!) Building small or modest stick-built homes onsite is probably a better solution for the rural low income
Vastly different labor cost structures, lower volumes of single-family house-building, more standardized local design codes, a shortage of skilled construction labor compared to the US, expensive legacy building processes, and a hefty dose of “this is how we want to do it”.
Nothing I’ve seen has convinced me that it’s a highly economical alternative to on-site timber frame construction, but most of Europe doesn’t have builders experienced in that, just brick-and-block, which is very expensive.
Some economy comes from the standardization. It's my impression that standardization is most appealing for smaller units, which is why prefab backyard cottages are popping up all around California.
I mean, if we’re talking about a studio pool cottage that literally just requires a concrete slab, a water line, an electrical hook-up, and a wastewater line, then probably.
Because I can do literally everything off-site and then drop it there in one piece, the shipping and permitting expenses will probably not eat all my cost savings.
Once I try to scale beyond the level of “small cottage”, the portion of tasks I can do off-site falls, and I very quickly cross a threshold where increased cost for logistics eats any savings in labor.
There is also an element of regulatory arbitrage here; in most jurisdictions, I don’t need licensed plumbers or electricians to install “standard systems” in a factory environment, but do need them to install “custom systems” on a site.
Getting more people into those trades to reduce the premium that those credentials bring would bring most of those benefits without having to reinvent the wheel.
I understand, yes. "Pool cottage" was an attempt to establish the rough size involved, not actually referring to a pool.
To sum up, there is a spectrum of prefabrication for single-family housing:
At one extreme, if I can build a complete enclosure and do all internal fit-out (plumbing, electrical, cabinetry, interior decor) in a factory environment, such that basically no further on-site assembly, fit out, or interior work is required, then prefabrication makes sense. The labor cost and time savings outweigh the additional costs of shipping and a crane on-site.
At the other extreme, we have the various "panelized" systems that we and others have discussed, where all I'm able to prefabricate is the structural system and a limited portion of weatherproofing. Extensive fitting and the installation of basically all non-structural systems is still required on-site.
In the US, these systems make no sense because they vastly increase required logistical support, without meaningfully impacting speed or labor inputs. American homebuilders can frame a custom house with a team of 5-6 in a week or less with minimal equipment. Their European counterparts can erect a panelized system in 2 days for the same house with a team of 5-6 and a crane operator. By the time you factor in the labor used off-site, I see no way for this to be economical if you're able to choose either option. Europe is not. It has few experienced timber-frame builders, which is why the latter is preferred.
There is a tipping point between the two where prefabrication stops making sense. That point, in the US, is much closer to the former (cottage) than the latter (custom single-family home).
I am definitely open to learning more about this. If it's such a good idea, why isn't being done all over the US? I do recommend reading the Austin Vernon piece that MY linked https://austinvernon.eth.link/blog/construction.html
The high-end/low-end change in Yglesias' post is one reason. Builders know how to build houses the way they build houses, and they don't want to change. Multifamily builders are just starting to experiment with modular building.
Very, very different market. Proportionally speaking, much more of the cost of construction is tied up in the actual structural system as opposed to site work or interior fit out. The higher the building, the more true that becomes.
A single mid-sized apartment building is sufficient to realize many of the benefits of mass production in either steel-and-timber or concrete-and-steel podium construction, or prefabricated concrete for the structural system.
Note that plumbing, interiors, and electrical are still “same old, same old” for these projects.
I worked on a policy study in 1984 assessing the merits of allowing manufactured housing subdivisions in unincorporated areas in Illinois that would be treated as real property. Quite the statement that people still kick the idea around without it having taken hold. If I recall one challenge was that if you separate the land purchase and home purchase, you had a higher interest burden on the purchaser. There was a lots of back and forth on whether housing built to the HUD code was inferior to local building codes. I believe one of the cost issues of modular housing is that it does have to meet the specific local building codes, which can vary by location, so it's harder to standardize. I don't see an inherent reason why you couldn't have parity in quality. I was taken on a tour of a MH factory in rural Indiana near Fort Wayne. The homes were literally built by Amish craftsmen. There was a large Amish community in that area and their population growth had driven farm prices up. In order to pay their loans on the farms, they would work either an early or late shift at the MH factory and then put in a day at their farm.
Agreed in full. This is a bad take that could have been avoided if Matt had consulted with any of the engineers among us before posting it.
Prefabrication in both steel and (especially) concrete is actually an excellent way to cut down on construction costs in mid-rise institutional and multi-unit housing projects. It’s come a long way from shabby Moscow apartments and exurban warehouse blocks.
But every single time someone promises to revolutionize the prefabricated housing market for single family homes, they fail catastrophically regardless of whether they are aiming at the low or high end of the market.
As you note, part of that is transportation cost. There are other big issues:
Site/geotech/foundation costs are around 20% of a typical project
Interior finish work is another 20%.
Permitting and compliance is another 10%.
Prefabrication off-site solves none of these.
To the extent that prefabrication lowers costs at all, those benefits can be gleaned by manufacturing framed panels off-site rather than shipping raw lumber, and the benefits would be marginal given US labor cost structures IMO.
If you want a GOOD take on this, it’s that regional governments should be focused on how to use public housing budgets to smooth the business cycle and build capital capacity among home builders. The US chronically underutilizes capital and site automation for both land development and heavy civil projects, because the boom and bust nature of both markets is a nightmare for construction contractors. Workers can be laid off when cashflow crunches loom; debt payments for capital cannot be deferred.
Thinking about this a bit more- I bet that there's a lot more deregulation that could be done at the 'build smaller houses onsite' end. The whole city permitting game seems to be a bit corrupt/kickbacky- I've heard lots of talk that local officials are much more likely to grant permits when using local/favored builders, and so on. Maybe issue county or state-level building permits to get around local permitting types?
I think the local/favored builders usually have an advantage not because of corruption per se, but because they're familiar with the byzantine rules and unspoken norms of a city. Allowing cities less local discretion would cure some of this. For example, in California, cities have to issue permits promptly to ADUs (this is widely disobeyed), and they have to use objective standards to allow/deny the projects, rather than using some discretionary standards that wouldn't be known to builders/architects that hadn't already built in that city.
Not by a tenth. The volume of bulk goods (lumber, siding, and insulation) to erect a single-story, 1200 sq ft house would take up a third of a flatbed, not a double wide, over-height load.
"Sears Modern Homes were catalog and kit houses sold primarily through mail order by Sears, Roebuck and Co., an American retailer. Sold primarily to customers in East Coast and Midwest states, Sears homes have been located as far south as Florida and as far west as California. Examples have also been found in Alaska and Canada.[1] Sears reported that more than 70,000 of these homes were sold in North America between 1908 and 1940.[2] More than 370 different home designs in a wide range of architectural styles and sizes were offered over the program's 34-year history."
I wasn't aware of this. I suppose the idea is not new, but like most things, it comes down to execution. And Amazon has done a good job executing their vision lately. Sears, not so much.
I fully support the idea of modular homes as an option to reduce housing costs, but Matt's post doesn't really discuss the biggest problem with the "mobile home park" model, which is that people only own the (rapidly-depreciating) building rather than the land underneath it. I've seen the marketing, and it's very predatory. They tell poor people, mostly seniors, that they can own their own home at a low, low cost that seems too good to be true, because it is. They're really just taking out something like a car loan for a house that will lose value, and then also paying rent on the land to the property owner. It's worse than normal renting, because at least with normal renting the landlord is responsible for maintenance on the house itself. In this case, you're stuck with an asset but don't own the land, so it's a bad deal.
As your token fly over country commenter, and closest to white trash reader. (I do have a lot of kids), this is a subject near and dear to my heart. I have many friends who live in Trailers.
I’ve been reading a lot about this subject lately. Mainly because I bought a small cabin with some land and I have been exploring putting up two more cabins or buildings on it.
Specifically I started looking at boxabl. They are foldable portable buildings. Apparently Elon Musk. They are building a huge factory in Las Vegas. Starting out with a 20x20 fully furnished building. Eventually they will have 20x30 and 20x40 buildings. They will also be sectional. So I can have a living room module. And a kitchen module.
Anyway. I have been researching all the requirements of manufactured vs mobile vs normal buildings. Especially regarding foundations.
I suspect that the rules will change in the future. I’m so confident that I am investing!
Now hold on there, pardner. You can't just claim the trophy without competing for it.
What are your bona fides?
Lots of kids? That won't do it, unless you think that Haredi diamond-cutters in mid-town Manhattan count as white trash.
Live away from the coasts? So do Chicago traders, Walmart heirs, and Oberlin professors.
Nope: you're going to have to do better.
Here's my bid: I and my five sibs grew up eating dog food because my mom was too poor to buy hamburger. I once had three non-functioning cars in my front yard, and when I got them all working again they were still not worth more than $500 a piece. Also, the time that I didn't have any cash to pay a toll over the river, so I gave the guy in the booth my cassette tape of Hank Williams.
I'm not saying I'm going to win this thing, but I'm not going to cede it to you that easy, either.
This isn't one of the worst ideas. In fact, the changes suggested here seem like a no-brainer. I don't hear anyone defending these regulations. On the other hand, changing these regulations also isn't likely to make a huge improvement, so nobody is motivated to spend a lot of time pushing for it either. But it's the job of public-minded legislators to pay attention to stuff like this and make continual small updates and improvements to the laws.
That's supposed to be a benefit of representative instead of direct democracy, that the representatives are people willing to spend the time on small, boring things like this so average citizens don't have to.
It's actually a terrible idea, along the lines of all his terrible ideas about housing. His one essential point is that we should permanently destroy any semblance of beauty and history in this country to address a temporary housing imbalance. I have no doubt that if we turned this country into one gigantic trailer park or infinitely tall tower housing costs would be driven to almost nothing because nobody would want to live here. So from that perspective, (and I understand it's a perspective shared by most people who subscribe to his substack), it's a good idea. But for anyone with any priority other than lower rents, it's a terrible idea.
How is it better to require prefabricated homes to have a permanent chassis, i.e., to be trailers, than repeal those regulations and allow prefabricated homes to be placed on permanent foundations like other homes?
It seems that would reduce the things people don't like about "trailer parks", not exacerbate them
I may have missed it, but did Matt account for how much less a manufactured home would be if it cost included the lot? It’s one thing to say that the land under a home in a trailer park is worth $2k, if the home was sited on a regular lot (probably larger) then would it cost that much less than a site-built house of similar size? I’ve seen quite a few obviously-manufactured homes on lots visible from I-95 in the Carolinas while driving through, I assume these are common enough in the Southeastern states (of course nowhere near any major urban area).
Unfortunately Matt didn't distinguish between manufactured homes and prefab homes. Manufactured homes (trailers) don't have to follow state building codes; they have their own building codes. Prefab/modular homes do have to follow state building codes; they're built in a factory to the same standards as a site built home. Manufactured homes are cheaper because they don't have to have some of the features that other homes do.
In California, some companies are doing prefab backyard cottages. They're cheaper, not a lot cheaper, mostly I think because of standardization. They're probably better built, though, because the workers get better doing the same thing and the project isn't exposed to the elements during construction.
I assume this is rhetorical, but if not, the whole point of the chassis requirement is to restrict the development of trailer parks. Matt is making suggestions to enable them to spread all over the place. His ultimate goal is to remove all restrictions on housing, as I'm sure you know, and this is just one of his many ideas.
A development of affordable prefabricated homes is not a trailer park, if the homes are not actually trailers. It's more like a Levittown, but without as many local construction jobs to build it.
But the name isn't what bothers me, it's the substance. I don't want trailer parks or Levittowns, I don't want historical neighborhoods or forests destroyed for these eyesores.
You start with a straw man, non sequitur it into another straw man, and finish with a straw man.
Impressive.
I'm in the construction industry and this seems like a bloody good idea to me. Let's start with one brief point: tastes change. Many young people would prefer to live in a multifamily home because it better aligns with their values.
Next, as Matt points out: this is not going to mean that modular homes and trailer parks will pop up in every neighborhood in America. Most rich people don't want to live in (or near) them, which means there will always be some differentiation between current single family neighborhoods and new ones. But tweaking regulation to increase productivity in construction, and increase the number of homes built, is a good idea.
I really don't care about that content free "straw man" accusation that people stuck on the wrong side of an issue always make. But it's been made several times here against me and I really don't think people understand what it means. I'm just arguing against what Matt has said repeatedly before about his housing policies. And I'm saying there are huge swathes of the country that are already developed that should be ripped down and redeveloped. And yet comment after comment make fake quotes from me usually saying "I want poor people to die so things can be pretty". I don't say anything like this, it's a ridiculously exaggerated parody of my preference for historic preservation, and yet somehow I'm the one with the straw man argument. Whatever.
If it makes ya feel better, there's a guy re-running for president in 2024 who will agree with every word of your comment.
(He's basically a criminal and already got impeached twice, though, so you might wanna re-think this view. It will soon be exclusively the province of MAGA. Matt sees that, to his credit.)
Trump's fortune was made by his father selling cheap crappy apartments all over New York, and trump mistakenly believes he is a genius at selling expensive crappy apartments. I think you're wildly off on guessing the Trump world's affection for historically significant architecture. And since being anti Trump seems to be what dictates your position on everything, welcome to my team!
You are precisely the person MY is addressing when he says upfront that regarding manufactured housing, it's not even about noise or traffic, it's just aesthetics. Your argument is worth 0. How can you possibly claim that your right to view neighborhoods you deem beautiful is worth more than the right of affordable housing to people who need it?
There's a pretty wide range of views between your "everything built before 1930 is automatically of architectural merit and anyone who can't afford to live where I've already bought property can go get fucked" and "let's pave it all over with 10 story brutalist apartment blocks in cities and modular houses in rural areas".
This is a bad take, not out of any kind of subjective beauty/architectural merit arguments, but because it solves nothing.
That you're right, for the wrong reasons, in this particular instance... absolutely does not absolve you of having far worse takes on basically every topic that's ever come up here.
You already own a house in a desirable area. As do I.
It's quite clear that, to you, "architectural preservation" is a fig leaf to justify 10% annual appreciation in local property values instead of 2-4%.
If you actually cared about beauty or understood our history, you would be forced to admit that there are wide swathes of every American city east of the Mississippi, and many others, that are the industrial era equivalent of tract homes with no residential architecture worth preserving. A key goal of housing policy in those cities should be to rebuild them in a way that allows both long-time residents and newcomers to enjoy them. That, by definition, requires them to be built more densely, not "flipped" at one-to-one.
We should not disingenuously claim that their shells have architectural merit and create policy on that basis. All that achieves is to ensure that no new houses are ever built, and to price out current residents and replace them wholesale with financially stretched young renters who need access to local economic opportunities.
Oh David how wrong you are across the board. First, there is no fig leaf involved. I care about architectural preservation passionately. I know some people here think that means I'm a racist, others think it means I want the poor to die. For my part I have lost a fortune on my house, it is unsaleable because nobody would be dumb enough to inherit the upkeep, and if I could get a fraction of my cost back at some point it would be a miracle, never mind this 2 or 4 or 10% appreciation. If you want more poor or Black people to live near me, go for it. But there are more direct ways, like make it a law that only poor people or Black people can buy houses from now on. I'm all for it! But they'd have to maintain them if they're architecturally significant so the government can raise taxes on rich people to pay for the maintenance. So you see, these are not practical ideas but I'm open to absolutely anything, no matter how financially destructive to me, to preserve things.
Second, about 1/4 of all my back and forth in this comment chain has been about tearing down all the mountains of ugly old housing developments, strip malls, underused office space rather than targeting historic neighborhoods or unspoiled countryside. I've said it at least six times, very clearly, and yet every single person ignores it. You're the first to not only ignore it but somehow believe that I want to preserve suburban sprawl, levittowns etc. I really don't think I can be any clearer. have at it, destroy it all, replace ugly with ugly, I really want that to happen. Is that still ambiguous? Let me know and I can stress it again until it becomes clear.
You know what? I'll take you at your word for the moment.
I agree, broadly, with the goal of preserving historical communities and works of architectural merit. I'm even probably willing to apply a broader brush in making those determinations than most people. But that still only accounts for perhaps a third of the housing stock in major metros, if I'm being very charitable.
Here's a thought to see if I can ever trust that you're acting in good faith:
Full disclosure: I own one of them. I've done some serious research; the thoroughfare in question was redeveloped in 1918, when this row of houses was built. They are entirely typical of mid-market construction at that time, with very basic architectural flourish in and outside. The cornices, for instance, are mass-manufactured, punch-patterned sheet metal, probably tin. There are tens or hundreds of thousands like them in the NE US.
The road is wide for Philadelphia and located immediately next to a major boulevard with trolley service; as such, both streets have been repeatedly singled out as potential upzoning candidates. It's walkable to a major commercial thoroughfare, upmarket leisure, and the museums and major park, and the trolley can get to the subway for quick access to sports venues and all the Broad St cultural amenities and employment hubs.
Is this worth preserving, or can it be torn down and redeveloped into something denser?
Investment property, for now. We bought it with an eye to maybe moving there down the line, but as of today it's in mediocre shape, just the single bathroom, basement unfinished, kitchen needs work, etc. We live on the western edge of the city just south of the Schuylkill, opposite East Falls.
Honest answer, I would love to have that preserved, but only as an entire neighborhood. And yes, I know they are all over the northeast, although each city has a slight variation that I find interesting. But, and it's a big but, the neighborhood is the asset here. As things are abandoned or burned down and replaced by gas stations or a corner store, they lose their architectural merit. But if it's a perfectly preserved neighborhood, I'd be against somebody ripping down one house and replacing it with something out of character. But a whole block or more redevelopment, I'm fine with that. Also, to my earlier point, there are vast areas of this country that are incredibly ugly and could only benefit from a redevelopment. I wish they'd be targeted first but I know it's not a perfect substitute for this sort of inner city development.
While I disagree... to be honest, even if you want to preserve most neighborhoods like this, that's still only 40% or so of Philadelphia's housing stock.
A large majority is either newer and less interesting, or in far, far worse condition than this area individually or as a neighborhood.
I have no objection to trying to repurpose an old mall as a mixed-size, mixed-income, mixed-use development. God knows that it'd be interesting to see them converted to apartments surrounding a public atrium, with private businesses renting restaurant and leisure space, and parking built over with rowhomes.
But there aren't really enough of them in viable locations for that to make a huge dent in the problem.
To sum up... "there are vast areas of this country that are incredibly ugly"
So, is there a housing crisis in the U.S., and if so how should we address it? This series of comments makes it seem that you're just flatly opposed to building new housing.
No, there isn't a housing crisis, but I agree costs are high in some areas. It's a temporary phenomenon, happens all the time, and I don't think should be addressed with permanently destructive moves. Fortunately, population is stabilizing, work from home is picking up, online shopping continues to eat into brick and mortar retailing. All these things will solve the problem over time without permanent destruction. But it also leaves ample available already despoiled space for new housing. Much of America is taken up by miles and miles of strip malls, motels and fast food chains. I'm all for swapping ugly for ugly. But Matt insists on his glass towers taking down Beacon Hill or Georgetown. And we don't need new suburban sprawl, which is what this prefab housing push would generate.
I don't think it makes sense to call a phenomenon temporary when, aside from 2008-2012, it's been a steady upward much-faster-than-inflation trend in all the major US coastal cities for the past ~20 years (2.5 times longer than the average length of time someone owns a given home).
Also, I've lived in Beacon Hill, in an apartment on Louisberg Square, catty-corner from John Kerry's home. It's a terrible place to live as a renter, because no landlord has any incentive to maintain or fix or improve anything, because they know they can get top dollar no matter what. Plus, the rats (indoors and out) tend to detract from the beauty; I've never had that problem anywhere else I've lived, in the Boston area or otherwise.
This is just the sort of high-progressive-ideals-meets-brass-tacks brilliance that I love and expect from Matt. Seriously, who else does it better? I find his argument completely convincing and I'll probably agree with this position until I die.
Does this mean we'd get an American adaptation for Trailer Park Boys?
My suspicion is that the "trailer trash" stereotype would lead to a lot more NIMBYism against permitting trailers vs. other types of cheap housing, though I suppose that in a lot of communities, the number of apartments/duplexes that ends up being built is zero so maybe the point is moot. But you do need a lot more land for a trailer than you would for other multi-family buildings... not sure how this plays out exactly in places with housing scarcity. Are you going to have trailer parks in places like Palo Alto or Paramus?
So you do get a lot of stuff right. And other stuff you just don't know about. Wondering why construction productivity goes down? Well son get on a construction job. And the question you want to ask as a construction worker/supervisor/union agent is what's next when this job is done? Nothing booked when this job is done? Well let's slow this puppy down. I have never seen that not happen on major construction projects.
Now on to modular housing. The first thing you have to do is lose the idea that it is in any way inferior. It isn't. Not only are such structures built in clean well lit environmentally controlled factories they are also built to a much higher level of precision and use more and better fastening systems than site built construction. The need is obvious which is that they have to travel over sometimes crappy roads with potholes. They have to get where they are going intact. While still meeting the same building codes as any site built structure.
I am not the least bit surprised that anti-housing laws have been formalized. But thirty years ago the main barrier were local building codes designed to protect local construction trades from competition. Unless the factory is in your town it was considered the enemy. The rules you have laid out are dangerously stupid and risk the lives of their inhabitants. You can lag bolt 'mobile homes' directly to the slab and remove the undercarriage. Which can be reused for transport. Not allowing or insisting such structures be bolted to slab puts their residents lives in danger when storms with high winds like hurricanes or tornadoes arrive. That is the issue I would use to fight this particular stupidity.
A huge part of this dynamic is the perception that modular or prefabricated homes do not hold their value as well. Which returns to the housing-as-necessity vs home-ownership-as-investment dichotomy that drives so very much of this-- I'm considering buying a home; but because I know that's where a substantial portion of my money is going to go, I'm not even remotely considering a prefabricated home.
Modular and prefabricated homes are not the same as manufactured homes. Prefabs/modulars are built to the local building code. Manufactured homes are not.
Regulatory capture across the country is a huge impediment to improving people's lives. Matt highlights one area in this post (essay?, blog?, I never know how to describe a substack writing), but it extends into almost every part of our lives. Licensing rules for everything from hairdressers to car dealerships to real estate brokers inhibit competition and act as a hidden tax on consumers while protecting entrenched interests.
President Biden's recent executive orders are a good step, but they are limited in scope. The battle against these silly regulations - is it really necessary to require 2,000 hours of training to be a barber? - happens primarily at the state level. This should be an area where conservatives and progressives come together - more competition, enabling a pathway for lower-income people to improve their lives and a shrinking the regulatory state. Entrenched interests, though, have captured so many of the licensing bodies, it will take dedicated people working the details. I'd love to know how to find and support anyone who is working in this area.
I agree that there's an excess of regulation. But the tendency to regulate is not driven only by cartels and incumbents. It is also driven by what happens in the absence of regulation: scammers, incompetents, and horror stories.
True, when someone pretends to be a plumber and screws up your pipes, the damage is not as severe as when someone pretends to be a cardiologist. But it can be bad enough to create a lot of news stories and irate voters. When you deregulate, there will be abuses: you can count on it.
So, while I agree that the pendulum has swung too far towards regulation in many areas, I also think that unregulated caveat emptor is a bad system as well, which will bring calls for regulation in its wake.
Deregulate slowly, incrementally, carefully, watching the effects as you go. Seems like the Chestertonian approach, no?
I think the point was about regulation of activities other than skilled trades like plumbing (or cardiology). Licensing requirements are often ridiculous and harmful to consumers as well as actual and potential workers.
"...skilled trades like plumbing (or cardiology)..."
That may seem like a bright line, but it isn't. Good barbers are skilled; good nail salon workers are skilled. Many people would say that plumbers are more like barbers than like cardiologists. The line between skilled and unskilled is not uncontroversial; if there is a line at all, then it takes skill to find it.
So there's no simple response of saying, "sure, the skilled trades should be regulated, but not the unskilled ones."
"...when someone pretends to be a plumber and screws up your pipes, the damage is not as severe as when someone pretends to be a cardiologist."
"Many people would say that plumbers are more like barbers than like cardiologists."
Cardiologists are concerned with pumps ("hearts") and pipes ("blood vessels"); they just happen to be our favorite pumps and pipes. They are the plumbers of the medical world. (Orthopedists are the carpenters.)
It’s not a bright line but there is a line IMO. A bad haircut isn’t equivalent to a flood, and I don’t think it’s very likely that a bad haircut or manicure would include flesh wounds. The concept of 10th Amendment-related health, safety, and welfare as a justification for regulation has been overstretched to great harm, including very much in my own profession of land use planning.
Well, I did have a barber draw blood once. But I came here to make roughly the same point: the justification for licensing isn't the level of skill involved in a profession, it's the harm that follows a lack of skill. A bad cardiologist can get you killed. A bad lawyer can land you in jail when you didn't do it. A bad barber took a little skin off my neck once, but that really seems like about a 7-sigma event, and I survived. A bad nail salon worker seems even less likely to cause significant harm.
And if the barber hadn't disinfected their equipment, that nick could have given you hepatitis.
Thanks, I like your framing of this point better than mine!
spoken like someone who has never or almost never had a manicure or especially pedicure. the work can verge on podiatry. look up callous shavers sometime. they’re, oh, marginally less dangerous than straight razors. and even incompetent cuticle trimming can lead to infections and potentially serious sequelae. some techniques involve UV burn risk. overall i would put it on par with or quite likely a bit more dangerous than barbers.
… okay, but is it overregulated? hell yeah! the solution for callous shavers being kinda dangerous is not to outlaw callous shaving during a pedicure! it absolutely belongs in this discussion. just, don’t lump nail salon work in with or make it the poster child example of Low Skilled Benign Bullshit that would be fine if it were completely unregulated.
I've thought about this a bit and I suspect where most people would draw the line is if the professional/tradesperson's negligence is likely to seriously impact your life/health, your freedom, or your wealth/property. Like, if a doctor screws up, you either die or are in pain. A lawyer screws up, and you may end up in jail or losing a lot of money. A plumber screws up, and you stand a good chance of paying a massive repair bill. A barber screws up, and...I dunno. If you're unlucky, your bad haircut *might* cost you a job if you just happen to have an interview immediately afterward with an employer who cares about these things, or if you're *really* unlucky maybe they nick you with the same razor as they nicked someone with HepC and now you have it too, but most likely you just look like crap for a few days/weeks.
with lawyers screwing up, the effects really depend upon the case. screw up a traffic ticket and your client gets points that maybe he shouldn’t have. screw up a murder where the client was obviously guilty and there are zero consequences because the client would have gotten life even with a great lawyer. screw up a divorce without children, and the consequences will be a small or moderate fraction of your clients’s net worth. i like handling misdemeanors because they aren’t stressful. got a client out of jail between slow boring posts this morning and earned a $3k fee in about 4 hours total work. that case actually took erudition and politesse and i feel like i earned the $750 an hour. but pleading out a dui client who was visibly drunk is only semi skilled work, it’s not worth any more than carpentry.
I'm a lawyer myself, so I know how vast the differences are within the profession. The issue is that the law license that lets you take on DWIs, childless divorces, and piddling small-claims cases is the same one as lets you take on contested murders, removal actions, and multi-million-dollar contract and tort claims. And the value of stuff can vary; I spend a lot of time prosecuting fairly small claims (amounting in the thousands or tens of thousands) that aren't huge as an absolute proportion of my client's revenues (which amount in the hundreds of millions)...but because my client is the City of Philadelphia, these small cases are valuable even individually because this is the public's money. (I am the Philadelphia equivalent of the tax police MY keeps talking about funding.)
The HepC thing to me is an argument to minimal barber regulation, more similar to a food handlers card than what currently exists. Food handlers cards don’t seem to be an issue for American restaurants.
Yeah, that's about the right level there. Honestly, I suspect most people think that's about the level of certification needed, not hours and hours of training on how to style hair "correctly."
The best haircuts I ever had were when I was studying abroad in Egypt. The barber was a guy who had no licensing or training (those not being required) and actually cut hair as a side-gig to supplement his income from a white-collar job at the university admissions office that paid way too little. (I talked to him a little about his background, since we took the same microbus to campus every morning.) (Admittedly, the quality of the cut for me is mostly because the guy was used to working with my Arab/Middle Eastern hair, which is a somewhat unusual texture for most American barbers.) The only thing that worried me was hygiene, but he kept all his tools in cleaner or under UV (as applicable) and always used a new blade for his razor for each customer. Still, a formal certification of *that* would've eased my mind a bit further.
It seems like the time since regulations are enacted is an important dimension here. You might get a regulation through because of a few scams or bad actors and a moment of public outrage, but over time people will stop paying attention and incumbents can capture the rule for their own advantage. The question is less about wether or not you can have a good regulations but instead if you can keep regulations from having unintended consequences in the long run. For my money its probably important to stir the pot every now and then (get new regulations, bust up old and tired out ones) to keep incumbents from capturing system.
I agree that a sunset is a good idea when regulations are necessary; I do wonder how much capture would still be an issue since, as you rightly note, the public tends to not pay a lot of attention.
start with things like hair dressers where the cost of screwing up is almost nil
The following video clip argues that the cost of hair dressers' screwing up is not nil. It also argues that the cost is less than some people think. I find both arguments powerfully convincing!
https://www.youtube.com/watch?v=q97iIDx-b7U
My pet idea: let social workers who take a couple courses in family law and civil procedure handle low asset divorces. Most family law is distorted by attorneys fees. Few separating people with kids can pay me $300 an hour, and none of them want to pay for my understanding of constitutional history and federal jurisdiction.
"...none of them want to pay for my understanding of constitutional history and federal jurisdiction."
I got the same problem. I blame it on the over-regulated lawyering business, which won't let me charge money for my understanding of constitutional history and federal jurisdiction without jumping through all sorts of bullshit hoops like law school, passing the bar, CE courses, and got knows what else.
Instead, I'm stuck giving it all away for free on SlowBoring.
So I am a licensed lawyer I don’t practice anymore. But low end divorces are hard taking family law isn’t enough, criminal complaints come up all the time. People will saw whatever they need to stop the spouse from seeing their kid. And if the divorce isn’t nasty like then you don’t need any lawyer. Also, immigration issues come up
In those cases as well. And people trying to avoid paying a baby moma will comment fraud to hid a job etc. it is a lot of work across 4-5 practice areas. And the pay sucks do I am a teacher now.
My understanding is that a similar dynamic exists between doctors and nurses. The latter, I believe, are perfectly well qualified to directly provide a lot of medical care, but they are prevented from doing so in many jurisdictions by doctors’ groups.
I think it was Dickens who said that all professions are conspiracies against the laity.
"I think it was Dickens who said that all professions are conspiracies against the laity."
'People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick, or in some contrivance to raise prices.'
But that quote's not Dickens; it's from that filthy communist, Adam Smith.
most radiology work could be offshored to india. medicare regulations and other laws prevent it. and radiologists make bank
Some radiology work could be outsourced to AI.
If I had to guess, I'd say this is one area where my own political tribe, liberals, are likely a bit more problematic in terms of impeding reform, than folks on the right. Mind you I think their concerns -- elevating the wage floor -- aren't frivolous. But nonetheless, it's abundantly clear excessive occupational licensing requirements hurt both workers and consumers.
Yes! How can we get this going if it isn’t already happening?
Overregulation is just a tough nut to crack. Whether you're adding or cutting regulations, the people most invested in any given regulation are interested parties, and so either adding or cutting can lead to unfair outcomes that (usually) benefit incumbents.
I have mixed thoughts on deregulation as a whole, but I certainly agree with things like barbers or other aesthetic professions. If the harm from a bad experience is minimal, it is very easy to just try someone new the next time. A bad pedicure, haircut, or massage seems pretty easy to shake off and move in. Bad plumbers/electricians are a bit more questionable but perhaps some deregulation is reasonable.
Some jobs are safety-critical and people should be required to have a safety certification. Doctors, plumbers, electricians, anyone using dangerous chemicals (exterminators, some of the bleaches and dyes used on hair, etc.) are all obvious examples.
For others, where the question is skill that isn't easy to determine in advance (if it's easy to tell whether someone is good or not, then caveat emptor is fine), then creating a narrow antitrust exemption (if needed) for private certification schemes, which would allow the market to segment as it chooses (e.g. separate certifications for styling black and white hair could form) and no legal requirement to possess a certification at all.
Lawyers are harder, as you do need to be admitted to practice before a specific court (for good reasons, the court needs to be able to sanction people and not to be filled with uneducated timewasters). For non-litigators, the risks of a bad contract can only be mitigated by mandatory negligence insurance, at which point the insurers are going to require a certification anyway, so restructuring seems remarkably pointless.
I write the newsletter Construction Physics, which is what Austin based most of his post on, and have written about this issue a lot.
First, a bit of a clarification. Manufactured homes are homes that don't meet local building codes, but instead meet the HUD code for manufactured homes (which, among other things, requires the permanent chassis). But there's nothing stopping anyone from building a home in a factory that meets local building codes, and putting it up on a normal site just like a normal house. The reason this isn't more popular is that it tends to be more expensive than traditional construction.
The main issue preventing returns to scale in home construction is shipping and logistics. Homes are so big that to prefabricate them you have to either break them into panels (adding a lot of upfront complexity and still having significant site work) or ship them as large modules that require carefully planned routes, follow cars, large cranes to set, etc. The result is that you tend to see prefabricated homes (and other buildings) shipped relatively short distances, generally less than 500 miles. This fundamentally limits how big a market you can serve and what sort of scale you can achieve.
Even manufactured homes don't really get around this. Clayton has something like 17 factories around the country to deliver a relatively small number of homes (in the neighborhood of 50,000).
Many, many companies have tried and failed to overcome this, Katerra (a 2B-dollar prefab construction startup that just went bankrupt) being the latest.
Also, I think Matt is overstating the importance of high land cost. The vast majority of population growth (and thus new construction) occurs in the south and the southwest, places where the land cost is very low and the cost of a new house often approaches the cost of construction. You actually see a fairly strong correlation between cost of construction and population growth, but NOT any correlation between home cost with the price of land and population growth. So lowering the cost of construction would have fairly enormous effects if you could figure out how to do it.
For manufactured homes, I think the larger issue than zoning is the way they're financed. These are almost never financed as real estate, but as personal property. So the loans for them have higher interest rates, and they don't maintain their value over time the way a traditional home does. But there's a new type of manufactured home called a "CrossMod" that's advertised as built like a manufactured home but financed like a traditional home - we'll see how that does.
California recently allowed backyard cottages in every back yard. Some builders are offering prefab cottages: they build them in a factory and drop them in your backyard with a crane. They're cheaper, but mostly because they're standardized I think.
abodu.com
Yea I've been wondering about this, sort of tempted but my backyard is preeeetty small unfortunately
Finding an, eg, 12' x 28' spot for a small abodu, isn't always easy, and not everyone has a garage to convert into a JADU. But for those who can find a spot and want an ADU, the new laws have been great.
"The vast majority of population growth (and thus new construction) occurs in the south and the southwest, places where the land cost is very low and the cost of a new house often approaches the cost of construction."
What's the direction of cause and effect there? I know lots of people who have moved south *because* costs of living are lower, and the only people I know who have moved into more expensive cities have done so because they have to for work, or because they're willing to pay more to be near family and friends who are already there.
The biggest driver of low end housing costs is the illiquidity of poor people and the transactions costs of rent default.
When I was a public defender in Hall County, I was up for an adventure and I looked at a few single wides in the country. The rent wasn’t much cheaper than the ($815/month in 2005) apartment I ended up leasing. The difference is rent was due weekly rather than monthly and the deposit was only one week’s rent. You could move in for $375, but it still cost $675 a month to rent a trailer that cost ~$32k new and was on a quarter acre of rural land that might have been worth $2k. The annual rent was 24% of the cost of the trailer and land.
Decreasing the cost of that single wide by 15% would not have decreased the rent by anywhere near 15%, because much of the rent covered the landlord’s risk in renting to people with spotty credit and evicting them if they didn’t pay and fixing the place up if it got trashed.
This problem extends further up the market. In my exurb (Peachtree City, GA) a 815 sf apartment goes for about $1550 a month, plus utilities. At a discount rate of 6%, that implies a value of $310k per unit. Conversely, you can buy a 2100 square foot home for $370k. Obviously, the apartments are cheaper to build per square foot than houses because they are built on top of each other, share walls, share plumbing and utilities and use less land. Yet houses sell for $176 a square foot while apartments rent for the equivalent of $380 a square foot.
Cheap construction does not mean low payments.
Thanks for bringing facts. That's interesting both about how exploitative the trailer-rental market is, and also why the risks for owners go some way towards justifying the exploitation.
Cheaper construction won't change the rental system much. But could that plus the change to mortgage regulations turn some renters into owners?
Then you might have some portion of those low-end renters succeed in becoming owners outright after four or five years.
That’s absolutely correct. If the federal government offered mortgages at 2% for trailers, the payments would be minimal, eg $200 a month for a double wide. With payments that low, I think the risk of default wouldn’t be too great, certainly less than it is on unsecured loans for shitty, fir-profit colleges.
There could also be low interest loans to turn apartments into condos.
The trailers you can’t get a loan for are the ones you rent in a trailer park. I was able to get a low-down payment loan on a early 90s double wide because I also bought the land.
"... the risk of default wouldn’t be too great..."
Suppose that half of them default. Bad, but you might accept that cost for the benefit of turning half of the former renters into owners.
I mean, for the target population, that increase in wealth and reduction in ongoing expenses would be huge -- not just life-changing but legacy-changing as it affected their kids.
And, sure, these units are never going to sky-rocket in value. Resale value may not create millionaires. But not paying rent is a huge improvement in finances.
if someone misses a few $200 payments and then gets a job, they could get current pretty quickly. additionally, stable housing helps create more stable workers.
"...stable housing helps create more stable workers."
Absolutely. The equestrian paradigm.
It's not 'exploitative'. People who rent trailers are generally the absolute bottom tier of credit & personal finance, and have volatile personal lives. The landlords are probably not even earning enough return to take on the credit risk of renting to that type of person, I doubt it makes any financial sense. Evictions take time, and you certainly can't sue the person for whatever rent they didn't pay or damage they did- they don't have any assets
"It's not 'exploitative'...landlords are probably not even earning enough return to take on the credit risk...."
Meh. Every exploiter has a story. Every pay-day loan shark will tell you about the risks that they are taking, and why it justifies usurious interest rates. Every slave owner talked about the ingratitude of their property.
I agree that trailer-park owners face some risks. That does not show that they are not engaged in exploitation. Are the tenants being exploited? Then the owners are probably engaged in exploitation.
Where is the 6% discount rate coming from? High for a mortgage (consumer perspective) low for real estate investment ROI (producer perspective)?
i intentionally split the difference. Of course a corporate investor can borrow at 4 or 5%, so the return to equity and be over 6% even if the return on capital is only 6%. change the discount rate to 5% or 7% and the point stands.
"When factories are running at capacity, unit costs are lower. When demand is sufficient to open more factories, shipping costs fall. So you can have a flywheel of falling costs and higher quality."
It's generally pointless to rail against idioms, and this one may be too entrenched to eradicate, but may I point out that actual flywheels do not do anything like what your metaphor wants them to do?
You're imagining some sort of accelerating virtuous circle here, where every complete rotation makes the next rotation faster.
In fact, adding a flywheel to a system does just the opposite: it stabilizes the rotational speed and increases the rotational inertia. It smooths out small deviations, so that the output shaft tends to keep rotating at the same speed even if there are deviations in the power pumped into it.
What adding a flywheel to a system will never do is to increase the speed of the system, or increase the acceleration of the rotation. Of course, you can also make a system with a flywheel accelerate, but it will accelerate despite the flywheel, not because of it.
I don't know what the right metaphor for a virtuous circle of accelerating rotation might be, but a flywheel ain't it.
This cracked me up quite a bit when I first read it, so thank you, but on a second read I can't tell whether Matt implies an accelerating cycle or just a self-perpetuating one. Considering how "momentum" is commonly used, however, it strikes me that the eliding of the distinction between motion and accelerating motion is par for course --- punditry is a pre-Newtonian world!
"I can't tell whether Matt implies an accelerating cycle or just a self-perpetuating one"
Well, he says, "falling costs and higher quality," so I think he wants acceleration.
"...punditry is a pre-Newtonian world..." -- Pre-Copernican, I'd say. The best of them think that the universe revolves around the earth; most of them think it revolves around punditry.
Maybe it’s a runaway train of price competition that results in ever increasing pressure on wages until the workers are so immiserated that it derails.
I love this comment from a guy with treadmill in his name!!!!
Not a metaphor, but the phrase that seems most apt here is "economies of scale".
For something more figurative, "snowball effect" seems to fit better than flywheel.
I think the right metaphor is superchargers in cars. The engine has to get up to a certain output before diverting some of its power to compress the input air with the supercharger is worth it.
Perhaps?: "... a spiral of falling costs and higher quality."
My understanding is that Amazon loves the flywheel metaphor, and they like it for a reason that doesn't really apply here: they build out an individual line of business that has "flywheels" so they can stop investing in that line of business and move on to conquer new markets. Their idea is that the business keeps going on its own momentum while its headcount costs are reduced. It kind of fits the metaphor.
Thing is, as done by Amazon, the flywheel metaphor is perhaps a bit more accurate than they would hope: areas where Amazon has stopped investing have proven to become flea markets filled with knock-offs and scams.
My wife project-managed an affordable housing project which was essentially buying and renovating a mobile home park that was dilapidated.
It was insanely complicated because a whole bunch of the existing... I'm not sure what to call them. There are sort of modular pieces of business process that you apply to affordable housing. Ways to get money for certain kinds of activities, processes that apply to people you have to displace because they're units are unsafe and must be condemned, etc. They're like components of a piece of machinery, but they aren't real, they're business processes. And they're based on regulations.
A huge number of these standard business processes were regulatorily excluded from her project because they didn't apply to manufactured homes. They couldn't help the residents get the kind of loans they normally could, because those loans don't apply to manufactured housing. They had insane relocation costs because two laws interacted in ways probably nobody anticipated when it came to manufactured homes. Etc.
My wife was fond of saying when she did the project that nobody has ever done this kind of project before (she found it interesting trying to problem solve it without, as it were, the rails and guides). But my takeaway is that nobody is likely to do that kind of project again because of the headache. And none of it is "real." We could make all those problems go away just by cutting through some of the regulatory barriers.
Another job for a (probably nonexistent) politician seeking to establish some street credentials as a sleeves rolled up problem solver
Good post. I’m sorry if you addressed this in the article and I missed it but do manufactured homes appreciate in value over time like regular homes or do they lose value over time like cars? One argument I’ve heard against manufactured homes is that consumers view them as poor long term investments when compared to regular homes. Lots of home buyers take comfort in the fact that they can (barring another housing crisis) sell their homes at a price more than what they paid for originally and use the funds to pay for retirement whereas with a manufactured home there’s a bigger risk of losing money on it.
Your house per se depreciates in value over time, it does not appreciate (unless you have one of a very small number of architecturally valuable houses that are essentially art). Its depreciation is slow, it's a durable asset, but steady. People just don't notice that because their house is packaged up with their land.
If you have a mobile home on a lot you own, it will usually work the same way as a normal house. If you have a mobile home on a lot you rent, as is the case with trailer parks, you don't have the appreciating asset, just the depreciating one.
In Tokyo, where they have sane land use policies, lots of new construction, and housing prices have been flat, when someone buys a house they typically demolish it and rebuild to their taste. We have a different homeowner culture in the U.S., but it illustrates that there's no "real world" reason to think that a structure should appreciate in value. I live in a 100-year-old house and it's a pain in the ass because it feels like it needs constant maintenance; I"m sure most people would prefer to live in a house built using modern methods. If we stopped building or importing new cars, existing cars would start appreciating in value over time instead of depreciating, but that would be a perverse state of affairs.
That's an uncomfortable thing for YIMBYs to talk about because Mike G is right that homeownership is treated in the U.S. like a forced investment plan, so anything that messes with the mental model of homeownership as an "investment" is scary, but we really would be better off in a world where a house is a consumption good and not the ticket to a middle-class retirement.
Yeah, definitely. And there are real disadvantages to old structures in the US. For example, I had a house from the 40s that had frankly scary wiring.
I've never looked into it closely, but I assume a lot of what prevents people from demolishing and rebuilding houses in the US is regulation. Getting a permit to tear down a house is very hard in a lot of jurisdictions.
Yes, and you can’t always build to the dimensions of the demolished structure. Plus, as discussed in the post, the cost of construction is high in many parts of the country.
Sorry, I missed in copy and paste the summary sentence here, which is:
Land appreciates. Structures depreciate.
It could also be masked because people tend to do things like renovations and additions that counteract the structure’s depreciation. Structures depreciate if left alone but we don’t normally leave them alone.
I bought a double wide and the land it sat on, and made a killing when I had to sell it last fall to move. The property was eligible for FHA-backed loans. It was in a neighborhood full of fairly upscale if older manufactured homes that was zoned as such, though prices were still moderately low for the area. There were two companies that sold manufactured homes within a mile of the neighborhood, so it was a fairly common type of less-expensive housing.
I'd also point out that it is hard to disentangle the asset (house) from the land as they are a bundle. My guess (and its pure guesswork) is that the appreciation is almost all (or maybe more than all!) tied to the land. Since manufactured homes can easily be removed and you mostly rent a spot in a trailer park, the asset and the land are totally unbundled.
I haven’t seen this addressed here or in Matt’s piece but the big difference between most “mobile” homes and site-built homes is that “mobile” homes (no doubt due to some of the problematic regulation Matt cites) are generally in parks where they are on rented land rather than on a fee simple plot, so that even if one owns the house they don’t own the land under it and can be evicted when the park owner decides to sell the land. Of course if your home (which is not really mobile) can be evicted from its site it’s going to be worth a lot less.
That’s not true of mobile homes that are rented out. The landlord buys a couple acres and plunks down 8-12 trailers.
Not quite. The way trailer parks work is that the landlord owns the dirt, and the 'tenants' own the trailers & move them on there themselves. The number of places where you can just park your trailer is pretty restricted by zoning codes/local town snobbery, so the more restricted it is, the more the landlord can charge for basically just renting dirt. People who own their own trailers tend to be a bit better off/more organized, an older crowd, lots of retirees, etc.
No one is just buying trailers and renting them. As I mentioned elsewhere, people who rent the trailers themselves are just the bottom of the barrel in terms of personal finance & personal lives, sorry. There's no way you could charge them enough to make up for the credit & damage risk. They could have a meth lab in there, etc.
I’m no expert, but it seems like this is a loophole exploited by slumlords which will make properly classifying mobile homes as real estate difficult. They’re making money by charging people ground rent for immobile homes. They push the cost of the house onto renters but then repossess the house if the renter can’t pay the ground the rent. They aren’t going to be happy if we fix the law to properly account for the homes as stationary. So it will take political will to defeat them.
It's not *that* different from how condos work. It's on a smaller scale so one person can often manage the finances, but shitty/corrupt condo boards exist too.
In England (and Wales, but not Scotland), flats have a freeholder who owns the land and the building and then you buy the flat, but not the overall structure, and then rent the structure. This is like a condo, but worse, and there's lots of "leasehold abuse" where the "ground rent" goes up and up and up and you end up paying both a mortgage and rent on the same home.
It really depends upon the quality of the construction. Cheap manufacture homes don’t last 30 years. Because of building codes, there aren’t many cheap, site built homes. Still, try selling a site built home with mold and a leaky roof and you won’t get much return.
Eh, this is not the best take. Matt leaves out one of the main points of Austin's piece, which is the transportation costs. If you build a home or parts of a home in factory, you have to then transport that to the customer site- I think we've all seen these huge flatbeds on the highway. This transportation mostly eats up any cost advantage. You can try to have a bunch of factories scattered all over the country to cut the transport down, but that gets mega-expensive, and there's still some transport. If you use a modular/assemble on site type of construction, you have to transport & house the construction crew to the site while they put it together. These kinds of costs just make the low end of housing financially impossible.
Austin has a quip about how every generation thinks they invented sex & modular housing for the first time.
I'm definitely open to this chassis deregulation thing, but in general I wouldn't look to manufactured housing as much of a solution. You can't pack them very close together because of the fire hazard, so you still get single family density. Trailers tend to age very poorly and become substandard housing for the very poor within a few decades (Matt you're in Maine, drive around some of the more rural parts for an afternoon and see!) Building small or modest stick-built homes onsite is probably a better solution for the rural low income
If prefab/modular is such a bad idea, why are they doing it all over Europe?
Vastly different labor cost structures, lower volumes of single-family house-building, more standardized local design codes, a shortage of skilled construction labor compared to the US, expensive legacy building processes, and a hefty dose of “this is how we want to do it”.
Nothing I’ve seen has convinced me that it’s a highly economical alternative to on-site timber frame construction, but most of Europe doesn’t have builders experienced in that, just brick-and-block, which is very expensive.
Some economy comes from the standardization. It's my impression that standardization is most appealing for smaller units, which is why prefab backyard cottages are popping up all around California.
I mean, if we’re talking about a studio pool cottage that literally just requires a concrete slab, a water line, an electrical hook-up, and a wastewater line, then probably.
Because I can do literally everything off-site and then drop it there in one piece, the shipping and permitting expenses will probably not eat all my cost savings.
Once I try to scale beyond the level of “small cottage”, the portion of tasks I can do off-site falls, and I very quickly cross a threshold where increased cost for logistics eats any savings in labor.
There is also an element of regulatory arbitrage here; in most jurisdictions, I don’t need licensed plumbers or electricians to install “standard systems” in a factory environment, but do need them to install “custom systems” on a site.
Getting more people into those trades to reduce the premium that those credentials bring would bring most of those benefits without having to reinvent the wheel.
I'm talking an in-law unit that someone can live in.
I understand, yes. "Pool cottage" was an attempt to establish the rough size involved, not actually referring to a pool.
To sum up, there is a spectrum of prefabrication for single-family housing:
At one extreme, if I can build a complete enclosure and do all internal fit-out (plumbing, electrical, cabinetry, interior decor) in a factory environment, such that basically no further on-site assembly, fit out, or interior work is required, then prefabrication makes sense. The labor cost and time savings outweigh the additional costs of shipping and a crane on-site.
At the other extreme, we have the various "panelized" systems that we and others have discussed, where all I'm able to prefabricate is the structural system and a limited portion of weatherproofing. Extensive fitting and the installation of basically all non-structural systems is still required on-site.
In the US, these systems make no sense because they vastly increase required logistical support, without meaningfully impacting speed or labor inputs. American homebuilders can frame a custom house with a team of 5-6 in a week or less with minimal equipment. Their European counterparts can erect a panelized system in 2 days for the same house with a team of 5-6 and a crane operator. By the time you factor in the labor used off-site, I see no way for this to be economical if you're able to choose either option. Europe is not. It has few experienced timber-frame builders, which is why the latter is preferred.
There is a tipping point between the two where prefabrication stops making sense. That point, in the US, is much closer to the former (cottage) than the latter (custom single-family home).
I am definitely open to learning more about this. If it's such a good idea, why isn't being done all over the US? I do recommend reading the Austin Vernon piece that MY linked https://austinvernon.eth.link/blog/construction.html
The high-end/low-end change in Yglesias' post is one reason. Builders know how to build houses the way they build houses, and they don't want to change. Multifamily builders are just starting to experiment with modular building.
Very, very different market. Proportionally speaking, much more of the cost of construction is tied up in the actual structural system as opposed to site work or interior fit out. The higher the building, the more true that becomes.
A single mid-sized apartment building is sufficient to realize many of the benefits of mass production in either steel-and-timber or concrete-and-steel podium construction, or prefabricated concrete for the structural system.
Note that plumbing, interiors, and electrical are still “same old, same old” for these projects.
I worked on a policy study in 1984 assessing the merits of allowing manufactured housing subdivisions in unincorporated areas in Illinois that would be treated as real property. Quite the statement that people still kick the idea around without it having taken hold. If I recall one challenge was that if you separate the land purchase and home purchase, you had a higher interest burden on the purchaser. There was a lots of back and forth on whether housing built to the HUD code was inferior to local building codes. I believe one of the cost issues of modular housing is that it does have to meet the specific local building codes, which can vary by location, so it's harder to standardize. I don't see an inherent reason why you couldn't have parity in quality. I was taken on a tour of a MH factory in rural Indiana near Fort Wayne. The homes were literally built by Amish craftsmen. There was a large Amish community in that area and their population growth had driven farm prices up. In order to pay their loans on the farms, they would work either an early or late shift at the MH factory and then put in a day at their farm.
Agreed in full. This is a bad take that could have been avoided if Matt had consulted with any of the engineers among us before posting it.
Prefabrication in both steel and (especially) concrete is actually an excellent way to cut down on construction costs in mid-rise institutional and multi-unit housing projects. It’s come a long way from shabby Moscow apartments and exurban warehouse blocks.
But every single time someone promises to revolutionize the prefabricated housing market for single family homes, they fail catastrophically regardless of whether they are aiming at the low or high end of the market.
As you note, part of that is transportation cost. There are other big issues:
Site/geotech/foundation costs are around 20% of a typical project
Interior finish work is another 20%.
Permitting and compliance is another 10%.
Prefabrication off-site solves none of these.
To the extent that prefabrication lowers costs at all, those benefits can be gleaned by manufacturing framed panels off-site rather than shipping raw lumber, and the benefits would be marginal given US labor cost structures IMO.
If you want a GOOD take on this, it’s that regional governments should be focused on how to use public housing budgets to smooth the business cycle and build capital capacity among home builders. The US chronically underutilizes capital and site automation for both land development and heavy civil projects, because the boom and bust nature of both markets is a nightmare for construction contractors. Workers can be laid off when cashflow crunches loom; debt payments for capital cannot be deferred.
Thinking about this a bit more- I bet that there's a lot more deregulation that could be done at the 'build smaller houses onsite' end. The whole city permitting game seems to be a bit corrupt/kickbacky- I've heard lots of talk that local officials are much more likely to grant permits when using local/favored builders, and so on. Maybe issue county or state-level building permits to get around local permitting types?
I think the local/favored builders usually have an advantage not because of corruption per se, but because they're familiar with the byzantine rules and unspoken norms of a city. Allowing cities less local discretion would cure some of this. For example, in California, cities have to issue permits promptly to ADUs (this is widely disobeyed), and they have to use objective standards to allow/deny the projects, rather than using some discretionary standards that wouldn't be known to builders/architects that hadn't already built in that city.
The components also have to be transported for site built homes. The shape is slightly easier to handle, but it still takes a lot of truck capacity
EDIT: typo
Not by a tenth. The volume of bulk goods (lumber, siding, and insulation) to erect a single-story, 1200 sq ft house would take up a third of a flatbed, not a double wide, over-height load.
The shape is much, much easier to handle- they're just prefabbed beams, not a (by definition) entire home. I'm familiar with construction logistics
I can't wait to buy my next home from Amazon. Seriously. High end, modular, and high value.
All that's old is new again:
"Sears Modern Homes were catalog and kit houses sold primarily through mail order by Sears, Roebuck and Co., an American retailer. Sold primarily to customers in East Coast and Midwest states, Sears homes have been located as far south as Florida and as far west as California. Examples have also been found in Alaska and Canada.[1] Sears reported that more than 70,000 of these homes were sold in North America between 1908 and 1940.[2] More than 370 different home designs in a wide range of architectural styles and sizes were offered over the program's 34-year history."
https://en.wikipedia.org/wiki/Sears_Modern_Homes
And now many of those Sears kit homes are historically protected in the DC area!
Sounds more like an IKEA Wudhäus than an AmazonBasics product, but you could probably get it fulfilled by Amazon.
I wasn't aware of this. I suppose the idea is not new, but like most things, it comes down to execution. And Amazon has done a good job executing their vision lately. Sears, not so much.
I'm not so sure. What address do I put for the RMA?
Trailers, swift!!
I fully support the idea of modular homes as an option to reduce housing costs, but Matt's post doesn't really discuss the biggest problem with the "mobile home park" model, which is that people only own the (rapidly-depreciating) building rather than the land underneath it. I've seen the marketing, and it's very predatory. They tell poor people, mostly seniors, that they can own their own home at a low, low cost that seems too good to be true, because it is. They're really just taking out something like a car loan for a house that will lose value, and then also paying rent on the land to the property owner. It's worse than normal renting, because at least with normal renting the landlord is responsible for maintenance on the house itself. In this case, you're stuck with an asset but don't own the land, so it's a bad deal.
As your token fly over country commenter, and closest to white trash reader. (I do have a lot of kids), this is a subject near and dear to my heart. I have many friends who live in Trailers.
I’ve been reading a lot about this subject lately. Mainly because I bought a small cabin with some land and I have been exploring putting up two more cabins or buildings on it.
Specifically I started looking at boxabl. They are foldable portable buildings. Apparently Elon Musk. They are building a huge factory in Las Vegas. Starting out with a 20x20 fully furnished building. Eventually they will have 20x30 and 20x40 buildings. They will also be sectional. So I can have a living room module. And a kitchen module.
Anyway. I have been researching all the requirements of manufactured vs mobile vs normal buildings. Especially regarding foundations.
I suspect that the rules will change in the future. I’m so confident that I am investing!
"...and closest to white trash reader..."
Now hold on there, pardner. You can't just claim the trophy without competing for it.
What are your bona fides?
Lots of kids? That won't do it, unless you think that Haredi diamond-cutters in mid-town Manhattan count as white trash.
Live away from the coasts? So do Chicago traders, Walmart heirs, and Oberlin professors.
Nope: you're going to have to do better.
Here's my bid: I and my five sibs grew up eating dog food because my mom was too poor to buy hamburger. I once had three non-functioning cars in my front yard, and when I got them all working again they were still not worth more than $500 a piece. Also, the time that I didn't have any cash to pay a toll over the river, so I gave the guy in the booth my cassette tape of Hank Williams.
I'm not saying I'm going to win this thing, but I'm not going to cede it to you that easy, either.
Potential tiebreaker - did you have a working TV on top of a nonworking TV?
Two TVs? Nobody I knew had two TVs. We had a black and white set that could get two channels, or three if we made the kid sister hold the rabbit-ears.
The amount of work Matt puts into uncovering the very worst housing ideas is commendable.
This isn't one of the worst ideas. In fact, the changes suggested here seem like a no-brainer. I don't hear anyone defending these regulations. On the other hand, changing these regulations also isn't likely to make a huge improvement, so nobody is motivated to spend a lot of time pushing for it either. But it's the job of public-minded legislators to pay attention to stuff like this and make continual small updates and improvements to the laws.
That's supposed to be a benefit of representative instead of direct democracy, that the representatives are people willing to spend the time on small, boring things like this so average citizens don't have to.
It's actually a terrible idea, along the lines of all his terrible ideas about housing. His one essential point is that we should permanently destroy any semblance of beauty and history in this country to address a temporary housing imbalance. I have no doubt that if we turned this country into one gigantic trailer park or infinitely tall tower housing costs would be driven to almost nothing because nobody would want to live here. So from that perspective, (and I understand it's a perspective shared by most people who subscribe to his substack), it's a good idea. But for anyone with any priority other than lower rents, it's a terrible idea.
How is it better to require prefabricated homes to have a permanent chassis, i.e., to be trailers, than repeal those regulations and allow prefabricated homes to be placed on permanent foundations like other homes?
It seems that would reduce the things people don't like about "trailer parks", not exacerbate them
I may have missed it, but did Matt account for how much less a manufactured home would be if it cost included the lot? It’s one thing to say that the land under a home in a trailer park is worth $2k, if the home was sited on a regular lot (probably larger) then would it cost that much less than a site-built house of similar size? I’ve seen quite a few obviously-manufactured homes on lots visible from I-95 in the Carolinas while driving through, I assume these are common enough in the Southeastern states (of course nowhere near any major urban area).
Unfortunately Matt didn't distinguish between manufactured homes and prefab homes. Manufactured homes (trailers) don't have to follow state building codes; they have their own building codes. Prefab/modular homes do have to follow state building codes; they're built in a factory to the same standards as a site built home. Manufactured homes are cheaper because they don't have to have some of the features that other homes do.
In California, some companies are doing prefab backyard cottages. They're cheaper, not a lot cheaper, mostly I think because of standardization. They're probably better built, though, because the workers get better doing the same thing and the project isn't exposed to the elements during construction.
I assume this is rhetorical, but if not, the whole point of the chassis requirement is to restrict the development of trailer parks. Matt is making suggestions to enable them to spread all over the place. His ultimate goal is to remove all restrictions on housing, as I'm sure you know, and this is just one of his many ideas.
A development of affordable prefabricated homes is not a trailer park, if the homes are not actually trailers. It's more like a Levittown, but without as many local construction jobs to build it.
But the name isn't what bothers me, it's the substance. I don't want trailer parks or Levittowns, I don't want historical neighborhoods or forests destroyed for these eyesores.
"We should ban cheap (but safe) housing because it's yucky," is not a convincing argument to me.
I am fully aware that this is not my crowd, so I'm ok with losing your support (even if you're opposing something I didn't say).
You start with a straw man, non sequitur it into another straw man, and finish with a straw man.
Impressive.
I'm in the construction industry and this seems like a bloody good idea to me. Let's start with one brief point: tastes change. Many young people would prefer to live in a multifamily home because it better aligns with their values.
Next, as Matt points out: this is not going to mean that modular homes and trailer parks will pop up in every neighborhood in America. Most rich people don't want to live in (or near) them, which means there will always be some differentiation between current single family neighborhoods and new ones. But tweaking regulation to increase productivity in construction, and increase the number of homes built, is a good idea.
Thank you.
You bring straw man argumentation to new and ever-more impressive heights. Well-payed!
I really don't care about that content free "straw man" accusation that people stuck on the wrong side of an issue always make. But it's been made several times here against me and I really don't think people understand what it means. I'm just arguing against what Matt has said repeatedly before about his housing policies. And I'm saying there are huge swathes of the country that are already developed that should be ripped down and redeveloped. And yet comment after comment make fake quotes from me usually saying "I want poor people to die so things can be pretty". I don't say anything like this, it's a ridiculously exaggerated parody of my preference for historic preservation, and yet somehow I'm the one with the straw man argument. Whatever.
If it makes ya feel better, there's a guy re-running for president in 2024 who will agree with every word of your comment.
(He's basically a criminal and already got impeached twice, though, so you might wanna re-think this view. It will soon be exclusively the province of MAGA. Matt sees that, to his credit.)
Trump's fortune was made by his father selling cheap crappy apartments all over New York, and trump mistakenly believes he is a genius at selling expensive crappy apartments. I think you're wildly off on guessing the Trump world's affection for historically significant architecture. And since being anti Trump seems to be what dictates your position on everything, welcome to my team!
Yay team!! :D
But seriously, Trump has no affection for anything but his own money, power, and impunity. As such, he'll say whatever needs to be said to regain it.
He gave us a taste of that in the 2020 campaign. To be clear, this isn't an "architectural" argument so much as another form of culture war, but the effect is the same. https://www.nytimes.com/2020/07/29/us/politics/trump-suburbs-housing-white-voters.html
You are precisely the person MY is addressing when he says upfront that regarding manufactured housing, it's not even about noise or traffic, it's just aesthetics. Your argument is worth 0. How can you possibly claim that your right to view neighborhoods you deem beautiful is worth more than the right of affordable housing to people who need it?
I dunno, I guess it's just being a normal person that let's me make normal statements. You should try it sometimes.
Nothing 'temporary' about our housing imbalance folks.
There's a pretty wide range of views between your "everything built before 1930 is automatically of architectural merit and anyone who can't afford to live where I've already bought property can go get fucked" and "let's pave it all over with 10 story brutalist apartment blocks in cities and modular houses in rural areas".
This is a bad take, not out of any kind of subjective beauty/architectural merit arguments, but because it solves nothing.
That you're right, for the wrong reasons, in this particular instance... absolutely does not absolve you of having far worse takes on basically every topic that's ever come up here.
You already own a house in a desirable area. As do I.
It's quite clear that, to you, "architectural preservation" is a fig leaf to justify 10% annual appreciation in local property values instead of 2-4%.
If you actually cared about beauty or understood our history, you would be forced to admit that there are wide swathes of every American city east of the Mississippi, and many others, that are the industrial era equivalent of tract homes with no residential architecture worth preserving. A key goal of housing policy in those cities should be to rebuild them in a way that allows both long-time residents and newcomers to enjoy them. That, by definition, requires them to be built more densely, not "flipped" at one-to-one.
We should not disingenuously claim that their shells have architectural merit and create policy on that basis. All that achieves is to ensure that no new houses are ever built, and to price out current residents and replace them wholesale with financially stretched young renters who need access to local economic opportunities.
Oh David how wrong you are across the board. First, there is no fig leaf involved. I care about architectural preservation passionately. I know some people here think that means I'm a racist, others think it means I want the poor to die. For my part I have lost a fortune on my house, it is unsaleable because nobody would be dumb enough to inherit the upkeep, and if I could get a fraction of my cost back at some point it would be a miracle, never mind this 2 or 4 or 10% appreciation. If you want more poor or Black people to live near me, go for it. But there are more direct ways, like make it a law that only poor people or Black people can buy houses from now on. I'm all for it! But they'd have to maintain them if they're architecturally significant so the government can raise taxes on rich people to pay for the maintenance. So you see, these are not practical ideas but I'm open to absolutely anything, no matter how financially destructive to me, to preserve things.
Second, about 1/4 of all my back and forth in this comment chain has been about tearing down all the mountains of ugly old housing developments, strip malls, underused office space rather than targeting historic neighborhoods or unspoiled countryside. I've said it at least six times, very clearly, and yet every single person ignores it. You're the first to not only ignore it but somehow believe that I want to preserve suburban sprawl, levittowns etc. I really don't think I can be any clearer. have at it, destroy it all, replace ugly with ugly, I really want that to happen. Is that still ambiguous? Let me know and I can stress it again until it becomes clear.
You know what? I'll take you at your word for the moment.
I agree, broadly, with the goal of preserving historical communities and works of architectural merit. I'm even probably willing to apply a broader brush in making those determinations than most people. But that still only accounts for perhaps a third of the housing stock in major metros, if I'm being very charitable.
Here's a thought to see if I can ever trust that you're acting in good faith:
https://www.google.com/maps/@39.9728907,-75.1810731,3a,75y,50.45h,97.37t/data=!3m6!1e1!3m4!1stHuYiaFpwZlxu8U6by_MqQ!2e0!7i16384!8i8192
Full disclosure: I own one of them. I've done some serious research; the thoroughfare in question was redeveloped in 1918, when this row of houses was built. They are entirely typical of mid-market construction at that time, with very basic architectural flourish in and outside. The cornices, for instance, are mass-manufactured, punch-patterned sheet metal, probably tin. There are tens or hundreds of thousands like them in the NE US.
The road is wide for Philadelphia and located immediately next to a major boulevard with trolley service; as such, both streets have been repeatedly singled out as potential upzoning candidates. It's walkable to a major commercial thoroughfare, upmarket leisure, and the museums and major park, and the trolley can get to the subway for quick access to sports venues and all the Broad St cultural amenities and employment hubs.
Is this worth preserving, or can it be torn down and redeveloped into something denser?
Wait, we're neighbors? (Broadly speaking. I live about a mile and a half away from that block.)
Investment property, for now. We bought it with an eye to maybe moving there down the line, but as of today it's in mediocre shape, just the single bathroom, basement unfinished, kitchen needs work, etc. We live on the western edge of the city just south of the Schuylkill, opposite East Falls.
Honest answer, I would love to have that preserved, but only as an entire neighborhood. And yes, I know they are all over the northeast, although each city has a slight variation that I find interesting. But, and it's a big but, the neighborhood is the asset here. As things are abandoned or burned down and replaced by gas stations or a corner store, they lose their architectural merit. But if it's a perfectly preserved neighborhood, I'd be against somebody ripping down one house and replacing it with something out of character. But a whole block or more redevelopment, I'm fine with that. Also, to my earlier point, there are vast areas of this country that are incredibly ugly and could only benefit from a redevelopment. I wish they'd be targeted first but I know it's not a perfect substitute for this sort of inner city development.
While I disagree... to be honest, even if you want to preserve most neighborhoods like this, that's still only 40% or so of Philadelphia's housing stock.
A large majority is either newer and less interesting, or in far, far worse condition than this area individually or as a neighborhood.
So the debate here is really quite academic, because I easily clear more than enough land area in Philly, Boston, or NY to facilitate denser, transit-oriented development without touching things like this: https://www.google.com/maps/@39.9483591,-75.1757668,3a,60y,123.83h,103.67t/data=!3m6!1e1!3m4!1shY6_zjkoJhvoc2zE-y0u1w!2e0!7i16384!8i8192
I have no objection to trying to repurpose an old mall as a mixed-size, mixed-income, mixed-use development. God knows that it'd be interesting to see them converted to apartments surrounding a public atrium, with private businesses renting restaurant and leisure space, and parking built over with rowhomes.
But there aren't really enough of them in viable locations for that to make a huge dent in the problem.
To sum up... "there are vast areas of this country that are incredibly ugly"
Yes, and lots of them are in major cities.
So, is there a housing crisis in the U.S., and if so how should we address it? This series of comments makes it seem that you're just flatly opposed to building new housing.
We have a crisis in the places where people (currently) seem interested in living. There are plenty of houses in other parts of the country.
No, there isn't a housing crisis, but I agree costs are high in some areas. It's a temporary phenomenon, happens all the time, and I don't think should be addressed with permanently destructive moves. Fortunately, population is stabilizing, work from home is picking up, online shopping continues to eat into brick and mortar retailing. All these things will solve the problem over time without permanent destruction. But it also leaves ample available already despoiled space for new housing. Much of America is taken up by miles and miles of strip malls, motels and fast food chains. I'm all for swapping ugly for ugly. But Matt insists on his glass towers taking down Beacon Hill or Georgetown. And we don't need new suburban sprawl, which is what this prefab housing push would generate.
I don't think it makes sense to call a phenomenon temporary when, aside from 2008-2012, it's been a steady upward much-faster-than-inflation trend in all the major US coastal cities for the past ~20 years (2.5 times longer than the average length of time someone owns a given home).
Also, I've lived in Beacon Hill, in an apartment on Louisberg Square, catty-corner from John Kerry's home. It's a terrible place to live as a renter, because no landlord has any incentive to maintain or fix or improve anything, because they know they can get top dollar no matter what. Plus, the rats (indoors and out) tend to detract from the beauty; I've never had that problem anywhere else I've lived, in the Boston area or otherwise.
This is just the sort of high-progressive-ideals-meets-brass-tacks brilliance that I love and expect from Matt. Seriously, who else does it better? I find his argument completely convincing and I'll probably agree with this position until I die.
Does this mean we'd get an American adaptation for Trailer Park Boys?
My suspicion is that the "trailer trash" stereotype would lead to a lot more NIMBYism against permitting trailers vs. other types of cheap housing, though I suppose that in a lot of communities, the number of apartments/duplexes that ends up being built is zero so maybe the point is moot. But you do need a lot more land for a trailer than you would for other multi-family buildings... not sure how this plays out exactly in places with housing scarcity. Are you going to have trailer parks in places like Palo Alto or Paramus?
"...Palo Alto or Paramus?"
I thought today's pitch was,
"Enough about urban housing issues, today let's talk about non-urban housing issues."
There is a trailer park in Palo Alto. I used to live near it.
Me too. I grew up down the street from there. It's not in great shape -- I was surprised to see it still exists.
Do they still have that awful trailer park on the Stanford campus?
I don't know. The trailer park I'm thinking of is: https://www.google.com/maps/place/Buena+Vista+Mobile+Home+Park/@37.4151046,-122.1294727,15z/data=!4m12!1m6!3m5!1s0x0:0x63706db85775548!2sBuena+Vista+Mobile+Home+Park!8m2!3d37.4151046!4d-122.1294727!3m4!1s0x0:0x63706db85775548!8m2!3d37.4151046!4d-122.1294727
So you do get a lot of stuff right. And other stuff you just don't know about. Wondering why construction productivity goes down? Well son get on a construction job. And the question you want to ask as a construction worker/supervisor/union agent is what's next when this job is done? Nothing booked when this job is done? Well let's slow this puppy down. I have never seen that not happen on major construction projects.
Now on to modular housing. The first thing you have to do is lose the idea that it is in any way inferior. It isn't. Not only are such structures built in clean well lit environmentally controlled factories they are also built to a much higher level of precision and use more and better fastening systems than site built construction. The need is obvious which is that they have to travel over sometimes crappy roads with potholes. They have to get where they are going intact. While still meeting the same building codes as any site built structure.
I am not the least bit surprised that anti-housing laws have been formalized. But thirty years ago the main barrier were local building codes designed to protect local construction trades from competition. Unless the factory is in your town it was considered the enemy. The rules you have laid out are dangerously stupid and risk the lives of their inhabitants. You can lag bolt 'mobile homes' directly to the slab and remove the undercarriage. Which can be reused for transport. Not allowing or insisting such structures be bolted to slab puts their residents lives in danger when storms with high winds like hurricanes or tornadoes arrive. That is the issue I would use to fight this particular stupidity.
A huge part of this dynamic is the perception that modular or prefabricated homes do not hold their value as well. Which returns to the housing-as-necessity vs home-ownership-as-investment dichotomy that drives so very much of this-- I'm considering buying a home; but because I know that's where a substantial portion of my money is going to go, I'm not even remotely considering a prefabricated home.
Modular and prefabricated homes are not the same as manufactured homes. Prefabs/modulars are built to the local building code. Manufactured homes are not.