I'm wondering if "first movers" (big developers, private equity) move into these growth areas, build like crazy, and then lobby/socially engineer to prevent further development, giving them an unnatural monopoly.
This would fit with the general state of our current oligarchs, who are extractive rather than additive.
Sorry for the frankness, but I suspect that your impression of the "general state of our current oligarchs" is influenced by your inclination to create plausible sounding explanations which confirm that and which have absolutely no relationship to anything that is actually happening.
Given wealth disparity has been increasing over the past 100 years so that the top 1% now owns about 1/3 of all assets, I think my observation about the state of our current oligarchs is correct.
I’m not going to debate the historical wealth numbers here. That’s not what the newsletter is about. But the process you imagined happening in housing is definitely not a description of what happens in housing.
I guess, but from a quick search it looks like my wild ass guess was more on the money than not.
This https://www.niskanencenter.org/faster_fairer/liberating_the_captured_economy.html makes a good observation (in the "housing" section) that a big driver of housing scarcity is regulatory capture. There's quite a few other articles/papers on this. There's also many on private equity purchasing larger and larger portions of the housing market.
So it appears I was wrong on the "first mover" portion, but essentially correct on the "unnatural monopoly" portion and "parasitic" observation. "Monopoly" isn't the best descriptor, I admit. "Oligopoly" would have been closer.
Also, on this: "There's also many on private equity purchasing larger and larger portions of the housing market."
Those firms are trying to buy new homes. Take a look at who is trying to pass bills to stop them from BUILDING NEW HOMES. I doubt you'll find any corporate support for any of those bills. Those bills are introduced by people with anti-corporate conspiracy theories.
There is nothing in the link about corporate interests doing what you imagined. From the link.
“ the strong bias of homeowners against new construction nearby – because of concerns over the disruptions of construction, increased congestion, and effects on neighborhood amenities and property values – is the primary political force in opposition to new housing, and its formidable muscle all too often carries the day. ”
Not specifically, but there's plenty at these links related to private equity share of "homes" (better described as rental units). Many of these come from left-biased publications, but occasionally they get things correct (after all, Marx identified many problems, even though his solution was worse).
There's probably hundreds of articles like these, from what I can see.
Part of the problem, as I see it, is these favored private equity entities get more favorable terms by way of being "in the club", allowing them to lever up and purchase more and more properties with the intent to seek rents. Unless they have to deal with the same price of money as the average homeowner, this will continue until something breaks.
Unless institutional money is prevented from flowing into anything but actually physically productive assets (goods or services), they will continue to parasitize until the host expires, or purges.
Again: Regarding the problem (scarce/unaffordable housing), It's just one part of several.
Is there any particular reason not to use other metrics for agglomeration - for example population growth (NYC grew by about 1.5mln people from 1994 to 2018 - metro area almost by 4mln) or number of job positions? Permits doesn't feel like a natural measure of agglomeration.
I'll post a population chart in a follow-up post, but over long periods of time, housing, population, and jobs all correlate pretty strongly, by necessity.
There are minor deviations, like, in a housing-deprived city, there will be more overcrowding, or more extreme commuting, or outmigration by families. But, those can only create so much deviation. And, in general, housing permits provides a better picture of the situation than jobs or population do, because those deviations are driven by the housing problem.
I think the tension in the x variable is that it is housing permits per capita, which captures population growth by construction. The more standard measures such as absolute population change, should capture the agglomeration story better (or lack of). Regarding the productivity thesis: if I understand correctly, you're arguing agglomeration does not provide any productivity increases, and thus the observed income growth are driven by another factor (selection?). The pressure on this point is the question why are firms locally willing to pay higher incomes, given they should be able to offer lower incomes for the same productivity in other areas. Firms should be agnostic to housing costs if there's no productivity benefit.
"I’m not saying that cities aren’t productive. I’m saying where productive cities actually grow, everyone benefits (even people outside those cities). The gains are shared. Where productive cities don’t grow, gains go to parasitical land owners and are canceled out."
One thing to keep in mind is that much of this is compositional. Cities create productive jobs with higher pay. Much of what keeps average incomes moderate is that other workers move in who work in non-tradable sectors, etc.
If San Francisco approved another 2 million homes, they would mostly be filled with school teachers, yoga instructors, etc., Not that many extra software developers. The lack of housing today causes the teachers to move away but the software developers are still there. They're just living in worse housing than they would prefer.
I’ve done figure 2 using UK data. It’s checks out https://ibb.co/Pzbmy6C
I'm wondering if "first movers" (big developers, private equity) move into these growth areas, build like crazy, and then lobby/socially engineer to prevent further development, giving them an unnatural monopoly.
This would fit with the general state of our current oligarchs, who are extractive rather than additive.
Sorry for the frankness, but I suspect that your impression of the "general state of our current oligarchs" is influenced by your inclination to create plausible sounding explanations which confirm that and which have absolutely no relationship to anything that is actually happening.
Given wealth disparity has been increasing over the past 100 years so that the top 1% now owns about 1/3 of all assets, I think my observation about the state of our current oligarchs is correct.
Perhaps you have some evidence to the contrary?
I’m not going to debate the historical wealth numbers here. That’s not what the newsletter is about. But the process you imagined happening in housing is definitely not a description of what happens in housing.
I guess, but from a quick search it looks like my wild ass guess was more on the money than not.
This https://www.niskanencenter.org/faster_fairer/liberating_the_captured_economy.html makes a good observation (in the "housing" section) that a big driver of housing scarcity is regulatory capture. There's quite a few other articles/papers on this. There's also many on private equity purchasing larger and larger portions of the housing market.
So it appears I was wrong on the "first mover" portion, but essentially correct on the "unnatural monopoly" portion and "parasitic" observation. "Monopoly" isn't the best descriptor, I admit. "Oligopoly" would have been closer.
Also, on this: "There's also many on private equity purchasing larger and larger portions of the housing market."
Those firms are trying to buy new homes. Take a look at who is trying to pass bills to stop them from BUILDING NEW HOMES. I doubt you'll find any corporate support for any of those bills. Those bills are introduced by people with anti-corporate conspiracy theories.
I'll bet most aren't building them to sell them, they're building them to rent them.
There is nothing in the link about corporate interests doing what you imagined. From the link.
“ the strong bias of homeowners against new construction nearby – because of concerns over the disruptions of construction, increased congestion, and effects on neighborhood amenities and property values – is the primary political force in opposition to new housing, and its formidable muscle all too often carries the day. ”
Not specifically, but there's plenty at these links related to private equity share of "homes" (better described as rental units). Many of these come from left-biased publications, but occasionally they get things correct (after all, Marx identified many problems, even though his solution was worse).
https://www.propublica.org/article/when-private-equity-becomes-your-landlord
https://www.theguardian.com/us-news/2021/jun/22/blackstone-6bn-deal-homes
https://www.cnbc.com/2023/02/21/how-wall-street-bought-single-family-homes-and-put-them-up-for-rent.html
There's probably hundreds of articles like these, from what I can see.
Part of the problem, as I see it, is these favored private equity entities get more favorable terms by way of being "in the club", allowing them to lever up and purchase more and more properties with the intent to seek rents. Unless they have to deal with the same price of money as the average homeowner, this will continue until something breaks.
Unless institutional money is prevented from flowing into anything but actually physically productive assets (goods or services), they will continue to parasitize until the host expires, or purges.
Again: Regarding the problem (scarce/unaffordable housing), It's just one part of several.
If I'm wrong here, please show me where.
Is there any particular reason not to use other metrics for agglomeration - for example population growth (NYC grew by about 1.5mln people from 1994 to 2018 - metro area almost by 4mln) or number of job positions? Permits doesn't feel like a natural measure of agglomeration.
I'll post a population chart in a follow-up post, but over long periods of time, housing, population, and jobs all correlate pretty strongly, by necessity.
There are minor deviations, like, in a housing-deprived city, there will be more overcrowding, or more extreme commuting, or outmigration by families. But, those can only create so much deviation. And, in general, housing permits provides a better picture of the situation than jobs or population do, because those deviations are driven by the housing problem.
I think the tension in the x variable is that it is housing permits per capita, which captures population growth by construction. The more standard measures such as absolute population change, should capture the agglomeration story better (or lack of). Regarding the productivity thesis: if I understand correctly, you're arguing agglomeration does not provide any productivity increases, and thus the observed income growth are driven by another factor (selection?). The pressure on this point is the question why are firms locally willing to pay higher incomes, given they should be able to offer lower incomes for the same productivity in other areas. Firms should be agnostic to housing costs if there's no productivity benefit.
"I’m not saying that cities aren’t productive. I’m saying where productive cities actually grow, everyone benefits (even people outside those cities). The gains are shared. Where productive cities don’t grow, gains go to parasitical land owners and are canceled out."
One thing to keep in mind is that much of this is compositional. Cities create productive jobs with higher pay. Much of what keeps average incomes moderate is that other workers move in who work in non-tradable sectors, etc.
If San Francisco approved another 2 million homes, they would mostly be filled with school teachers, yoga instructors, etc., Not that many extra software developers. The lack of housing today causes the teachers to move away but the software developers are still there. They're just living in worse housing than they would prefer.
I like the emphasis on how nimbyism has led to millions of the poorest residents being displaced. This is not usually emphasized enough.
It would be interesting to see the permits broken out into types of units or even a measurement of dispersal of units.
The response required a chart, so I posted another follow-up post.