I think this idea that there are two economies resonates. Also the idea that Florida and Arizona weren’t overheating so much as just growing twice (their own internal growth plus a large share of the growth that wanted to happen in LA and NYC spilling over) is compelling.
I think we may have a general problem of excess centralization - the federal government manages the US as a single economy and relies too much on aggregate data, we have few tools to try and respond to state or regional level problems.
All of this connects to the sense that there are two Americas that increasingly don’t relate to each other or understand each other. And your description of “closed access cities” is spot-on. The world inside the closed access cities is quite different than the world outside. So people from the two sides of that boundary end up just talking past each other.
> When the Fed looked at the aggregate US economy, they just saw an economy that was running a bit hot. But, the inflationary places weren’t the growing places. So, how do you apply monetary policy to that?
> In 2005, real growth in Florida and Arizona was 6% and 7%! Effectively, the Fed had to slow down real growth! And, what was driving that growth? Families regionally migrating to reduce rent inflation.
Why wouldn't the Fed look at per capita real growth? Given the in-migration, per capita real growth in Florida and Arizona was probably a lot lower than 6% and 7%?
They look at per capita growth at the national level, but I haven't seen any indication that they were or are aware of the swings in migration that were caused by constrained housing supply during the time. They considered construction to be overheated. When construction cooled in Florida and Arizona, they considered it a correction. I'm not sure they did any analysis regarding how the whipsaw changes in migration affected regional per capita growth. I don't think it was on their radar.
Part of the "A Tale of Two Americas" plot line, which also happens to track with some aspects of our political divides---most red states have cheaper housing through better land use policies AND declining rural property values. Grumpy leftists who live near Boston like me get to enjoy inflated property values due to five decades of democratically mandated scarcity. I don't even have to mow my damn lawn and I make money through annual appreciation.
Also, I like Ben, so I'll try to be gentle with my criticism of any innovative construction method that could improve housing production. The Levitt family, and even many of the speculative builders who were active from the late 1800's through the Depression, figured out nearly all of the efficient construction methods for detached single family neighborhoods. Many architects and engineers are currently besotted with ideas of 3D printed buildings, streamlined custom design through BIM (a cruel joke), modular systems, Amazon kit homes, robot brick layers, etc... Some of it's amusing and makes for good video content, but the brutal reality of hand-on-part labor inputs dominates ALL building types. Brian Potter has done an excellent job of outlining this over at Construction Physics.
Though I do suspect if massively more construction was allowed, we would see productivity improve, just from learning-by-doing, more specialisation born by a larger market, and the learning curve that any industry has.
We might not see much of any fancy innovative construct, just better application of existing methods; perhaps some innovation in how to efficiently navigate the remaining bureaucracies. (I say remaining, because we'd have to tear down quite a bit of bureaucracy to get into the counterfactual of lots-more-construction in the first place.)
Always love these columns, although sometimes they are too complicated for me to understand.
The big constraint son new housing still appears to be zoning and other restrictions on supply.
But something may be happening in AI and what is called BIM, or building information modeling.
On the horizon is rapid production of blueprints and BIM results, which can be used to organize construction and parts ordering and so on. Producing a building digitally, in great detail, and to organize construction may be something that can be done a few days in the future.
The day may even come that robots will work on construction, plugged into the BIM models.
Even if builders develop rapid and cheaper building techniques in the next 20 years, which I believe will happen...so what? They will not be allowed to build where housing is wanted.
A few thoughts:
I think this idea that there are two economies resonates. Also the idea that Florida and Arizona weren’t overheating so much as just growing twice (their own internal growth plus a large share of the growth that wanted to happen in LA and NYC spilling over) is compelling.
I think we may have a general problem of excess centralization - the federal government manages the US as a single economy and relies too much on aggregate data, we have few tools to try and respond to state or regional level problems.
All of this connects to the sense that there are two Americas that increasingly don’t relate to each other or understand each other. And your description of “closed access cities” is spot-on. The world inside the closed access cities is quite different than the world outside. So people from the two sides of that boundary end up just talking past each other.
I don’t know what to do about it either.
> When the Fed looked at the aggregate US economy, they just saw an economy that was running a bit hot. But, the inflationary places weren’t the growing places. So, how do you apply monetary policy to that?
> In 2005, real growth in Florida and Arizona was 6% and 7%! Effectively, the Fed had to slow down real growth! And, what was driving that growth? Families regionally migrating to reduce rent inflation.
Why wouldn't the Fed look at per capita real growth? Given the in-migration, per capita real growth in Florida and Arizona was probably a lot lower than 6% and 7%?
They look at per capita growth at the national level, but I haven't seen any indication that they were or are aware of the swings in migration that were caused by constrained housing supply during the time. They considered construction to be overheated. When construction cooled in Florida and Arizona, they considered it a correction. I'm not sure they did any analysis regarding how the whipsaw changes in migration affected regional per capita growth. I don't think it was on their radar.
Part of the "A Tale of Two Americas" plot line, which also happens to track with some aspects of our political divides---most red states have cheaper housing through better land use policies AND declining rural property values. Grumpy leftists who live near Boston like me get to enjoy inflated property values due to five decades of democratically mandated scarcity. I don't even have to mow my damn lawn and I make money through annual appreciation.
Also, I like Ben, so I'll try to be gentle with my criticism of any innovative construction method that could improve housing production. The Levitt family, and even many of the speculative builders who were active from the late 1800's through the Depression, figured out nearly all of the efficient construction methods for detached single family neighborhoods. Many architects and engineers are currently besotted with ideas of 3D printed buildings, streamlined custom design through BIM (a cruel joke), modular systems, Amazon kit homes, robot brick layers, etc... Some of it's amusing and makes for good video content, but the brutal reality of hand-on-part labor inputs dominates ALL building types. Brian Potter has done an excellent job of outlining this over at Construction Physics.
Yes, Brian Potter has some excellent articles!
Though I do suspect if massively more construction was allowed, we would see productivity improve, just from learning-by-doing, more specialisation born by a larger market, and the learning curve that any industry has.
We might not see much of any fancy innovative construct, just better application of existing methods; perhaps some innovation in how to efficiently navigate the remaining bureaucracies. (I say remaining, because we'd have to tear down quite a bit of bureaucracy to get into the counterfactual of lots-more-construction in the first place.)
Always love these columns, although sometimes they are too complicated for me to understand.
The big constraint son new housing still appears to be zoning and other restrictions on supply.
But something may be happening in AI and what is called BIM, or building information modeling.
On the horizon is rapid production of blueprints and BIM results, which can be used to organize construction and parts ordering and so on. Producing a building digitally, in great detail, and to organize construction may be something that can be done a few days in the future.
The day may even come that robots will work on construction, plugged into the BIM models.
But they still won't be allowed to build.
I'm not sure how AI and BIM is supposed to get around zoning restrictions?
Right. That's my point.
Even if builders develop rapid and cheaper building techniques in the next 20 years, which I believe will happen...so what? They will not be allowed to build where housing is wanted.
Add on , possibly antiquated building codes.
Yes. Though I don't quite understand what any of this has to do with the article that our host posted?
Right. I was OT. But still in the ballpark. I am just a wag who sometimes goes OT.
No worries, I just wasn't sure I hadn't missed something.