Here is my 2-hour debate with Cameron Murray on the question, “What should come first, if at all: Market Liberalization or Investments in Public Housing?"
Kevin, I really enjoyed your debate with Cameron and you should be commended for participating.
Can I ask you: I found your model of housing very specific to the US and to recent years, but in fact, housing has been said to be affordable around the world and over time (decades, if not hundreds of years).
To the extent your explanation of the current malaise in US housing seems to focus on regulation, it seems poorly suited to explain the wide scope and temporal persistence of this issue. Am I missing something?
I know you've done a lot of work on this issue, so please feel free to point me towards something you've written around this in the past. Again, for participating in that debate and thanks for all your work on housing!
Did you mean to say that "housing has been said to be affordable around the world...."? or UNaffordable? If it is correct as written, I need you to clarify your question.
Well, I think there are a lot of orthogonal complications. It is obviously a lot more expensive, per square foot or what have you, to live downtown where there are lots of public transit and other amenities. Those areas tend to be favored by families with lower incomes, because they benefit from all those public amenities. The most extreme versions of this issue are today's big cities in the past, when they were growing, early in the industrial revolution. Families piled into tenements, etc.
Some of them, just because they were poor, had difficulty finding affordable places to live, but most of the complaints of reformers were more about conditions than cost. Cities offered amenities and economic benefits, and families make a bunch of trade-offs to get those - higher rent, worse units, negative amenities like crime, taxes, etc. Some of those trade-offs seem inhumane, etc., especially to people with a better set of choices.
But, at the end of the day, those choices were available. Millions of people moved to New York, London, etc. At the end of the day, migration flows tell you what's affordable.
The thing that makes our recent experience really odd is that migration flows reversed. There aren't trade-offs available for families to choose the package of amenities and costs that big, dense cities offer. Cities with the highest incomes today are the cities that poor existing residents are moving away from at the highest rate. I don't believe that has ever happened before, so if I am making a historical assertion there that is wrong, I'd be happy to reassess it.
In a way, affordability is a confusing lens through which to view it. Our major cities today just simply block city building. It's basically a pure cap on the population of dense cities, and the affordability issue is downstream of that. Affordability is how we ration this newly scarce resource.
Gotcha. Can I also ask: to what extent do you think your explanation for the housing problems afflicting large cities in the United States (a blocking of city building through excessive regulation) also helps explain what's happening in other cities around the world—because this is really an Anglosphere problem more than a US-specific problem, isn't it?
Yes. I have not put much effort into understanding the intricate details of cities outside of the US. I'd say London and the UK seem pretty obviously to have the same problems as the US at a similar or worse scale.
It seems to me that Canada, Australia, and New Zealand have a similar problem. Possibly, in those cases, the constraints to urban building in their worst cities aren't quite as bad as the worst cities in the US. Maybe Toronto and Vancouver are more akin to Seattle than to Los Angeles or New York. But, on the other hand, the US has more alternative metro areas for the outmigrants from the undersupplied cities.
The US was unique (joined only by Ireland) in trying to solve the cost problem by reducing prices through mortgage capital suppression. That has created a number of data oddities. It reduced prices in the US, but raised rents in the US. It made those alternative cities in the US less affordable. It lowered housing production across the US. Etc.
So, it leads to confused comparisons in the post-2008 data. ("Well, since 2008, Toronto has approved as much new housing as Dallas has, but prices have just kept skyrocketing in Toronto, anyway. So, supply won't bring prices down." Things like that.)
Kevin, I really enjoyed your debate with Cameron and you should be commended for participating.
Can I ask you: I found your model of housing very specific to the US and to recent years, but in fact, housing has been said to be affordable around the world and over time (decades, if not hundreds of years).
To the extent your explanation of the current malaise in US housing seems to focus on regulation, it seems poorly suited to explain the wide scope and temporal persistence of this issue. Am I missing something?
I know you've done a lot of work on this issue, so please feel free to point me towards something you've written around this in the past. Again, for participating in that debate and thanks for all your work on housing!
Did you mean to say that "housing has been said to be affordable around the world...."? or UNaffordable? If it is correct as written, I need you to clarify your question.
Thanks.
sorry, meant "unaffordable"!
Well, I think there are a lot of orthogonal complications. It is obviously a lot more expensive, per square foot or what have you, to live downtown where there are lots of public transit and other amenities. Those areas tend to be favored by families with lower incomes, because they benefit from all those public amenities. The most extreme versions of this issue are today's big cities in the past, when they were growing, early in the industrial revolution. Families piled into tenements, etc.
Some of them, just because they were poor, had difficulty finding affordable places to live, but most of the complaints of reformers were more about conditions than cost. Cities offered amenities and economic benefits, and families make a bunch of trade-offs to get those - higher rent, worse units, negative amenities like crime, taxes, etc. Some of those trade-offs seem inhumane, etc., especially to people with a better set of choices.
But, at the end of the day, those choices were available. Millions of people moved to New York, London, etc. At the end of the day, migration flows tell you what's affordable.
The thing that makes our recent experience really odd is that migration flows reversed. There aren't trade-offs available for families to choose the package of amenities and costs that big, dense cities offer. Cities with the highest incomes today are the cities that poor existing residents are moving away from at the highest rate. I don't believe that has ever happened before, so if I am making a historical assertion there that is wrong, I'd be happy to reassess it.
In a way, affordability is a confusing lens through which to view it. Our major cities today just simply block city building. It's basically a pure cap on the population of dense cities, and the affordability issue is downstream of that. Affordability is how we ration this newly scarce resource.
Gotcha. Can I also ask: to what extent do you think your explanation for the housing problems afflicting large cities in the United States (a blocking of city building through excessive regulation) also helps explain what's happening in other cities around the world—because this is really an Anglosphere problem more than a US-specific problem, isn't it?
Yes. I have not put much effort into understanding the intricate details of cities outside of the US. I'd say London and the UK seem pretty obviously to have the same problems as the US at a similar or worse scale.
It seems to me that Canada, Australia, and New Zealand have a similar problem. Possibly, in those cases, the constraints to urban building in their worst cities aren't quite as bad as the worst cities in the US. Maybe Toronto and Vancouver are more akin to Seattle than to Los Angeles or New York. But, on the other hand, the US has more alternative metro areas for the outmigrants from the undersupplied cities.
The US was unique (joined only by Ireland) in trying to solve the cost problem by reducing prices through mortgage capital suppression. That has created a number of data oddities. It reduced prices in the US, but raised rents in the US. It made those alternative cities in the US less affordable. It lowered housing production across the US. Etc.
So, it leads to confused comparisons in the post-2008 data. ("Well, since 2008, Toronto has approved as much new housing as Dallas has, but prices have just kept skyrocketing in Toronto, anyway. So, supply won't bring prices down." Things like that.)
(and thank you for the fulsome response to my first question!)
Such a great discussion, well done to both of you