Here, I’m going to take another stab at back-of-the-envelope estimates for the cumulative shortage of residential investment and the effects that correcting it would have.
On Strong Towns… oof. I don’t know how serious the various individual claims are, but the gestalt point of the article is awful.
There are deep veins of distrust of finance in the human condition. I joke that Jesus broke bread with prostitutes and tax collectors, but he needed no explanation to throw the money changers out of the temple. It’s our one sacred prejudice.
Whether it’s the Strong Towns financialization stuff. Or anti-Fed hawks and liquidationists. Or now, when I see the coming fight over the backlash to build-to-rent and suddenly a lot of YIMBYs see a source of homes that they don’t like so much because surely we don’t want Wall Street to own homes meant for families.
Sadly, I think quantitatively this has done more harm to American families struggling for housing than banal NIMBYism has.
It's so interesting that "we just didn't build enough housing" is so often rejected when in many ways it's the simplest explanation to the problem. One expects over-simplification of complex social problems but rarely the reverse!
I like your mathematical exercise at the end of this post because it corresponds nicely to various figures that have been tossed around on this blog and other odd corners of the internet about the overall volume of the housing shortage. I seem to recall that people who are informed about the condition of housing in the U.S. will note that we're short between 10 and 20 million dwellings. Other people will claim that we don't have a shortage at all, and point to the number of vacation homes, price declines in select regions, and the fact that there aren't 7 million unhoused people wandering about living in tents or under bridges. The "No Shortage" crowd will also point to the decline in average household size from 1940 to the present day. Perhaps the moral fiber of the nation could be restored with families packed into small dwelling units--along with some kinder, kirche, and kuche thrown into the mix. Alas, I digress....stay focused!
The math behind the price trends, and the objective conditions of rent stress that persists in many metro areas, tells the truth. I would also like to emphasize that there is a qualitative aspect to the problem which plays out in nearly every real estate transaction across the country except in places that are experiencing true population loss. These include:
-Bidding wars for used houses in popular neighborhoods
-Construction resources directed at constant renovations of houses and buildings that should really be demolished (Disclosure: I make money as an architect on this either way)
-The persistent belief that housing is a perpetually appreciating asset class regardless of its physical condition
-The frustration experienced by younger generations when they try to start a family and realize that they're getting shafted by policies put into place by prior generations
The road out of the housing shortage is when the frustrated people constitute a majority voting bloc at various levels of our democratic system. I hope some of them are reading your stuff.
Yep. The irony is that an amply supplied market would include a lot of various vacancies. But when there is a shortage, you can’t say “normalcy will be associated with 2 million additional vacation homes” because in the condition of deprivation you can’t dare suggest that every single unit won’t go to the most precious, socially approved use. So the appropriate number of homes is unspeakable.
Really glad I found this substack, more people should know about it! I'd be interested to know your take on https://www.strongtowns.org/journal/2024/8/19/the-housing-market-is-a-bubble-full-of-fraud-and-its-going-to-pop. Strong Towns seems generally pro-housing but that's a weird take if we are supply-constrained.
Thank you! So glad you’re here!
On Strong Towns… oof. I don’t know how serious the various individual claims are, but the gestalt point of the article is awful.
There are deep veins of distrust of finance in the human condition. I joke that Jesus broke bread with prostitutes and tax collectors, but he needed no explanation to throw the money changers out of the temple. It’s our one sacred prejudice.
Whether it’s the Strong Towns financialization stuff. Or anti-Fed hawks and liquidationists. Or now, when I see the coming fight over the backlash to build-to-rent and suddenly a lot of YIMBYs see a source of homes that they don’t like so much because surely we don’t want Wall Street to own homes meant for families.
Sadly, I think quantitatively this has done more harm to American families struggling for housing than banal NIMBYism has.
I loved this take: https://tobyhardtospell.substack.com/p/why-housing-breaks-peoples-brains
It's so interesting that "we just didn't build enough housing" is so often rejected when in many ways it's the simplest explanation to the problem. One expects over-simplification of complex social problems but rarely the reverse!
That's a great post.
I like your mathematical exercise at the end of this post because it corresponds nicely to various figures that have been tossed around on this blog and other odd corners of the internet about the overall volume of the housing shortage. I seem to recall that people who are informed about the condition of housing in the U.S. will note that we're short between 10 and 20 million dwellings. Other people will claim that we don't have a shortage at all, and point to the number of vacation homes, price declines in select regions, and the fact that there aren't 7 million unhoused people wandering about living in tents or under bridges. The "No Shortage" crowd will also point to the decline in average household size from 1940 to the present day. Perhaps the moral fiber of the nation could be restored with families packed into small dwelling units--along with some kinder, kirche, and kuche thrown into the mix. Alas, I digress....stay focused!
The math behind the price trends, and the objective conditions of rent stress that persists in many metro areas, tells the truth. I would also like to emphasize that there is a qualitative aspect to the problem which plays out in nearly every real estate transaction across the country except in places that are experiencing true population loss. These include:
-Bidding wars for used houses in popular neighborhoods
-Construction resources directed at constant renovations of houses and buildings that should really be demolished (Disclosure: I make money as an architect on this either way)
-The persistent belief that housing is a perpetually appreciating asset class regardless of its physical condition
-The frustration experienced by younger generations when they try to start a family and realize that they're getting shafted by policies put into place by prior generations
The road out of the housing shortage is when the frustrated people constitute a majority voting bloc at various levels of our democratic system. I hope some of them are reading your stuff.
Yep. The irony is that an amply supplied market would include a lot of various vacancies. But when there is a shortage, you can’t say “normalcy will be associated with 2 million additional vacation homes” because in the condition of deprivation you can’t dare suggest that every single unit won’t go to the most precious, socially approved use. So the appropriate number of homes is unspeakable.