This series started with yesterday’s overview. This post and the next will offer some market data for consideration. Part 4 will review Ed Leamer’s address to the Federal Reserve in August 2007. Part 5 will review Ed Leamer’s 2015 review of the crisis and his presentation, using parts 1-4 as my frame of reference.
While this is all eminently convincing and make sense, I think I've finally figured out what still rubs me wrong about your overall project:
You hold supply to be one of, if not THE core factor of why the mortgage crackdown was so bad... BUT the mortgage crackdown only makes sense as the latest episode of yet another policy misstep exacerbating the saga of a generations-long supply crunch.
What I mean by this is, let's consider the contrast: What does a NIMBY/supply-denialist version of your narrative look like? "We cracked down on mortgage lending because we were overproducing housing for so many decades -- it was the final lever the evil developers had been using to gentrify people out of their homes and keep building sprawl. We would've been fine if [X]... !".
The thing is, that last sentence is where it all breaks down:
1. "... if we hadn't cracked down, so the sprawl could've continued unabated" => This is contradictory to the NIMBY position that sprawl is bad.
2. "... if we hadn't cracked down, the evil developers could've gentrified the cities" => This is contradictory to the NIMBY position that developers and gentrification are evil, and cities are hellish places to live.
The NIMBY-induced supply crunch is basically the only background trend that's compatible with your narrative of the last 2-3 decades. And as true as your narrative might be, the cumulative amount of housing that would've been built without supply restrictions vastly outstrips the cumulative amount of housing that would've been built without mortgage/credit restrictions.
Just to reiterate... I really appreciate this project, though. Not trying to be your Most Annoying Commenter or anything, just offering opinions and constructive criticism (housing pun intended). It's been very illuminating and helped me update my model of the housing crisis to incorporate the mortgage crackdown that you so vividly describe. Cheers!
Land use reform and housing affordability have a lot of overlap and interaction, but they are two separate issues. I am a student in the land use topic and a creator in the affordability topic. I have come to appreciate the city-building movement, but I only write about it as it relates to affordability because it's not where I have any business claiming authority.
My first book, "Shut Out" had the tone of "You all need to stop obsessing on credit markets. All the problems you're blaming on credit are fundamentally caused by our urban land use problem."
Over time, given the regulatory context we currently live in, my tone has evolved more to, "Nobody noticed that these things we did in the credit markets made affordability a much larger problem than land use ever could have on its own."
I focus on that now because it is the aspect of the problem that is least appreciated and it's where I have novel insights to offer.
As a matter of scale, I'd say, the country can be cut, roughly, in thirds:
1) The Closed Access cities where land use regs had become so binding that it was driving an affordability crisis. So, the 2 topics interacted.
2) Other major metropolitan areas that are large enough for land use regs to be very important to quality of life, but where sprawl was providing an outlet for supply and keeping affordability good before 2008. (And a few of these places occasionally have temporary affordability issues because they are swamped by refugees from the first category.) In these places, it would be better to have good city-building, but people are living in tents at this point, so I'm going to push on all the levers I have. And, again, it's the credit aspect of it where I have knowledge to impart, so my content may seem to err on the side of the affordability solution that is at odds with better city building. (Also, even in the face of the mortgage crackdown, single-family build-to-rent will rise up to help the affordability issue. That is another interesting issue because both NIMBYs and urbanists might find common cause to oppose rental sprawl, and opposing it would be very very bad.)
3) Smaller cities where scalar stress isn't particularly important yet. They need good city-building norms as they grow, but the 20th century development of treating multi-unit housing like a nuisance isn't necessarily that binding on their current geographic form. But the mortgage crackdown really hurt affordability there.
Have you read Chuck Marohn’s latest book? He goes into how the financing of 5-over-1’s is dysfunctionally impacting their construction and also disproportionately skewing new construction towards them.
OT, but in the same ballpark or maybe the parking lot
https://www.bls.gov/news.release/pdf/prod2.pdf
Unit labor costs are up 0.8% in Q3 on year.
The Fed is fighting inflation? Or just wants to beat the snot out of people who work for a living?
This is a labor shortage?
While this is all eminently convincing and make sense, I think I've finally figured out what still rubs me wrong about your overall project:
You hold supply to be one of, if not THE core factor of why the mortgage crackdown was so bad... BUT the mortgage crackdown only makes sense as the latest episode of yet another policy misstep exacerbating the saga of a generations-long supply crunch.
What I mean by this is, let's consider the contrast: What does a NIMBY/supply-denialist version of your narrative look like? "We cracked down on mortgage lending because we were overproducing housing for so many decades -- it was the final lever the evil developers had been using to gentrify people out of their homes and keep building sprawl. We would've been fine if [X]... !".
The thing is, that last sentence is where it all breaks down:
1. "... if we hadn't cracked down, so the sprawl could've continued unabated" => This is contradictory to the NIMBY position that sprawl is bad.
2. "... if we hadn't cracked down, the evil developers could've gentrified the cities" => This is contradictory to the NIMBY position that developers and gentrification are evil, and cities are hellish places to live.
The NIMBY-induced supply crunch is basically the only background trend that's compatible with your narrative of the last 2-3 decades. And as true as your narrative might be, the cumulative amount of housing that would've been built without supply restrictions vastly outstrips the cumulative amount of housing that would've been built without mortgage/credit restrictions.
Just to reiterate... I really appreciate this project, though. Not trying to be your Most Annoying Commenter or anything, just offering opinions and constructive criticism (housing pun intended). It's been very illuminating and helped me update my model of the housing crisis to incorporate the mortgage crackdown that you so vividly describe. Cheers!
These are all excellent points.
Here are a few scattered thoughts:
Land use reform and housing affordability have a lot of overlap and interaction, but they are two separate issues. I am a student in the land use topic and a creator in the affordability topic. I have come to appreciate the city-building movement, but I only write about it as it relates to affordability because it's not where I have any business claiming authority.
My first book, "Shut Out" had the tone of "You all need to stop obsessing on credit markets. All the problems you're blaming on credit are fundamentally caused by our urban land use problem."
Over time, given the regulatory context we currently live in, my tone has evolved more to, "Nobody noticed that these things we did in the credit markets made affordability a much larger problem than land use ever could have on its own."
I focus on that now because it is the aspect of the problem that is least appreciated and it's where I have novel insights to offer.
As a matter of scale, I'd say, the country can be cut, roughly, in thirds:
1) The Closed Access cities where land use regs had become so binding that it was driving an affordability crisis. So, the 2 topics interacted.
2) Other major metropolitan areas that are large enough for land use regs to be very important to quality of life, but where sprawl was providing an outlet for supply and keeping affordability good before 2008. (And a few of these places occasionally have temporary affordability issues because they are swamped by refugees from the first category.) In these places, it would be better to have good city-building, but people are living in tents at this point, so I'm going to push on all the levers I have. And, again, it's the credit aspect of it where I have knowledge to impart, so my content may seem to err on the side of the affordability solution that is at odds with better city building. (Also, even in the face of the mortgage crackdown, single-family build-to-rent will rise up to help the affordability issue. That is another interesting issue because both NIMBYs and urbanists might find common cause to oppose rental sprawl, and opposing it would be very very bad.)
3) Smaller cities where scalar stress isn't particularly important yet. They need good city-building norms as they grow, but the 20th century development of treating multi-unit housing like a nuisance isn't necessarily that binding on their current geographic form. But the mortgage crackdown really hurt affordability there.
Have you read Chuck Marohn’s latest book? He goes into how the financing of 5-over-1’s is dysfunctionally impacting their construction and also disproportionately skewing new construction towards them.
I haven't read it. Is there a post on that particular issue that he has written, which you could link to?