Welcome to The Debate. Today we are looking at,
well, the single largest asset class in the world.
It is the thing that historically defined voting
rights, status, and wealth. And today it is likely
the biggest line item in your personal budget.
We are talking about real estate. And to be clear,
right out the gate, we aren't just talking about
Zillow listings or, you know, open houses with
fresh cookies. We are analyzing the strict definition.
The land itself, the buildings on top of it,
and the natural resources, the water, the minerals,
the crops that come with it. Exactly. It's the
physical stage upon which new life, well, happens.
And the central question we are wrestling with
today is this. Is real estate primarily a fundamental
expression of natural rights, a vehicle for individual
liberty and economic stability? Or is it a mechanism
that locks in social stratification and, frankly,
accelerates environmental degradation? I'm taking
the latter view. I think if you look closely
at the history and the data, you find that the
estate part of real estate That legal fiction
we wrap around the land has historically prioritized
profit over people and extraction over sustainability.
And I'm here to defend the institution. I believe
that private property rights, specifically real
estate, are the bedrock of free society and the
primary engine for capital formation. I mean,
without clear ownership, you don't have an economy.
You have chaos. So let's get into the dirt. Let's
do it. I want to start with the philosophy because
it explains why we treat land the way we do.
The idea that you can point to a patch of earth
and say, this is mine and the state will project
my right to it is a profound concept. It's not
just modern capitalism. You can trace this back
to Roman law, to Greek philosophy, and specifically
to writers in the 15th and 16th centuries who
discussed universal law. You're referring to
the natural law arguments? Yes. Take Emmerich
de Wattel. In 1758, he wrote the Law of Nations.
He was instrumental in conceptualizing private
property not just as a convenience, but as a
prerequisite for order. The argument is that
without the security of ownership, the private
domain, citizens cannot truly be free or safe.
I mean, if the king or the mob can take your
home, you have no liberty. It sounds noble when
you quote Vattel. It gives it this very clean,
intellectual lineage. But I think we need to
peel back that philosophical layer and look at
what that order actually looks like in practice.
You're talking about real property versus personal
property. Right. Personal property is movable.
Your car, your furniture, your crypto wallet.
Real property is immovable. It's the land. But
the way we handle that immovability is through
a legal construct called the estate. That is
the interest you hold in the land. And my issue
is that this legal construct has often been weaponized.
You speak of order, but whose order? The order
of the majority. Look at the United States. According
to the Congressional Research Service, as of
2021, 65 % of U .S. homes are owned by the occupier.
That is a stunning statistic. In a feudal system,
the Lord owns everything, and you work the fields.
In our system, two -thirds of families own their
slice of the earth. That is a massive democratization
of wealth. It is a large number, I grant you,
but let's look at the quality of that ownership.
We use terms like fee simple and leasehold. These
aren't just vocabulary words. They define your
power. I think it's important we define those
for the listeners because it goes to the heart
of my argument about liberty. Fee simple is the
gold standard of ownership. It means you own
the land, the air above it, the ground below
it, and, crucially, you can leave it to your
heirs. It is absolute ownership. When you buy
a house in the suburbs, you usually get fee -simple
title. Right. But then you have leasehold, or
other fractured forms of tenure. In a leasehold,
you might own the building, but someone else
owns the dirt, and your ownership expires after,
say, 99 years. Or look at a condo. You own the
airspace inside your unit, literally the paint
to the paint, but you share ownership of the
structure. The complexity of these estates often
serves to concentrate control. And historically,
that control was acquired through means that
were anything but natural law. Are you referring
to the origins of the American market? I am.
You cannot talk about American real estate without
talking about the Louisiana Purchase of 1803.
In business schools, it's taught as the greatest
real estate deal in history. Because it was.
Thomas Jefferson paid $15 million. Which breaks
down to about four cents an acre. Exactly. Four
cents an acre to double the size of the country.
It paved the way for Western expansion. It created
the inventory that allowed millions of poor immigrants
to come over and become landowners, something
they never could have done in Europe. Paved the
way is doing a lot of heavy lifting there. Legally,
scholars categorize that under acquisition by
conquest or discovery. We bought the rights from
France, but the land was fully occupied by indigenous
peoples. France didn't really own it in any practical
sense. They just had a map that said they did.
That natural right to property you mentioned,
Vattel praising, it apparently didn't apply to
the people actually living on the land. It was
a transfer of raw power, not a sterile business
transaction. I acknowledge the violence of the
acquisition. That is undeniable. And it's a dark
stain. But we have to look at what happened after
the acquisition. Once that land was brought into
the legal fold, the system that was built, the
surveying, the recording of deeds, allowed for
a stability that didn't exist before. You mentioned
business schools. Let's talk about the industry
itself. It moved from the Wild West to a profession.
A profession of gatekeepers. A profession of
standards. The oldest real estate brokerage in
the U .S., Baird & Warner, started in 1855. The
National Association of Realtors was founded
in 1908. Before that, it was chaos. You could
buy a farm and find out three other people thought
they owned it. These organizations established
a chain of title. When you buy a house today,
you know you own it because of that infrastructure.
That professionalization protects the little
guy just as much as the big guy. Does it? Let's
talk about who that professional infrastructure
was designed to protect. The National Association
of Realtors. which you cite as a beacon of order,
presided over decades of segregation. We had
the National Housing Act of 1934 and the Banking
Act of 1933. Which saved the banking system during
the Great Depression. They stabilized the banks.
Yes, they created the 30 -year mortgage, which
is great. But they also institutionalized redlining.
The government maps explicitly graded neighborhoods.
Green was good. Red was hazardous. And red almost
always meant... black populations. We were looking
at this through a modern lens, though. We have
to. The Fair Housing Act didn't pass until 1968.
That means for the first 60 years of this professional
industry, it was legal and often policy to discriminate
in renting, buying and financing based on race.
The stability you love. was purchased by excluding
entire demographics from building equity. You
can't separate the asset class from that history
because wealth compounds. If you were locked
out in 1940, your grandkids are feeling it in
2026. I agree that the history is flawed, but
the mechanism of real estate, the ability to
hold and transfer value is neutral. The policy
was bad. The asset is good. And that brings me
to the economic engine. You can't deny that real
estate is the primary vehicle for wealth creation
for the middle class. It is the only leveraged
investment most people will ever make. I can
deny that it should be. And I can certainly question
the mechanics of it. Let's pivot to the money.
You view real estate as an investment. I view
it as shelter. When you mix those two, you get
distortion. They aren't mutually exclusive. If
I buy a home, I get shelter and I get a store
of value. It's a forced savings account. Every
month I pay down my mortgage, I am essentially
paying myself. But look at the speculative side.
We treat houses like stocks. We have investors
buying properties in markets just because prices
are rising, with no intention of living there.
That signals value, though. It drives capital
to where it's in demand. Take flipping. It gets
a terrible reputation. But strip away the reality
TV drama and what is it? It's arbitrage. Arbitrage?
Yes. Arbitrage. Taking advantage of a price difference
between two markets. An investor finds a property
that is undervalued because it has a hole in
the roof or, you know, 1970s plumbing. The market
has discounted it heavily. They pour capital
and labor into it, fixing the roof, updating
the pipes, and they sell it for a profit. They
have improved the housing stock. That is value
creation, not extraction. If they didn't do it,
that house would rot. In an ideal world, maybe.
But often that flipping is purely cosmetic. Gray
laminate floors and white paint over structural
issues. Or it's just writing a bubble. And speaking
of bubbles, if real estate is such a stable store
of value, explain the crashes. Markets fluctuate.
That's the nature of economics. Fluctuate is
a very gentle word for what happened in 1929.
The stock market crashed, and in the four years
that followed, real estate values depreciated
by 50%. Half the value of the nation's housing
stock evaporated. That destroys lives. If your
safety net can lose half its value in four years,
it's not a safety net. It's a gamble. And we
saw it again in 2008. But look at the response
to that 1929 crash. That's my point about the
resilience of the system. We didn't just let
it rot. We created Fannie Mae in 1938. a government
bailout mechanism. A structural innovation. Before
Fannie Mae, a bank had to hold your mortgage
for the full term. If they ran out of cash, they
couldn't lend to anyone else. Fannie Mae was
created to buy those mortgages from the banks,
giving the banks fresh cash to lend to new homeowners.
It created liquidity. It proves that the real
estate market can evolve to support the population.
It proves the market is so volatile, it requires
massive federal backstops to function. And on
the high end, it's even worse. The source material
notes that luxury real estate in London and New
York is essentially a safety deposit box for
global corruption. Foreign officials use shell
companies to buy penthouses, not to live in,
but to launder money and protect it from seizure
at home. Those are criminal edge cases. You don't
judge the entire auto industry by bank robbers
who use getaway cars. You do if the car is designed
specifically to hide the robber. The opacity
of real estate ownership, the ability to hide
behind LLCs, is a feature, not a bug. We can
argue about regulation, but I want to pivot to
the physical reality of the asset. We've talked
about laws and money, but real estate is dirt
and timber. You mentioned earlier that the industry
prioritizes profit over the planet. In 2019,
the real estate sector was responsible for 39
% of total global emissions. 39 %? Nearly 40%.
And here is the kicker. 11 % of that wasn't from
heating or cooling. It was solely from manufacturing
the materials. The concrete, the steel, the glass.
We are literally burning the atmosphere to build
these assets. I'm glad you brought that up. Because
this is where the industry is actually making
its biggest strides. You are looking at legacy
data. The modern real estate market is obsessed
with efficiency. Since the 1970s, Poe inciting
with the World Commission on Environment and
Development, we've seen the rise of green development.
Is it substantive change or is it just marketing
brochures with pictures of leaves on them? It
is substantive. Look at LEED certification. Look
at the demand for green infrastructure. But more
importantly, look at how the market prices risk.
Today, you almost cannot close a commercial deal
without an Environmental Site Assessment, or
ESA. Explain what that is for the listener who
hasn't bought a warehouse lately. An ESA is a
due diligence report. A surveyor goes out to
check for contamination, oil in the soil, asbestos,
groundwater issues. If the land is sick, the
deal dies or the price collapses. The market
is explicitly putting a price tag on environmental
health that forces owners to be better stewards.
If you pollute your land, you lose your equity.
That is a very optimistic take. I see it differently.
I think the profession of environmental surveying
is what we might call a self -licking ice cream
cone. How so? The industry degrades the land
for a century. Then it creates a cottage industry
of surveyors to tell us how degraded it is. Then
we pay developers to remediate it and call it
green. It's a profit cycle based on fixing our
own mess. And even with green buildings, look
at the macro layout. Sprawl. You mean the suburbs?
I mean the list of detached dwellings, mansions,
villas, split -level homes. This model requires
massive amounts of land per person. It requires
miles of asphalt roads, more pipes, more wires.
You can put a solar panel on a villa, but if
that villa replaced a forest and requires a 40
-minute commute in a car, it is not green. But
that is what people want. You are criticizing
the market for responding to human desire. People
want space. They want privacy. They want a detached
home. Real estate developers are just organizing
space to meet human needs. Organizing space is
a very sterile way to put it. We are turning
wild animals and growing crops, which are part
of the definition of real estate, into paved
subdivisions. We are extracting utility from
the earth at a rate that is unsustainable. But
what is the alternative? Cramming everyone into
high -rises? The beauty of our system is the
variety of tenure. We have condominiums where
you share the land. We have housing cooperatives
where you own shares in a corporation. We have
townhouses. This diversity allows people at different
economic levels to enter the market. It allows
entry, sure, but it also creates a hierarchy.
The fee -simple, single -family home is the dream,
and everything else is a compromise. And frankly,
the complexity of things like co -ops often serves
as another layer of exclusion. Have you ever
tried to get approved by a co -op board in New
York? It's not just about money. It's about social
acceptability. It's about protecting the community's
interest. That is the essence of real estate,
balancing the individual right with the collective
value. And I argue the balance is off. I think
we need to zoom out to conclude. Despite the
flaws, despite the redlining of the past and
the emissions of the present, I keep coming back
to the fundamental utility. For the average family,
the home is the only leverage investment they
will ever make. It is the only way they can turn
a monthly expense, shelter, into an asset, equity.
It is a powerful tool, I don't deny that. But
it is a dangerous one. We are tying the financial
future of the middle class to an asset that is
physically vulnerable to climate change, which
the asset class itself is driving. It's a vicious
cycle. And by treating homes as financial vehicles
first and shelters second, we create a society
where housing is increasingly unaffordable for
the people who actually need to live in it. My
view is that the legal structure, the distinction
between real and property, The professionalization
of the industry provides the stability we need
to solve those problems. We are seeing the shift
to green building. We are seeing financing open
up. The natural right to property is a vehicle
for liberty, and we are getting better at ensuring
everyone has a set of keys. And my view is that
we need to stop looking at the espate, the profit,
the rights, the flipping, and start looking at
the real, the land, the water, the community.
If we don't prioritize the physical reality of
the earth over the legal fiction of the deed,
we're going to find that our store of value is
underwater, figuratively and literally. It is
certainly the intersection where the physical
world meets the legal world. And where the checkbook
meets the chainsaw. We hope this discussion has
encouraged you to look at your own housing situation,
whether you rent, own, or are looking to buy,
and consider how it fits into these global systems.
Dig into the history of your own deed. You might
be surprised what you find. Thank you for joining
us on The Debate. Goodbye.