WEBVTT 00:00:00.000 --> 00:00:03.480 Welcome to the debate. So today we're dissecting 00:00:03.480 --> 00:00:06.580 a phenomenon that I think you could argue defines 00:00:06.580 --> 00:00:09.000 the modern economic experience more than any 00:00:09.000 --> 00:00:12.460 other. It's personal. It is definitely painful. 00:00:12.640 --> 00:00:15.759 And it is playing out on this massive synchronized 00:00:15.759 --> 00:00:18.379 global scale. We are talking about the global 00:00:18.379 --> 00:00:21.940 housing crisis. It is a heavy topic. And frankly, 00:00:22.019 --> 00:00:24.219 calling it a crisis, it almost feels like an 00:00:24.219 --> 00:00:26.260 understatement at this point. When we look at 00:00:26.260 --> 00:00:28.359 the source material, we're not just seeing a 00:00:28.359 --> 00:00:31.420 series of local inconveniences or separate market 00:00:31.420 --> 00:00:33.520 bubbles. We are looking at what the literature 00:00:33.520 --> 00:00:37.000 calls a complex web of problems and dysfunctions. 00:00:37.159 --> 00:00:40.520 Exactly. And whether you're in Amsterdam or Auckland 00:00:40.520 --> 00:00:43.939 or San Francisco, the story is remarkably similar. 00:00:44.280 --> 00:00:46.939 Housing costs are consistently rising faster 00:00:46.939 --> 00:00:50.259 than household income. But the core disagreement 00:00:50.259 --> 00:00:53.530 and what we're here to discuss is why. Is this 00:00:53.530 --> 00:00:56.210 crisis primarily a failure of government regulation, 00:00:56.530 --> 00:00:59.189 a kind of self -inflicted wound caused by planning 00:00:59.189 --> 00:01:01.329 systems that just refuse to let cities grow? 00:01:01.630 --> 00:01:04.310 Or is it a systemic failure of financial markets, 00:01:04.450 --> 00:01:07.349 of labor dynamics, and deep -seated income inequality? 00:01:08.049 --> 00:01:12.129 I'd argue that simply chanting, build more, ignores 00:01:12.129 --> 00:01:15.250 the macroeconomic reality that housing is a financial 00:01:15.250 --> 00:01:18.409 asset. It's subject to these boom and bust cycles. 00:01:18.590 --> 00:01:20.950 And that the market, you know, when left to its 00:01:20.950 --> 00:01:24.209 own devices, consistently fails the most vulnerable. 00:01:24.590 --> 00:01:27.590 And I see why you think that. But let me offer 00:01:27.590 --> 00:01:30.730 a different perspective. I believe the evidence 00:01:30.730 --> 00:01:34.090 points almost overwhelmingly to a supply -side 00:01:34.090 --> 00:01:37.010 crisis driven by these artificial constraints. 00:01:37.430 --> 00:01:40.930 The solution isn't more complexity. It is simply 00:01:40.930 --> 00:01:44.450 deregulation and physical construction, as we've 00:01:44.450 --> 00:01:47.250 seen in places like Japan and New Zealand. Well, 00:01:47.310 --> 00:01:49.730 I come at it from a different angle. But let's 00:01:49.730 --> 00:01:52.200 get into the details. Why don't you lay out your 00:01:52.200 --> 00:01:55.579 case for the supply side argument? Gladly. If 00:01:55.579 --> 00:01:57.620 we look at the foundational economic research 00:01:57.620 --> 00:02:00.379 on this, specifically the work of Hilber and 00:02:00.379 --> 00:02:03.920 Shoney from 2022, they identify the primary strand 00:02:03.920 --> 00:02:06.680 of this whole debate as being about supply constraints. 00:02:07.239 --> 00:02:11.099 The logic is stark and really inescapable. Land 00:02:11.099 --> 00:02:13.240 use restrictions prevent the market from meeting 00:02:13.240 --> 00:02:16.039 a growing demand. When you stop people from building, 00:02:16.240 --> 00:02:19.330 costs go up. It's that simple. I don't deny that 00:02:19.330 --> 00:02:21.430 supply is tight, but to say it's the primary 00:02:21.430 --> 00:02:24.349 driver, that feels reductive to me. But consider 00:02:24.349 --> 00:02:27.169 the magnitude of the distortion here. Studies 00:02:27.169 --> 00:02:30.110 have found that restrictive zoning can make homes, 00:02:30.210 --> 00:02:33.050 I mean, we're talking more than 50 % more expensive 00:02:33.050 --> 00:02:36.009 than the actual cost to build them. That is not 00:02:36.009 --> 00:02:39.150 a market failure. That's a regulatory tax. We 00:02:39.150 --> 00:02:41.550 see this clear divergence between planning systems. 00:02:42.030 --> 00:02:44.729 Anglophone countries, the UK, the US, Australia. 00:02:45.319 --> 00:02:47.599 They have planning systems that basically enable 00:02:47.599 --> 00:02:50.120 obstruction, empowering local governments and 00:02:50.120 --> 00:02:52.219 NIMBYs, you know, not -in -my -backyard activists, 00:02:52.500 --> 00:02:55.759 to block new projects. And the result is shortage. 00:02:56.340 --> 00:02:59.020 Contrast that with Japan, where zoning is controlled 00:02:59.020 --> 00:03:01.740 more at the national level, which reduces local 00:03:01.740 --> 00:03:04.280 obstruction. Japanese cities have maintained 00:03:04.280 --> 00:03:06.680 abundant and affordable housing relative to their 00:03:06.680 --> 00:03:09.360 size precisely because they allow supply to meet 00:03:09.360 --> 00:03:12.419 demand. There's a compelling argument, I'll give 00:03:12.419 --> 00:03:14.879 you that. But have you considered the definition 00:03:14.879 --> 00:03:18.000 of the crisis itself? The source material describes 00:03:18.000 --> 00:03:21.280 it as a web of problems. You're pulling on one 00:03:21.280 --> 00:03:24.300 thread, zoning, and claiming it unravels the 00:03:24.300 --> 00:03:26.860 whole knot. I would argue that poor earnings 00:03:26.860 --> 00:03:29.979 are a major contributor that you're just overlooking. 00:03:30.080 --> 00:03:32.680 People simply do not make enough money relative 00:03:32.680 --> 00:03:36.500 to the cost of living. Income is a factor, certainly, 00:03:36.699 --> 00:03:39.669 but... It's more than just a factor. It's central. 00:03:39.810 --> 00:03:42.030 If you look at the findings from Moody's Analytics, 00:03:42.370 --> 00:03:44.629 they point out that the main causes of the crisis 00:03:44.629 --> 00:03:47.689 include shortages of labor and materials, issues 00:03:47.689 --> 00:03:50.490 that were significantly made worse by the COVID 00:03:50.490 --> 00:03:53.789 -19 pandemic. You can rezone a city all you want, 00:03:53.849 --> 00:03:55.889 but if you don't have the bricks, the timber, 00:03:55.969 --> 00:03:58.210 or the workers to lay them, you're not getting 00:03:58.210 --> 00:04:01.169 new houses. The crisis is also about financing 00:04:01.169 --> 00:04:04.289 conditions and just poor forecasting. It's a 00:04:04.289 --> 00:04:06.449 structural mismatch between the economy people 00:04:06.449 --> 00:04:08.610 live in and the housing market that operates 00:04:08.610 --> 00:04:12.330 way above their heads. I'm not entirely convinced 00:04:12.330 --> 00:04:15.509 by that because it treats labor and material 00:04:15.509 --> 00:04:19.709 shortages as these permanent, immutable barriers 00:04:19.709 --> 00:04:22.389 rather than market signals that would resolve 00:04:22.389 --> 00:04:25.810 if we just legalized the density that makes construction 00:04:25.810 --> 00:04:29.149 efficient. Let's look at a concrete example where 00:04:29.149 --> 00:04:32.660 deregulation actually worked. We have what you 00:04:32.660 --> 00:04:35.300 could call a gold standard of evidence in the 00:04:35.300 --> 00:04:37.740 source material. New Zealand. New Zealand is 00:04:37.740 --> 00:04:40.060 an interesting case, I grant you. It is more 00:04:40.060 --> 00:04:43.459 than interesting. It is proof of concept. Auckland 00:04:43.459 --> 00:04:46.899 specifically. In 2013, they started reforming 00:04:46.899 --> 00:04:49.439 their housing laws to loosen construction constraints. 00:04:49.839 --> 00:04:52.259 They didn't just talk about webs of problems. 00:04:52.500 --> 00:04:54.819 They cut the red tape with something called the 00:04:54.819 --> 00:04:58.319 Unitary Plan. And the result? Rent in Auckland 00:04:58.319 --> 00:05:01.120 grew more slowly than in other parts of the country 00:05:01.120 --> 00:05:05.000 and crucially, more slowly than incomes. Slowing 00:05:05.000 --> 00:05:07.220 the growth is not the same as solving the crisis, 00:05:07.300 --> 00:05:10.240 though. But look at the counterfactual. Ryan 00:05:10.240 --> 00:05:14.519 Greenway McGrivey estimated in July 2024 that 00:05:14.519 --> 00:05:17.839 rents in Auckland were 28 percent lower than 00:05:17.839 --> 00:05:20.459 they would have been without those reforms. That 00:05:20.459 --> 00:05:23.600 is a massive difference for a renter. It was 00:05:23.600 --> 00:05:27.480 so successful that in October 2021, the national 00:05:27.480 --> 00:05:30.240 government passed bipartisan upzoning for the 00:05:30.240 --> 00:05:32.920 country's largest cities, allowing three units 00:05:32.920 --> 00:05:35.860 and three stories on residential parcels. They 00:05:35.860 --> 00:05:39.240 legalized the missing middle. This proves that 00:05:39.240 --> 00:05:42.199 when you remove the obstruction, the market responds 00:05:42.199 --> 00:05:46.000 and prices stabilize. I see the data point you're 00:05:46.000 --> 00:05:48.160 using, but I think you're declaring victory a 00:05:48.160 --> 00:05:51.600 bit too early. Legislative targets and zoning 00:05:51.600 --> 00:05:55.189 changes. they don't automatically create homes. 00:05:56.370 --> 00:05:59.370 Let's look at the Netherlands. They're well aware 00:05:59.370 --> 00:06:01.949 of their crisis. The government set a target 00:06:01.949 --> 00:06:05.430 of constructing 100 ,000 new homes annually. 00:06:05.810 --> 00:06:08.389 A target is different from deregulation, though. 00:06:08.600 --> 00:06:11.779 But the intent was there, and yet in 2024, only 00:06:11.779 --> 00:06:15.019 about 82 ,000 were added. The shortage is actually 00:06:15.019 --> 00:06:18.560 increasing. It was around 396 ,000 homes in mid 00:06:18.560 --> 00:06:22.439 -2025, and experts forecast it to swell to 453 00:06:22.439 --> 00:06:25.519 ,000 by 2027. This is happening in a sophisticated 00:06:25.519 --> 00:06:28.920 economy. Why? Because the web is tangling them 00:06:28.920 --> 00:06:31.540 up. The source material notes that despite the 00:06:31.540 --> 00:06:33.759 demand, social housing is lagging way behind. 00:06:34.220 --> 00:06:38.879 Between 2020 and 2023, only 51 of 342 municipalities 00:06:38.879 --> 00:06:42.579 met their social housing goals. But wait, why 00:06:42.579 --> 00:06:44.800 are they missing those goals? The Netherlands 00:06:44.800 --> 00:06:47.439 example actually supports my skepticism of regulation, 00:06:47.899 --> 00:06:50.759 not your faith in it. How so? Well, look at the 00:06:50.759 --> 00:06:53.439 policy response. The Netherlands introduced the 00:06:53.439 --> 00:06:57.019 Affordable Rent Act in 2024 and the Good Landlordship 00:06:57.019 --> 00:07:00.459 Act in 2023. They're capping rents from mid -price 00:07:00.459 --> 00:07:03.399 dwellings and limiting annual hikes. And critics 00:07:03.399 --> 00:07:06.000 explicitly argue that these measures hinder the 00:07:06.000 --> 00:07:08.259 housing association's ability to invest in new 00:07:08.259 --> 00:07:10.680 construction. You have a rent freeze that reduces 00:07:10.680 --> 00:07:13.060 the rental income needed to build the next generation 00:07:13.060 --> 00:07:15.779 of social housing. It's a perfect example of 00:07:15.779 --> 00:07:18.040 how trying to control the market paradoxically 00:07:18.040 --> 00:07:20.579 kills investment. I'm sorry, but I just don't 00:07:20.579 --> 00:07:23.319 buy that. Let me tell you why. You're blaming 00:07:23.319 --> 00:07:25.639 tenant protections for a lack of supply, but 00:07:25.639 --> 00:07:27.379 that ignores the vulnerability of the people 00:07:27.379 --> 00:07:30.000 actually living in these homes. If you let the 00:07:30.000 --> 00:07:32.319 market run wild without those protections, you 00:07:32.319 --> 00:07:34.379 might get investment, but you also get displacement. 00:07:34.740 --> 00:07:37.420 But without the investment, you get shortage, 00:07:37.740 --> 00:07:40.860 which drives prices up for everyone. Look at 00:07:40.860 --> 00:07:43.600 Germany. It's often cited as a model of a strong 00:07:43.600 --> 00:07:45.720 rental market, but homeownership is incredibly 00:07:45.720 --> 00:07:50.740 low. Only what? 46 .7 % in 2022. And what's happening 00:07:50.740 --> 00:07:53.180 there? As subsidies for homeownership were reduced 00:07:53.180 --> 00:07:56.180 in the 2000s, overcrowding has steeply risen. 00:07:56.680 --> 00:07:59.319 The regulated approach is leading to people living 00:07:59.319 --> 00:08:01.600 on top of each other. That actually brings me 00:08:01.600 --> 00:08:04.160 to a crucial point about financialization. We 00:08:04.160 --> 00:08:06.660 cannot talk about housing without talking about 00:08:06.660 --> 00:08:08.939 it as an asset class. It's not just shelter. 00:08:09.019 --> 00:08:11.259 It's a financial vehicle. The source material 00:08:11.259 --> 00:08:13.939 discusses asset cycles. When you treat housing 00:08:13.939 --> 00:08:16.399 primarily as an investment to be deregulated 00:08:16.399 --> 00:08:19.459 and maximized, you invite volatility. Volatility 00:08:19.459 --> 00:08:22.300 is part of any market. But in housing, volatility 00:08:22.300 --> 00:08:26.259 ruins lives. Goran and McQuaid. and their 2020 00:08:26.259 --> 00:08:29.959 research describe these price default spirals. 00:08:30.139 --> 00:08:33.460 So when an economic shock hits, like a drop in 00:08:33.460 --> 00:08:36.779 employment, it induces foreclosures. In a hyper 00:08:36.779 --> 00:08:39.740 -financialized market, those foreclosures amplify 00:08:39.740 --> 00:08:43.100 asset price declines, which then leads to a credit 00:08:43.100 --> 00:08:46.019 crunch for the wider economy. We saw this in 00:08:46.019 --> 00:08:50.100 the subprime crisis of 2007, 2008. If you purely 00:08:50.100 --> 00:08:53.220 deregulate, you are inflating bubbles that inevitably 00:08:53.220 --> 00:08:55.659 burst. and the people at the bottom get crushed. 00:08:55.919 --> 00:08:58.740 But the bust is often caused by the distortion 00:08:58.740 --> 00:09:01.980 of the boom. If supply could adjust smoothly 00:09:01.980 --> 00:09:04.539 to demand, if we didn't have zoning creating 00:09:04.539 --> 00:09:07.259 this artificial scarcity, we wouldn't see such 00:09:07.259 --> 00:09:10.059 violent bubbles. I think that's wishful thinking. 00:09:10.259 --> 00:09:13.100 A purely market -based approach fails the poor 00:09:13.100 --> 00:09:15.940 because there is simply no profit in housing 00:09:15.940 --> 00:09:19.320 them. Look at India. The numbers are just staggering. 00:09:19.659 --> 00:09:24.350 In 2012, The shortage was estimated at 18 .78 00:09:24.350 --> 00:09:28.309 million units. But here's the kicker. 10 .55 00:09:28.309 --> 00:09:30.850 million of those were needed by the economically 00:09:30.850 --> 00:09:34.029 weaker section, households making under 300 ,000 00:09:34.029 --> 00:09:37.769 rupees. Another 7 .41 million were for the lower 00:09:37.769 --> 00:09:40.730 income group. That is a tragedy. Absolutely. 00:09:41.110 --> 00:09:43.649 It's not just a tragedy. It's a market reality. 00:09:44.009 --> 00:09:47.389 The middle income group and above only faced 00:09:47.389 --> 00:09:51.370 a shortfall of like... 0 .82 million units. The 00:09:51.370 --> 00:09:53.950 market builds for the rich. It builds for the 00:09:53.950 --> 00:09:56.529 middle. It does not build for the 18 million 00:09:56.529 --> 00:09:59.690 poor people in India without massive intervention. 00:10:00.570 --> 00:10:03.090 Deregulation doesn't solve that. It just makes 00:10:03.090 --> 00:10:06.090 it easier to build luxury condos. That's an interesting 00:10:06.090 --> 00:10:08.669 point, though I would frame it a little differently. 00:10:09.210 --> 00:10:12.610 When you build luxury condos or any market rate 00:10:12.610 --> 00:10:15.549 housing, you prevent high income earners from 00:10:15.549 --> 00:10:18.750 buying up the older housing stock, which suppresses 00:10:18.750 --> 00:10:21.370 prices down the chain. But let's look at how 00:10:21.370 --> 00:10:23.990 we even define need, because I think that's where 00:10:23.990 --> 00:10:26.549 the government planning models really fail. Take 00:10:26.549 --> 00:10:29.539 the United Kingdom. Right. The UK has its own 00:10:29.539 --> 00:10:32.419 unique set of issues. It does. The UK National 00:10:32.419 --> 00:10:35.980 Planning Policy Framework uses a standard formula 00:10:35.980 --> 00:10:39.500 to assess need based on household growth projections. 00:10:39.799 --> 00:10:42.759 And what does this formula reveal? A massive 00:10:42.759 --> 00:10:46.200 regional imbalance. You have undersupply and 00:10:46.200 --> 00:10:48.879 high demand in the south and relative abundance 00:10:48.879 --> 00:10:51.899 in the economically depressed north. This proves 00:10:51.899 --> 00:10:54.220 that the housing crisis is location specific. 00:10:54.460 --> 00:10:56.840 It is about the inability to build where the 00:10:56.840 --> 00:10:59.970 jobs are. Or it proves that the formula is flawed. 00:11:00.149 --> 00:11:04.330 How so? The parliament has a target of 300 ,000 00:11:04.330 --> 00:11:07.750 new homes a year. That's a clear metric for success. 00:11:08.070 --> 00:11:10.450 If they hit that, they alleviate the pressure. 00:11:10.710 --> 00:11:13.769 But critics of that standard formula say it ignores 00:11:13.769 --> 00:11:16.409 the backlog. It looks at future household growth, 00:11:16.570 --> 00:11:18.590 but it doesn't account for the millions of people 00:11:18.590 --> 00:11:21.409 currently living in poorly maintained or overcrowded 00:11:21.409 --> 00:11:25.080 accommodation. A 2019 report estimated 4 .75 00:11:25.080 --> 00:11:27.720 million households in Great Britain are in need 00:11:27.720 --> 00:11:31.539 of adequate affordable housing. 4 .75 million? 00:11:31.919 --> 00:11:35.580 Yes. And simply building 300 ,000 units somewhere 00:11:35.580 --> 00:11:38.100 doesn't necessarily help them if those units 00:11:38.100 --> 00:11:40.559 are the wrong type or in the wrong place. And 00:11:40.559 --> 00:11:42.360 this connects to the social unrest mentioned 00:11:42.360 --> 00:11:44.620 in the material. Political notes that the housing 00:11:44.620 --> 00:11:47.200 crisis has hurt millennials and Gen Z specifically, 00:11:47.500 --> 00:11:50.460 making them skeptical of democracy itself. I 00:11:50.460 --> 00:11:53.460 agree that the social cost is high. That is exactly 00:11:53.460 --> 00:11:56.460 why I'm so passionate about removing the barriers. 00:11:56.940 --> 00:12:00.059 If young people can't buy into the system, they 00:12:00.059 --> 00:12:02.659 will turn against it. But the missing middle 00:12:02.659 --> 00:12:06.200 housing, you know, duplexes, townhouses, is exactly 00:12:06.200 --> 00:12:09.460 what is illegal to build in so many Anglosphere 00:12:09.460 --> 00:12:12.820 cities. If we legalize that, the labor constraints 00:12:12.820 --> 00:12:15.720 you mentioned earlier would be less of an issue 00:12:15.720 --> 00:12:17.960 because those buildings are cheaper and easier 00:12:17.960 --> 00:12:20.980 to construct than high -rise towers. But you're 00:12:20.980 --> 00:12:23.419 still ignoring the labor shortage. The Moody's 00:12:23.419 --> 00:12:25.659 analytics finding wasn't a suggestion, it was 00:12:25.659 --> 00:12:28.820 a diagnosis. You can legalize a duplex, but you 00:12:28.820 --> 00:12:31.139 cannot build it without a carpenter. And right 00:12:31.139 --> 00:12:33.620 now, the labor market is broken. Relying on the 00:12:33.620 --> 00:12:35.720 private sector to magically summon a workforce 00:12:35.720 --> 00:12:38.779 when wages are stagnating? It's a fantasy. It's 00:12:38.779 --> 00:12:42.200 not magic. It's supply and demand. If the demand 00:12:42.200 --> 00:12:45.279 for construction is there, wages rise and workers 00:12:45.279 --> 00:12:47.919 enter the field. But they won't enter the field 00:12:47.919 --> 00:12:49.879 if the projects are blocked by city councils 00:12:49.879 --> 00:12:52.299 for five years before ground is even broken. 00:12:52.899 --> 00:12:55.799 I think we're circling the same drain here. You 00:12:55.799 --> 00:12:58.159 see the blockages as the starting line? I see 00:12:58.159 --> 00:13:00.379 the blockage as a symptom of a larger dysfunction. 00:13:00.820 --> 00:13:03.679 Okay, let's try to pull this together. We've 00:13:03.679 --> 00:13:06.139 looked at the global data from Auckland to Amsterdam. 00:13:06.480 --> 00:13:09.460 For me, the takeaway is clear. While the web 00:13:09.460 --> 00:13:12.419 is complex, we have empirical data, specifically 00:13:12.419 --> 00:13:15.200 from Ryan Greenaway -McGriffey in Auckland, showing 00:13:15.200 --> 00:13:18.159 that removing barriers works. It lowers the rent 00:13:18.159 --> 00:13:20.580 burden. Zoning restrictions are an artificial 00:13:20.580 --> 00:13:23.179 constraint that drives up prices by over 50%. 00:13:23.179 --> 00:13:26.379 We're taxing ourselves into poverty. And the 00:13:26.379 --> 00:13:28.820 solution is to stop doing that. And I remain 00:13:28.820 --> 00:13:32.100 skeptical that the solution is that linear. Housing 00:13:32.100 --> 00:13:34.519 is tied to labor markets, material availability, 00:13:34.879 --> 00:13:37.720 financial stability. If we don't address income 00:13:37.720 --> 00:13:40.500 inequality, the poor earnings cited in the literature, 00:13:40.700 --> 00:13:42.940 and if we don't protect tenants from the volatility 00:13:42.940 --> 00:13:45.899 of asset cycles, deregulation is only a partial 00:13:45.899 --> 00:13:48.960 solution. It might lower rents for some, but 00:13:48.960 --> 00:13:50.940 as we see in India and even the Netherlands, 00:13:51.159 --> 00:13:54.240 it can leave millions behind or create new vulnerabilities. 00:13:55.080 --> 00:13:58.440 It is a global phenomenon with significant variation. 00:13:58.879 --> 00:14:02.539 The Anglo -Saire, Europe, and Asia are all tackling 00:14:02.539 --> 00:14:05.399 this differently. Exactly. And the trade -offs 00:14:05.399 --> 00:14:07.720 between rent control, investment, and social 00:14:07.720 --> 00:14:10.659 stability are real. There is no silver bullet. 00:14:10.860 --> 00:14:13.320 We encourage you to look deeper into the material, 00:14:13.500 --> 00:14:16.139 specifically the trade -offs between those planning 00:14:16.139 --> 00:14:18.860 systems. And consider the human cost behind the 00:14:18.860 --> 00:14:20.940 numbers. Thank you for listening. Goodbye.