Welcome to the debate. So today we're dissecting
a phenomenon that I think you could argue defines
the modern economic experience more than any
other. It's personal. It is definitely painful.
And it is playing out on this massive synchronized
global scale. We are talking about the global
housing crisis. It is a heavy topic. And frankly,
calling it a crisis, it almost feels like an
understatement at this point. When we look at
the source material, we're not just seeing a
series of local inconveniences or separate market
bubbles. We are looking at what the literature
calls a complex web of problems and dysfunctions.
Exactly. And whether you're in Amsterdam or Auckland
or San Francisco, the story is remarkably similar.
Housing costs are consistently rising faster
than household income. But the core disagreement
and what we're here to discuss is why. Is this
crisis primarily a failure of government regulation,
a kind of self -inflicted wound caused by planning
systems that just refuse to let cities grow?
Or is it a systemic failure of financial markets,
of labor dynamics, and deep -seated income inequality?
I'd argue that simply chanting, build more, ignores
the macroeconomic reality that housing is a financial
asset. It's subject to these boom and bust cycles.
And that the market, you know, when left to its
own devices, consistently fails the most vulnerable.
And I see why you think that. But let me offer
a different perspective. I believe the evidence
points almost overwhelmingly to a supply -side
crisis driven by these artificial constraints.
The solution isn't more complexity. It is simply
deregulation and physical construction, as we've
seen in places like Japan and New Zealand. Well,
I come at it from a different angle. But let's
get into the details. Why don't you lay out your
case for the supply side argument? Gladly. If
we look at the foundational economic research
on this, specifically the work of Hilber and
Shoney from 2022, they identify the primary strand
of this whole debate as being about supply constraints.
The logic is stark and really inescapable. Land
use restrictions prevent the market from meeting
a growing demand. When you stop people from building,
costs go up. It's that simple. I don't deny that
supply is tight, but to say it's the primary
driver, that feels reductive to me. But consider
the magnitude of the distortion here. Studies
have found that restrictive zoning can make homes,
I mean, we're talking more than 50 % more expensive
than the actual cost to build them. That is not
a market failure. That's a regulatory tax. We
see this clear divergence between planning systems.
Anglophone countries, the UK, the US, Australia.
They have planning systems that basically enable
obstruction, empowering local governments and
NIMBYs, you know, not -in -my -backyard activists,
to block new projects. And the result is shortage.
Contrast that with Japan, where zoning is controlled
more at the national level, which reduces local
obstruction. Japanese cities have maintained
abundant and affordable housing relative to their
size precisely because they allow supply to meet
demand. There's a compelling argument, I'll give
you that. But have you considered the definition
of the crisis itself? The source material describes
it as a web of problems. You're pulling on one
thread, zoning, and claiming it unravels the
whole knot. I would argue that poor earnings
are a major contributor that you're just overlooking.
People simply do not make enough money relative
to the cost of living. Income is a factor, certainly,
but... It's more than just a factor. It's central.
If you look at the findings from Moody's Analytics,
they point out that the main causes of the crisis
include shortages of labor and materials, issues
that were significantly made worse by the COVID
-19 pandemic. You can rezone a city all you want,
but if you don't have the bricks, the timber,
or the workers to lay them, you're not getting
new houses. The crisis is also about financing
conditions and just poor forecasting. It's a
structural mismatch between the economy people
live in and the housing market that operates
way above their heads. I'm not entirely convinced
by that because it treats labor and material
shortages as these permanent, immutable barriers
rather than market signals that would resolve
if we just legalized the density that makes construction
efficient. Let's look at a concrete example where
deregulation actually worked. We have what you
could call a gold standard of evidence in the
source material. New Zealand. New Zealand is
an interesting case, I grant you. It is more
than interesting. It is proof of concept. Auckland
specifically. In 2013, they started reforming
their housing laws to loosen construction constraints.
They didn't just talk about webs of problems.
They cut the red tape with something called the
Unitary Plan. And the result? Rent in Auckland
grew more slowly than in other parts of the country
and crucially, more slowly than incomes. Slowing
the growth is not the same as solving the crisis,
though. But look at the counterfactual. Ryan
Greenway McGrivey estimated in July 2024 that
rents in Auckland were 28 percent lower than
they would have been without those reforms. That
is a massive difference for a renter. It was
so successful that in October 2021, the national
government passed bipartisan upzoning for the
country's largest cities, allowing three units
and three stories on residential parcels. They
legalized the missing middle. This proves that
when you remove the obstruction, the market responds
and prices stabilize. I see the data point you're
using, but I think you're declaring victory a
bit too early. Legislative targets and zoning
changes. they don't automatically create homes.
Let's look at the Netherlands. They're well aware
of their crisis. The government set a target
of constructing 100 ,000 new homes annually.
A target is different from deregulation, though.
But the intent was there, and yet in 2024, only
about 82 ,000 were added. The shortage is actually
increasing. It was around 396 ,000 homes in mid
-2025, and experts forecast it to swell to 453
,000 by 2027. This is happening in a sophisticated
economy. Why? Because the web is tangling them
up. The source material notes that despite the
demand, social housing is lagging way behind.
Between 2020 and 2023, only 51 of 342 municipalities
met their social housing goals. But wait, why
are they missing those goals? The Netherlands
example actually supports my skepticism of regulation,
not your faith in it. How so? Well, look at the
policy response. The Netherlands introduced the
Affordable Rent Act in 2024 and the Good Landlordship
Act in 2023. They're capping rents from mid -price
dwellings and limiting annual hikes. And critics
explicitly argue that these measures hinder the
housing association's ability to invest in new
construction. You have a rent freeze that reduces
the rental income needed to build the next generation
of social housing. It's a perfect example of
how trying to control the market paradoxically
kills investment. I'm sorry, but I just don't
buy that. Let me tell you why. You're blaming
tenant protections for a lack of supply, but
that ignores the vulnerability of the people
actually living in these homes. If you let the
market run wild without those protections, you
might get investment, but you also get displacement.
But without the investment, you get shortage,
which drives prices up for everyone. Look at
Germany. It's often cited as a model of a strong
rental market, but homeownership is incredibly
low. Only what? 46 .7 % in 2022. And what's happening
there? As subsidies for homeownership were reduced
in the 2000s, overcrowding has steeply risen.
The regulated approach is leading to people living
on top of each other. That actually brings me
to a crucial point about financialization. We
cannot talk about housing without talking about
it as an asset class. It's not just shelter.
It's a financial vehicle. The source material
discusses asset cycles. When you treat housing
primarily as an investment to be deregulated
and maximized, you invite volatility. Volatility
is part of any market. But in housing, volatility
ruins lives. Goran and McQuaid. and their 2020
research describe these price default spirals.
So when an economic shock hits, like a drop in
employment, it induces foreclosures. In a hyper
-financialized market, those foreclosures amplify
asset price declines, which then leads to a credit
crunch for the wider economy. We saw this in
the subprime crisis of 2007, 2008. If you purely
deregulate, you are inflating bubbles that inevitably
burst. and the people at the bottom get crushed.
But the bust is often caused by the distortion
of the boom. If supply could adjust smoothly
to demand, if we didn't have zoning creating
this artificial scarcity, we wouldn't see such
violent bubbles. I think that's wishful thinking.
A purely market -based approach fails the poor
because there is simply no profit in housing
them. Look at India. The numbers are just staggering.
In 2012, The shortage was estimated at 18 .78
million units. But here's the kicker. 10 .55
million of those were needed by the economically
weaker section, households making under 300 ,000
rupees. Another 7 .41 million were for the lower
income group. That is a tragedy. Absolutely.
It's not just a tragedy. It's a market reality.
The middle income group and above only faced
a shortfall of like... 0 .82 million units. The
market builds for the rich. It builds for the
middle. It does not build for the 18 million
poor people in India without massive intervention.
Deregulation doesn't solve that. It just makes
it easier to build luxury condos. That's an interesting
point, though I would frame it a little differently.
When you build luxury condos or any market rate
housing, you prevent high income earners from
buying up the older housing stock, which suppresses
prices down the chain. But let's look at how
we even define need, because I think that's where
the government planning models really fail. Take
the United Kingdom. Right. The UK has its own
unique set of issues. It does. The UK National
Planning Policy Framework uses a standard formula
to assess need based on household growth projections.
And what does this formula reveal? A massive
regional imbalance. You have undersupply and
high demand in the south and relative abundance
in the economically depressed north. This proves
that the housing crisis is location specific.
It is about the inability to build where the
jobs are. Or it proves that the formula is flawed.
How so? The parliament has a target of 300 ,000
new homes a year. That's a clear metric for success.
If they hit that, they alleviate the pressure.
But critics of that standard formula say it ignores
the backlog. It looks at future household growth,
but it doesn't account for the millions of people
currently living in poorly maintained or overcrowded
accommodation. A 2019 report estimated 4 .75
million households in Great Britain are in need
of adequate affordable housing. 4 .75 million?
Yes. And simply building 300 ,000 units somewhere
doesn't necessarily help them if those units
are the wrong type or in the wrong place. And
this connects to the social unrest mentioned
in the material. Political notes that the housing
crisis has hurt millennials and Gen Z specifically,
making them skeptical of democracy itself. I
agree that the social cost is high. That is exactly
why I'm so passionate about removing the barriers.
If young people can't buy into the system, they
will turn against it. But the missing middle
housing, you know, duplexes, townhouses, is exactly
what is illegal to build in so many Anglosphere
cities. If we legalize that, the labor constraints
you mentioned earlier would be less of an issue
because those buildings are cheaper and easier
to construct than high -rise towers. But you're
still ignoring the labor shortage. The Moody's
analytics finding wasn't a suggestion, it was
a diagnosis. You can legalize a duplex, but you
cannot build it without a carpenter. And right
now, the labor market is broken. Relying on the
private sector to magically summon a workforce
when wages are stagnating? It's a fantasy. It's
not magic. It's supply and demand. If the demand
for construction is there, wages rise and workers
enter the field. But they won't enter the field
if the projects are blocked by city councils
for five years before ground is even broken.
I think we're circling the same drain here. You
see the blockages as the starting line? I see
the blockage as a symptom of a larger dysfunction.
Okay, let's try to pull this together. We've
looked at the global data from Auckland to Amsterdam.
For me, the takeaway is clear. While the web
is complex, we have empirical data, specifically
from Ryan Greenaway -McGriffey in Auckland, showing
that removing barriers works. It lowers the rent
burden. Zoning restrictions are an artificial
constraint that drives up prices by over 50%.
We're taxing ourselves into poverty. And the
solution is to stop doing that. And I remain
skeptical that the solution is that linear. Housing
is tied to labor markets, material availability,
financial stability. If we don't address income
inequality, the poor earnings cited in the literature,
and if we don't protect tenants from the volatility
of asset cycles, deregulation is only a partial
solution. It might lower rents for some, but
as we see in India and even the Netherlands,
it can leave millions behind or create new vulnerabilities.
It is a global phenomenon with significant variation.
The Anglo -Saire, Europe, and Asia are all tackling
this differently. Exactly. And the trade -offs
between rent control, investment, and social
stability are real. There is no silver bullet.
We encourage you to look deeper into the material,
specifically the trade -offs between those planning
systems. And consider the human cost behind the
numbers. Thank you for listening. Goodbye.