WEBVTT 00:00:00.000 --> 00:00:03.940 Welcome back to the Deep Dive. It's really great 00:00:03.940 --> 00:00:07.639 to have you here with us. We are about to wade 00:00:07.639 --> 00:00:10.500 into some waters that on the surface might look 00:00:10.500 --> 00:00:15.000 a little bit, well, beige. Beige. That's an interesting 00:00:15.000 --> 00:00:17.140 choice of color for today's topic. You know exactly 00:00:17.140 --> 00:00:18.960 what I mean. We're talking about zoning codes, 00:00:19.219 --> 00:00:22.339 rental yields, municipal regulations, you know. 00:00:22.910 --> 00:00:25.870 square footage minimums. It's the kind of stuff 00:00:25.870 --> 00:00:28.329 that usually gets filed away under dry policy 00:00:28.329 --> 00:00:31.510 debates or maybe things I panic about once a 00:00:31.510 --> 00:00:34.429 month when the rent check clears. It feels like 00:00:34.429 --> 00:00:36.170 homework. I get that. It feels like the kind 00:00:36.170 --> 00:00:37.609 of thing you pay someone else to worry about 00:00:37.609 --> 00:00:39.630 until you realize you're the one paying for it. 00:00:39.670 --> 00:00:42.909 Exactly. But the more I looked at the stack of 00:00:42.909 --> 00:00:44.829 research we have for today, the reports from 00:00:44.829 --> 00:00:47.450 the Council of Economic Advisors, the case studies 00:00:47.450 --> 00:00:50.170 from Vienna to Mexico, the architectural critiques, 00:00:50.210 --> 00:00:53.119 the more I realized this isn't just about money. 00:00:53.420 --> 00:00:56.759 It's practically the theory of everything for 00:00:56.759 --> 00:00:59.119 how our daily lives actually function. It really 00:00:59.119 --> 00:01:01.500 is. I mean, when you pull on the thread labeled 00:01:01.500 --> 00:01:05.620 housing, you end up unraveling the entire fabric 00:01:05.620 --> 00:01:07.859 of society. You hit transportation immediately. 00:01:08.299 --> 00:01:10.340 Immediately. You hit public health, you hit education 00:01:10.340 --> 00:01:14.799 quality, environmental impact, and even the most 00:01:14.799 --> 00:01:18.200 finite resource we have, our time. That's the 00:01:18.200 --> 00:01:21.209 kicker for me. It dictates who gets to live where, 00:01:21.329 --> 00:01:24.170 how long you sit in a car every single day, and 00:01:24.170 --> 00:01:26.870 fundamentally who has access to opportunity and 00:01:26.870 --> 00:01:30.069 who is, you know, locked out. Yeah, absolutely. 00:01:30.329 --> 00:01:32.489 It determines if you can walk your kids to school 00:01:32.489 --> 00:01:34.370 or if you have to put them on a bus for an hour. 00:01:34.530 --> 00:01:38.090 And the scale of this is just, it's hard to overstate. 00:01:38.109 --> 00:01:39.450 We aren't just talking about expensive apartments 00:01:39.450 --> 00:01:41.530 in Manhattan or London. We are talking about 00:01:41.530 --> 00:01:45.670 a global structural failure. So here's the mission 00:01:45.670 --> 00:01:48.549 for today. We are going to peel back. the layers 00:01:48.549 --> 00:01:51.189 of this word affordable, because right now that 00:01:51.189 --> 00:01:53.269 word is doing a lot of heavy lifting that the 00:01:53.269 --> 00:01:55.810 math simply doesn't support. Not at all. Globally, 00:01:55.810 --> 00:01:58.390 we're looking at 1 .6 billion people living in 00:01:58.390 --> 00:02:00.549 inadequate housing. And to bring that closer 00:02:00.549 --> 00:02:03.069 to home for the U .S. audience, we're looking 00:02:03.069 --> 00:02:06.450 at a system where income simply has not kept 00:02:06.450 --> 00:02:09.030 pace with costs. I mean, we've reached a point 00:02:09.030 --> 00:02:11.909 where half of all renters are what economists 00:02:11.909 --> 00:02:15.310 call cost burdened. Which is a polite, very sanitized 00:02:15.310 --> 00:02:17.310 way of saying they are broke because of their 00:02:17.310 --> 00:02:20.030 landlord. Essentially. It means they're making 00:02:20.030 --> 00:02:22.990 tradeoffs between rent and food or rent and medicine. 00:02:23.569 --> 00:02:26.629 But the goal of this deep dive isn't just to, 00:02:26.629 --> 00:02:29.439 you know, admire the problem. Right. We want 00:02:29.439 --> 00:02:31.419 to understand the mechanics of it, the intersection 00:02:31.419 --> 00:02:35.340 of urban planning, economics, human rights. We're 00:02:35.340 --> 00:02:37.259 going to look at why it's broken, and then we're 00:02:37.259 --> 00:02:39.000 going to look at the architectural and policy 00:02:39.000 --> 00:02:41.379 solutions that are actually working. But before 00:02:41.379 --> 00:02:43.500 we get into the solution, we have to appreciate 00:02:43.500 --> 00:02:47.520 the absurdity of the problem. I want to start 00:02:47.520 --> 00:02:49.539 with a number from the research that just stopped 00:02:49.539 --> 00:02:52.360 me dead in my tracks. It's from a study mentioned 00:02:52.360 --> 00:02:54.740 in The Atlantic regarding San Francisco. Oh, 00:02:54.740 --> 00:02:56.439 I know the one you mean. This is the Right to 00:02:56.439 --> 00:02:58.840 Build study. This is a crucial piece of economic 00:02:58.840 --> 00:03:01.599 detective work. It blew my mind. We often assume 00:03:01.599 --> 00:03:03.960 houses are expensive because, well, land is finite 00:03:03.960 --> 00:03:06.780 and expensive or because bricks and glass and 00:03:06.780 --> 00:03:09.819 labor cost money. And those do play a role. I 00:03:09.819 --> 00:03:12.169 mean, you can't ignore material costs. Lumber 00:03:12.169 --> 00:03:14.990 prices fluctuate. Labor shortages are real. Sure. 00:03:15.110 --> 00:03:17.990 But this study tried to isolate the cost of the 00:03:17.990 --> 00:03:21.169 bureaucracy itself. Not buying the land, not 00:03:21.169 --> 00:03:23.490 paying the construction crew, not buying a single 00:03:23.490 --> 00:03:25.810 two by four. Just the paperwork. Just the cost 00:03:25.810 --> 00:03:29.009 of permissions, red tape, delays and fees. The 00:03:29.009 --> 00:03:31.569 study found that this right to build adds approximately 00:03:31.569 --> 00:03:35.430 $600 ,000 to the price tag of a single house. 00:03:35.669 --> 00:03:38.370 Let that sit for a second. $600 ,000. That is 00:03:38.370 --> 00:03:40.389 the price of a very nice house in almost any 00:03:40.389 --> 00:03:42.460 other part of the world. In the Midwest, that's 00:03:42.460 --> 00:03:44.919 a mansion. And in San Francisco, that amount 00:03:44.919 --> 00:03:48.120 of money buys you nothing. Nothing physical. 00:03:48.240 --> 00:03:50.319 It buys you a permission slip. It creates no 00:03:50.319 --> 00:03:53.419 physical structure. It provides no utility. It's 00:03:53.419 --> 00:03:56.210 essentially a scarcity tax. It is the cost of 00:03:56.210 --> 00:03:58.969 navigating a system that is, frankly, designed 00:03:58.969 --> 00:04:02.169 to say no. It is the monetized value of meetings, 00:04:02.469 --> 00:04:04.830 environmental impact reports that get challenged, 00:04:05.069 --> 00:04:07.509 neighborhood reviews, and just the sheer time 00:04:07.509 --> 00:04:10.310 value of money while a project sits in limbo 00:04:10.310 --> 00:04:14.069 for years. So keep that $600 ,000 figure in the 00:04:14.069 --> 00:04:15.949 back of your mind as we go through this. That 00:04:15.949 --> 00:04:18.829 is the invisible weight hanging over this entire 00:04:18.829 --> 00:04:21.129 conversation. But let's start with the basics. 00:04:21.209 --> 00:04:23.230 Let's talk about the math of affordability. Okay. 00:04:24.430 --> 00:04:27.209 a place is affordable, is there actually a scientific 00:04:27.209 --> 00:04:30.350 definition or is it just, you know, a vibe? There 00:04:30.350 --> 00:04:32.410 is a definition, but it's a bit of a blunt instrument. 00:04:32.589 --> 00:04:35.069 The gold standard in the U .S. and Canada is 00:04:35.069 --> 00:04:37.509 the 30 % rule. Okay, walk us through that. It's 00:04:37.509 --> 00:04:39.750 pretty simple on paper. Housing is considered 00:04:39.750 --> 00:04:42.709 affordable if it costs less than 30 % of your 00:04:42.709 --> 00:04:45.370 gross household income. Gross, so before taxes. 00:04:45.629 --> 00:04:48.110 Before taxes, yes. And that includes your rent 00:04:48.110 --> 00:04:50.370 or your mortgage, plus your utilities like heat 00:04:50.370 --> 00:04:53.459 and water. 30%. It seems so neat and tidy. But 00:04:53.459 --> 00:04:55.439 where did that specific number come from? Was 00:04:55.439 --> 00:04:57.660 it brought down from a mountain on stone tablets 00:04:57.660 --> 00:05:00.519 by an economist? Hardly. It's actually been a 00:05:00.519 --> 00:05:02.500 moving target historically. If you look back 00:05:02.500 --> 00:05:06.500 at Canada in the 1950s, the rule was 20%. 20 00:05:06.500 --> 00:05:09.819 %? That sounds like a dream. Imagine keeping 00:05:09.819 --> 00:05:12.680 80 % of your paycheck. It does, doesn't it? Then 00:05:12.680 --> 00:05:16.899 it crept up to 25%, and by the 1980s, it settled 00:05:16.899 --> 00:05:20.360 at 30%. So it's not a law of physics? No, it's 00:05:20.360 --> 00:05:21.860 just a reflection of what we've collectively 00:05:21.860 --> 00:05:25.060 decided to tolerate. In India, for comparison, 00:05:25.300 --> 00:05:27.860 lenders often use a 40 % rule. So we've just 00:05:27.860 --> 00:05:29.959 slowly accepted that we should pay more and more 00:05:29.959 --> 00:05:32.519 of our paycheck for a roof over our heads. It's 00:05:32.519 --> 00:05:34.240 like the boiling frog experiment, but with our 00:05:34.240 --> 00:05:36.779 bank accounts. That's the trend line. And while 00:05:36.779 --> 00:05:39.199 30 % is a useful baseline for banks to decide 00:05:39.199 --> 00:05:41.740 if you're a risk, it is deeply flawed when you 00:05:41.740 --> 00:05:43.579 try to apply it to real people's lives. Why? 00:05:43.839 --> 00:05:45.870 Because it looks at housing in a vacuum. Great. 00:05:45.930 --> 00:05:48.269 It assumes that if you pay 30 % for your house, 00:05:48.410 --> 00:05:51.449 the other 70 % of your income is just free to 00:05:51.449 --> 00:05:54.050 do whatever. But life doesn't work that way. 00:05:54.170 --> 00:05:56.569 Not at all. The location of the house dictates 00:05:56.569 --> 00:05:58.649 how you spend the rest of that money. Exactly. 00:05:58.689 --> 00:06:01.209 It completely ignores the interaction between 00:06:01.209 --> 00:06:03.470 where you live and your second biggest expense. 00:06:03.910 --> 00:06:07.680 Which, for most Americans, is the car. Transportation. 00:06:07.980 --> 00:06:10.339 And this is where the data gets really, really 00:06:10.339 --> 00:06:12.100 interesting. There's an index developed by the 00:06:12.100 --> 00:06:13.980 Center for Neighborhood Technology called the 00:06:13.980 --> 00:06:17.980 H plus T affordability index. H plus T housing 00:06:17.980 --> 00:06:21.399 plus transportation. Exactly. They are arguing 00:06:21.399 --> 00:06:23.920 you can't separate the two. And they are right. 00:06:24.019 --> 00:06:27.220 You cannot separate where you live from how you 00:06:27.220 --> 00:06:30.000 get around. I mean, think about it. If you find 00:06:30.000 --> 00:06:32.899 a chic apartment, let's say it's $800 a month, 00:06:32.980 --> 00:06:35.120 but it's 50 miles from your job and nowhere near 00:06:35.120 --> 00:06:40.199 a bus line. No, my rent is low, but my gas bill 00:06:40.199 --> 00:06:42.800 is astronomical. And my car maintenance goes 00:06:42.800 --> 00:06:44.860 through the roof because I'm putting 20 ,000 00:06:44.860 --> 00:06:47.339 miles a year on it. Precisely. And the data bears 00:06:47.339 --> 00:06:50.279 this out. It's not just a gut feeling. If you 00:06:50.279 --> 00:06:52.959 look at U .S. neighborhoods using just that standard 00:06:52.959 --> 00:06:56.480 30 % rule for housing costs, about 55 % of neighborhoods 00:06:56.480 --> 00:06:58.959 look affordable. Okay. They passed the test. 00:06:59.139 --> 00:07:01.319 Slightly more than half. That's not great, but 00:07:01.319 --> 00:07:03.779 it's not catastrophic. It sounds manageable. 00:07:03.939 --> 00:07:06.980 Right. But if you factor in transportation costs 00:07:06.980 --> 00:07:10.740 alongside housing costs, using a 45 % threshold 00:07:10.740 --> 00:07:13.019 for the combined two, that number drops from 00:07:13.019 --> 00:07:18.759 55 % to 26%. Wow. Hold on. So nearly 30 % of 00:07:18.759 --> 00:07:22.579 neighborhoods are what? Fake affordable? That 00:07:22.579 --> 00:07:24.620 is a great way to put it. They are affordable 00:07:24.620 --> 00:07:28.000 only if you never leave the house. Once you factor 00:07:28.000 --> 00:07:30.459 in the commute, the model shows that you effectively 00:07:30.459 --> 00:07:34.060 eliminate nearly 60 ,000 neighborhoods from being 00:07:34.060 --> 00:07:38.139 truly affordable. And this explains that phenomenon 00:07:38.139 --> 00:07:41.639 known as... Drive till you qualify. Drive till 00:07:41.639 --> 00:07:44.240 you qualify. I've heard this phrase. It sounds 00:07:44.240 --> 00:07:46.839 like a bleak reality show title. It's the standard 00:07:46.839 --> 00:07:48.920 operating procedure for the American middle class. 00:07:49.160 --> 00:07:51.199 It's the idea that you keep driving away from 00:07:51.199 --> 00:07:53.439 the city center. Away from the jobs, the culture, 00:07:53.540 --> 00:07:56.399 the density. Until the bank says, OK, at this 00:07:56.399 --> 00:07:58.800 distance, the house prices have dropped enough 00:07:58.800 --> 00:08:00.800 that your income qualifies for the mortgage. 00:08:01.019 --> 00:08:03.680 So you get the house, you get the mortgage, but 00:08:03.680 --> 00:08:05.480 you've just signed yourself up for a two hour 00:08:05.480 --> 00:08:08.500 commute each way. And people often fail to calculate 00:08:08.500 --> 00:08:11.000 that the long commute eats up all the financial 00:08:11.000 --> 00:08:13.339 savings they made on the house price. It's a 00:08:13.339 --> 00:08:16.540 classic trap. It has to be. You save, say, $200 00:08:16.540 --> 00:08:19.720 on the mortgage payment, but you spend $300 on 00:08:19.720 --> 00:08:22.920 gas, tires, and vehicle depreciation. You're 00:08:22.920 --> 00:08:25.439 actually poorer. Not to mention the time cost. 00:08:25.839 --> 00:08:28.100 That's the hidden tax on your life, isn't it? 00:08:28.199 --> 00:08:29.860 That's the one you can't get back. If you're 00:08:29.860 --> 00:08:32.000 spending two hours a day in a car, that's 10 00:08:32.000 --> 00:08:34.590 hours a week. You aren't working, aren't with 00:08:34.590 --> 00:08:36.870 your family, aren't sleeping, you aren't exercising. 00:08:37.250 --> 00:08:39.970 It's a massive degradation of quality of life 00:08:39.970 --> 00:08:42.769 that doesn't show up on a bank spreadsheet. It 00:08:42.769 --> 00:08:44.990 also disconnects you from your community. If 00:08:44.990 --> 00:08:47.450 you leave at 6 a .m. and get back at 7 p .m., 00:08:47.450 --> 00:08:49.250 you aren't volunteering, you aren't going to 00:08:49.250 --> 00:08:51.009 the PTA meeting. You're just sleeping there. 00:08:51.190 --> 00:08:52.889 You are. You're just a resident, not a neighbor. 00:08:53.269 --> 00:08:56.129 So the 30 % rule is flawed because it ignores 00:08:56.129 --> 00:08:58.870 location and transportation. Are there other 00:08:58.870 --> 00:09:00.950 ways to measure this that make more sense? There 00:09:00.950 --> 00:09:04.179 are a few. The World Bank and the UN use something 00:09:04.179 --> 00:09:06.679 called the median multiple. This is more of a 00:09:06.679 --> 00:09:08.799 macroeconomic view. Okay, how does that work? 00:09:08.980 --> 00:09:11.539 You just divide the median house price in a city 00:09:11.539 --> 00:09:14.580 by the gross annual median household income. 00:09:14.799 --> 00:09:17.840 So it's a ratio. Simple division. Right. It's 00:09:17.840 --> 00:09:19.620 a broad stroke to see if a market is healthy. 00:09:19.799 --> 00:09:23.019 A balanced market means a median income family 00:09:23.019 --> 00:09:26.059 can afford a median house. Historically, that 00:09:26.059 --> 00:09:28.960 ratio was around 3 to 1. Three years of income 00:09:28.960 --> 00:09:31.840 to buy a house? That seems reasonable. It was. 00:09:32.200 --> 00:09:34.720 But in places like Sydney, Vancouver, or Hong 00:09:34.720 --> 00:09:38.120 Kong today, that ratio can be 10, 15, or even 00:09:38.120 --> 00:09:41.000 20 to 1. 20 to 1, which just confirms that the 00:09:41.000 --> 00:09:43.039 market is broken. It basically says you need 00:09:43.039 --> 00:09:45.039 to work for 20 years just to pay the principal, 00:09:45.259 --> 00:09:47.960 ignoring interest. Exactly. It's a good diagnostic 00:09:47.960 --> 00:09:50.539 tool for a sick market, but it doesn't really 00:09:50.539 --> 00:09:53.139 help the individual renter figure out their budget. 00:09:53.320 --> 00:09:55.539 So what does? For the individual, I prefer the 00:09:55.539 --> 00:09:58.330 residual income approach. This is used in Australia, 00:09:58.450 --> 00:10:01.509 and it's very, well, it's very human -centric. 00:10:01.750 --> 00:10:04.210 How does that work? It flips the equation. Instead 00:10:04.210 --> 00:10:06.190 of saying you can spend X percent on housing, 00:10:06.350 --> 00:10:09.509 it says, housing is affordable if, after paying 00:10:09.509 --> 00:10:11.470 for it, you still have enough money left over 00:10:11.470 --> 00:10:13.809 for basic necessities. Like food, health care, 00:10:13.870 --> 00:10:16.110 and education. Exactly. That feels much more 00:10:16.110 --> 00:10:17.929 grounded in reality because percentages can be 00:10:17.929 --> 00:10:19.549 really deceiving depending on how much you make. 00:10:19.789 --> 00:10:21.889 Right. If I make a million dollars a year and 00:10:21.889 --> 00:10:24.669 I spend 50 percent on a penthouse, I'm technically 00:10:24.669 --> 00:10:27.100 cost -burdened. By the percentage definition, 00:10:27.360 --> 00:10:28.740 yes. But I still have half a million dollars 00:10:28.740 --> 00:10:30.820 left for groceries. I'm going to be fine. I'm 00:10:30.820 --> 00:10:34.500 burdened on paper, but I'm rich in reality. But 00:10:34.500 --> 00:10:37.440 if I make, say, $20 ,000 a year and spend 30 00:10:37.440 --> 00:10:41.440 % on housing, that's $6 ,000. I have $14 ,000 00:10:41.440 --> 00:10:44.059 left for the entire year. For everything. That 00:10:44.059 --> 00:10:46.059 might not be enough to feed your kids. Precisely. 00:10:46.120 --> 00:10:48.379 Oh. The percentage impacts people differently 00:10:48.379 --> 00:10:51.519 at different income levels. A strict 30 % rule 00:10:51.519 --> 00:10:54.289 hits the poor much harder than the rich. The 00:10:54.289 --> 00:10:56.649 residual income approach forces policymakers 00:10:56.649 --> 00:10:59.250 to look at the actual cost of living, not just 00:10:59.250 --> 00:11:01.889 a ratio. There is one more nuance to the math 00:11:01.889 --> 00:11:04.690 I want to touch on from the notes. We often lump 00:11:04.690 --> 00:11:07.330 renters and owners together when we talk about 00:11:07.330 --> 00:11:10.009 these cost burdens, but the economic reality 00:11:10.009 --> 00:11:12.190 is different, isn't it? Oh, it is night and day. 00:11:12.389 --> 00:11:16.279 If a homeowner is... say they're paying 40 % 00:11:16.279 --> 00:11:18.720 of their income into a mortgage, they are certainly 00:11:18.720 --> 00:11:21.059 cash poor. They might be eating ramen noodles. 00:11:21.240 --> 00:11:22.899 For sure. But they are building equity. That 00:11:22.899 --> 00:11:25.059 money is technically still theirs. Right. It's 00:11:25.059 --> 00:11:27.740 just locked up in drywall and land. It's a forced 00:11:27.740 --> 00:11:31.399 savings plan. Whereas a renter who is burdened. 00:11:31.820 --> 00:11:34.899 is simply losing that income. It's gone. It dissolves. 00:11:35.039 --> 00:11:37.299 So the long -term impact of that affordability 00:11:37.299 --> 00:11:40.220 crisis is much more severe for renters than for 00:11:40.220 --> 00:11:42.840 owners, even if the monthly balance sheet looks 00:11:42.840 --> 00:11:44.840 similar. The owner comes out the other side with 00:11:44.840 --> 00:11:46.820 an asset. The renter comes out with nothing. 00:11:47.139 --> 00:11:49.399 Exactly. Okay, so we've established the math 00:11:49.399 --> 00:11:52.500 is messy, the 30 % rule is a bit of a lie, and 00:11:52.500 --> 00:11:54.580 transportation is the silent killer of budgets. 00:11:54.799 --> 00:11:57.519 But let's get to the why. Why is it so expensive? 00:11:58.319 --> 00:12:01.460 We touched on the $600 ,000 price tag for permission 00:12:01.460 --> 00:12:04.360 in San Francisco. That brings us to the economics 00:12:04.360 --> 00:12:07.240 of scarcity. At its core, yes, it is supply and 00:12:07.240 --> 00:12:09.279 demand. But whenever someone says just build 00:12:09.279 --> 00:12:11.940 more houses, they are missing the complexity 00:12:11.940 --> 00:12:14.039 of supply. It's not just about whether there 00:12:14.039 --> 00:12:15.879 are enough bricks or enough construction workers. 00:12:16.159 --> 00:12:20.379 No, it is about land value and, crucially, overregulation. 00:12:20.480 --> 00:12:22.519 This is where we get back to that right to build. 00:12:23.179 --> 00:12:25.620 You mentioned the Harvard and Atlantic Monthly 00:12:25.620 --> 00:12:28.320 study earlier. Can we dig a little deeper into 00:12:28.320 --> 00:12:30.700 how they actually calculate that? I mean, how 00:12:30.700 --> 00:12:33.149 do you put a price tag on bureaucracy? It's a 00:12:33.149 --> 00:12:36.250 fascinating methodology. The economists, Edward 00:12:36.250 --> 00:12:38.950 Glazer and Christina Tobayo, they looked at the 00:12:38.950 --> 00:12:42.450 cost of single -family homes on quarter -acre 00:12:42.450 --> 00:12:45.610 lots versus half -acre lots. By comparing those, 00:12:45.830 --> 00:12:47.470 they could figure out the marginal land price, 00:12:47.610 --> 00:12:50.070 basically what is a square foot of the land itself 00:12:50.070 --> 00:12:52.490 actually worth. So they isolate the land value. 00:12:52.570 --> 00:12:54.490 They separate the dirt from the house. Exactly. 00:12:54.830 --> 00:12:58.019 Then they look at the construction costs. labor 00:12:58.019 --> 00:13:00.539 and materials. So let's say the land is worth 00:13:00.539 --> 00:13:03.220 $100 ,000 and the construction costs $200 ,000. 00:13:04.220 --> 00:13:05.919 Theoretically, in a free market, the house should 00:13:05.919 --> 00:13:08.559 sell for roughly $300 ,000, maybe a bit more 00:13:08.559 --> 00:13:10.799 for developer profit. Makes sense. Cost plus 00:13:10.799 --> 00:13:13.360 margin equals price. But if that house is selling 00:13:13.360 --> 00:13:17.039 for $900 ,000, that massive gap, that extra $600 00:13:17.039 --> 00:13:20.419 ,000 is the cost of the regulatory tax. It represents 00:13:20.419 --> 00:13:22.799 the scarcity created by the government's refusal 00:13:22.799 --> 00:13:25.940 to let people build. It is the premium people 00:13:25.940 --> 00:13:28.600 are willing to pay just to get into a market 00:13:28.600 --> 00:13:31.360 where a supply is artificially capped. That is 00:13:31.360 --> 00:13:33.899 wild. It's an invisible markup. It's money you 00:13:33.899 --> 00:13:36.799 pay for the absence of housing supply. And a 00:13:36.799 --> 00:13:38.600 huge part of this comes down to zoning, right? 00:13:38.740 --> 00:13:41.940 A huge part. I feel like zoning is one of those 00:13:41.940 --> 00:13:44.500 words that makes people's eyes glaze over, but 00:13:44.500 --> 00:13:46.700 it seems to be the villain in this story. It 00:13:46.700 --> 00:13:48.559 often is. I mean, the zoning laws were originally 00:13:48.559 --> 00:13:52.039 created to keep loud factories away from quiet 00:13:52.039 --> 00:13:54.460 homes. That makes sense. We don't want a tannery 00:13:54.460 --> 00:13:56.539 next to a kindergarten. Of course not. But over 00:13:56.539 --> 00:13:58.879 the last century, they have morphed into a tool 00:13:58.879 --> 00:14:01.570 of exclusion. Give us an example of a zoning 00:14:01.570 --> 00:14:04.350 rule that hurts affordability. Okay, take minimum 00:14:04.350 --> 00:14:07.149 size requirements. Many cities have laws mandating 00:14:07.149 --> 00:14:10.289 that a housing unit must be at least, say, 400 00:14:10.289 --> 00:14:13.029 square feet. Right. Or they limit how many unrelated 00:14:13.029 --> 00:14:15.830 people can live together in a single unit. Which 00:14:15.830 --> 00:14:18.629 sounds like they're trying to ensure quality 00:14:18.629 --> 00:14:21.809 of life, right? The argument is usually, we don't 00:14:21.809 --> 00:14:24.190 want people living in shoeboxes. That is the 00:14:24.190 --> 00:14:26.929 stated intent. But the result is that you effectively 00:14:26.929 --> 00:14:29.169 outlaw the bottom end of the private market. 00:14:29.710 --> 00:14:32.870 If you cannot legally build a small, cheap unit, 00:14:33.029 --> 00:14:35.429 you simply don't build it. You build a luxury 00:14:35.429 --> 00:14:38.870 unit instead. Build a luxury unit instead. Because 00:14:38.870 --> 00:14:41.230 that's the only way to make the math work with 00:14:41.230 --> 00:14:43.970 those size constraints. It forces people who 00:14:43.970 --> 00:14:46.549 would have rented a small 200 -square -foot studio 00:14:46.549 --> 00:14:49.889 into a much more expensive market. Or worse. 00:14:50.169 --> 00:14:52.450 Or worse, onto the street. It's like saying, 00:14:52.590 --> 00:14:55.149 to prevent hunger, we are banning the sale of 00:14:55.149 --> 00:14:57.769 any food cheaper than a steak dinner. That is 00:14:57.769 --> 00:15:00.710 a perfect analogy. You aren't ensuring everyone 00:15:00.710 --> 00:15:03.330 eats steak. You're ensuring a lot of people starve 00:15:03.330 --> 00:15:05.610 because they can't buy a sandwich. By banning 00:15:05.610 --> 00:15:08.190 the bad housing, you don't magically create good 00:15:08.190 --> 00:15:10.970 housing. You create no housing for that segment 00:15:10.970 --> 00:15:13.330 of the market. And then there's the issue of 00:15:13.330 --> 00:15:15.470 parking. I read this in the notes and I couldn't 00:15:15.470 --> 00:15:18.490 believe it. The cost of a parking spot. Oh, parking 00:15:18.490 --> 00:15:21.629 requirements of the silent budget killer. A 2021 00:15:21.629 --> 00:15:24.190 study in California found that parking requirements 00:15:24.190 --> 00:15:26.870 mandating that developers build a certain number 00:15:26.870 --> 00:15:29.389 of spots per unit. Per apartment, yeah. Added 00:15:29.389 --> 00:15:32.889 up to $75 ,000 per unit in places like Los Angeles 00:15:32.889 --> 00:15:37.029 and San Francisco. $75 ,000 just to house a Toyota 00:15:37.029 --> 00:15:39.889 Camry. That's more than the car is worth. Think 00:15:39.889 --> 00:15:42.980 about the geometry of it. A parking spot is about 00:15:42.980 --> 00:15:45.440 300 square feet once you include the drive aisles. 00:15:45.500 --> 00:15:48.080 That is bigger than some studio apartments in 00:15:48.080 --> 00:15:51.179 other countries. So we are prioritizing housing 00:15:51.179 --> 00:15:54.919 for cars over housing for humans. We are literally 00:15:54.919 --> 00:15:57.179 giving the cars more square footage than some 00:15:57.179 --> 00:15:59.759 of the residents. Explicitly. And that cost gets 00:15:59.759 --> 00:16:03.059 passed directly to the renter or buyer. It forces 00:16:03.059 --> 00:16:06.139 developers to use valuable land for cars. If 00:16:06.139 --> 00:16:07.740 you didn't have to build that parking garage, 00:16:07.919 --> 00:16:09.580 you could have built another floor of apartments. 00:16:09.879 --> 00:16:14.320 It creates a direct competition. And in many 00:16:14.320 --> 00:16:17.059 U .S. cities, the cars are winning. And this 00:16:17.059 --> 00:16:19.539 regulatory stranglehold doesn't just make rent 00:16:19.539 --> 00:16:21.740 expensive for millennials with good jobs. It 00:16:21.740 --> 00:16:24.340 pushes people off the bottom rung entirely. It 00:16:24.340 --> 00:16:27.019 does. This leads us to the most visible and heartbreaking 00:16:27.019 --> 00:16:30.399 symptom of this crisis. Homelessness. It does. 00:16:30.919 --> 00:16:33.059 And it is important to view this as a spectrum. 00:16:34.019 --> 00:16:36.659 Affordability isn't binary. It is a continuum. 00:16:37.059 --> 00:16:39.960 At one end, you have homeownership. Then market 00:16:39.960 --> 00:16:43.730 rental. then social housing, transitional housing, 00:16:43.909 --> 00:16:47.370 emergency shelters, and finally, homelessness. 00:16:47.710 --> 00:16:50.070 It's a funnel or maybe a ladder with missing 00:16:50.070 --> 00:16:52.549 rungs at the bottom. Exactly. When you squeeze 00:16:52.549 --> 00:16:54.750 the top of that funnel with high costs and regulations, 00:16:55.110 --> 00:16:58.669 people get pushed down rung by rung until they 00:16:58.669 --> 00:17:00.210 fall out of the bottom. We have a report here 00:17:00.210 --> 00:17:02.129 from the Council of Economic Advisors, the state 00:17:02.129 --> 00:17:04.470 of homelessness in America. published in 2019. 00:17:04.950 --> 00:17:07.730 It gives us a snapshot of the crisis just before 00:17:07.730 --> 00:17:09.829 the pandemic reshaped everything. Right. And 00:17:09.829 --> 00:17:11.990 the numbers were already stark. On a single night 00:17:11.990 --> 00:17:14.630 in the U .S., over half a million people were 00:17:14.630 --> 00:17:17.529 homeless. Half a million. And almost half, 47 00:17:17.529 --> 00:17:20.809 % of all unsheltered people were in California. 00:17:21.069 --> 00:17:23.109 That geographic concentration is interesting. 00:17:23.230 --> 00:17:25.569 It challenges the idea that homelessness is evenly 00:17:25.569 --> 00:17:28.420 distributed. The report breaks down four main 00:17:28.420 --> 00:17:30.799 drivers of homelessness. Let's run through them 00:17:30.799 --> 00:17:32.980 because I think they bust some myths. The first 00:17:32.980 --> 00:17:34.680 one is exactly what we've been talking about. 00:17:34.819 --> 00:17:38.519 Housing price and regulation. The report actually 00:17:38.519 --> 00:17:41.509 ran a simulation. They calculated that if you 00:17:41.509 --> 00:17:43.930 deregulated the housing markets in 11 of the 00:17:43.930 --> 00:17:46.309 most constrained cities, places like San Francisco, 00:17:46.430 --> 00:17:50.170 Boston, NYC homelessness would drop significantly. 00:17:50.190 --> 00:17:52.890 How significantly? In San Francisco, the estimated 00:17:52.890 --> 00:17:55.329 deregulation alone could drop homelessness by 00:17:55.329 --> 00:18:00.569 54%. 54%. That is a massive number. It suggests 00:18:00.569 --> 00:18:02.849 that homelessness isn't just about mental health 00:18:02.849 --> 00:18:05.210 or drug addiction. It's largely a math problem. 00:18:05.329 --> 00:18:07.309 There just aren't enough places to be. Precisely. 00:18:07.309 --> 00:18:09.630 If you create more supply at the lower end, People 00:18:09.630 --> 00:18:11.910 don't fall off the ladder. But the second driver 00:18:11.910 --> 00:18:15.069 complicates things. Climate. This explains the 00:18:15.069 --> 00:18:17.509 California statistic. It does. Warmer cities 00:18:17.509 --> 00:18:19.650 have higher unsheltered rates. Not necessarily 00:18:19.650 --> 00:18:22.250 higher homeless rates overall, but higher unsheltered 00:18:22.250 --> 00:18:24.430 rates. Because if it's 20 degrees below zero 00:18:24.430 --> 00:18:27.130 in Chicago, you find a shelter or you die. If 00:18:27.130 --> 00:18:29.650 it's 60 degrees in Los Angeles, sleeping outside 00:18:29.650 --> 00:18:32.529 is physically survivable. Exactly. It affects 00:18:32.529 --> 00:18:35.109 the tolerability of being unsheltered. It doesn't 00:18:35.109 --> 00:18:36.690 mean weather causes homelessness. People are 00:18:36.690 --> 00:18:39.230 homeless in cold cities, too. But it dictates 00:18:39.230 --> 00:18:42.190 where the homeless are most visible. OK. Then 00:18:42.190 --> 00:18:44.569 there is the third driver, which is a bit of 00:18:44.569 --> 00:18:47.769 a paradox. Shelter supply. This one is controversial 00:18:47.769 --> 00:18:50.349 from what I've read. It is. Places like New York 00:18:50.349 --> 00:18:53.230 City and Massachusetts have a legal right to 00:18:53.230 --> 00:18:56.279 shelter. Meaning the government is legally obligated 00:18:56.279 --> 00:18:59.559 to provide a bed if you ask for one. Yes. And 00:18:59.559 --> 00:19:02.119 the report suggests, and this is their argument, 00:19:02.180 --> 00:19:05.519 not ours, that because the quality of these shelters 00:19:05.519 --> 00:19:08.660 is higher, with guaranteed beds and certain standards, 00:19:08.900 --> 00:19:11.420 they can become a viable substitute for housing 00:19:11.420 --> 00:19:13.900 for some people. Wait, so the argument is if 00:19:13.900 --> 00:19:16.059 you make shelters too nice, people will choose 00:19:16.059 --> 00:19:18.559 them over renting. That seems harsh. The economic 00:19:18.559 --> 00:19:21.740 argument is about substitution. If the shelter 00:19:21.740 --> 00:19:24.160 is safer and cleaner than the cheapest available 00:19:24.160 --> 00:19:28.019 dangerous illegal basement apartment, a rational 00:19:28.019 --> 00:19:30.440 person might choose the shelter. Okay, I see. 00:19:30.819 --> 00:19:33.380 Paradoxically, this can keep the demand for low 00:19:33.380 --> 00:19:36.579 -end market housing lower and shelter usage higher. 00:19:36.940 --> 00:19:39.480 It's a very difficult policy needle to thread 00:19:39.480 --> 00:19:42.339 because obviously you want shelters to be humane. 00:19:42.460 --> 00:19:43.859 Right, you don't want to make shelters terrible 00:19:43.859 --> 00:19:45.880 just to force people into apartments they can't 00:19:45.880 --> 00:19:48.079 afford. But we can't talk about homelessness 00:19:48.079 --> 00:19:50.769 without talking about the human element. The 00:19:50.769 --> 00:19:53.789 fourth driver. Individual factors. This is mental 00:19:53.789 --> 00:19:56.670 health and substance abuse. The data shows that 00:19:56.670 --> 00:19:59.529 about 20 % of the homeless population has a severe 00:19:59.529 --> 00:20:03.250 mental illness and 16 % suffer from chronic substance 00:20:03.250 --> 00:20:06.789 abuse. Weak social ties are also a huge factor. 00:20:07.029 --> 00:20:09.109 But here is the nuance that I think gets lost 00:20:09.109 --> 00:20:11.880 in the public debate. The vast majority of people 00:20:11.880 --> 00:20:14.460 with mental illness or addiction are not homeless. 00:20:14.680 --> 00:20:16.619 Correct. That is a critical point. They have 00:20:16.619 --> 00:20:19.000 families or they have cheap apartments or they 00:20:19.000 --> 00:20:21.359 live in areas where the rent is $500 a month. 00:20:21.579 --> 00:20:23.759 They become homeless when you combine those vulnerabilities 00:20:23.759 --> 00:20:25.960 with a housing market that is too expensive to 00:20:25.960 --> 00:20:28.740 navigate. It's a forced multiplier. If rent was 00:20:28.740 --> 00:20:31.359 $300, you might be able to scrape by even with 00:20:31.359 --> 00:20:34.420 a struggle. If rent is $3 ,000, you crash out. 00:20:34.700 --> 00:20:37.819 Exactly. High rents remove the margin for error 00:20:37.819 --> 00:20:40.589 in people's lives. You lose your job or you have 00:20:40.589 --> 00:20:42.930 a medical episode. And because the floor is so 00:20:42.930 --> 00:20:45.230 high, you fall right through it. Now, we focused 00:20:45.230 --> 00:20:47.990 a lot on the U .S., but this is a global deep 00:20:47.990 --> 00:20:51.029 dive. We mentioned 1 .6 billion people earlier. 00:20:51.490 --> 00:20:53.809 We have to look at the developing world. We have 00:20:53.809 --> 00:20:56.490 to talk about slums. In the developing world, 00:20:56.650 --> 00:20:59.759 the affordability crisis looks different. It 00:20:59.759 --> 00:21:02.039 doesn't always show up as homelessness. It manifests 00:21:02.039 --> 00:21:04.299 as informal settlements. The notes mention the 00:21:04.299 --> 00:21:07.200 world's largest slum, Nezachalco Itza, in Mexico. 00:21:07.460 --> 00:21:09.579 It houses nearly 4 million people. 4 million! 00:21:09.799 --> 00:21:11.799 That's larger than the population of Chicago. 00:21:11.839 --> 00:21:14.779 That's a metropolis. It is a city within a city. 00:21:14.880 --> 00:21:17.960 And these form because of rural to urban migration. 00:21:18.220 --> 00:21:21.019 People move to cities for jobs. That's a global 00:21:21.019 --> 00:21:23.690 constant. But the legal housing market is completely 00:21:23.690 --> 00:21:25.849 out of reach. He can't afford it. So they build 00:21:25.849 --> 00:21:28.049 their own. They squat on land and build with 00:21:28.049 --> 00:21:30.210 whatever they can find. Cinder blocks, corrugated 00:21:30.210 --> 00:21:34.170 metal, scrap wood. And over time, these settlements 00:21:34.170 --> 00:21:36.390 become semi -permanent. They steal electricity 00:21:36.390 --> 00:21:39.269 from the grid. They truck in water. But the projection. 00:21:39.829 --> 00:21:42.710 is what is truly terrifying. What is it? By 2030, 00:21:43.009 --> 00:21:46.150 one in four people on Earth will live in a slum 00:21:46.150 --> 00:21:48.450 or informal settlement. That is a statistic that 00:21:48.450 --> 00:21:50.650 needs to sit with us. One in four people. It 00:21:50.650 --> 00:21:52.390 really highlights that this isn't just a policy 00:21:52.390 --> 00:21:55.349 failure or a zoning issue. It's a humanitarian 00:21:55.349 --> 00:21:59.740 crisis on a planetary scale. It is. And it connects 00:21:59.740 --> 00:22:02.339 back to the labor market. If workers cannot afford 00:22:02.339 --> 00:22:05.259 to live near the work, the economy suffocates. 00:22:05.380 --> 00:22:07.660 Whether that's a barista in San Francisco or 00:22:07.660 --> 00:22:09.900 a factory worker in Mexico City. The city is 00:22:09.900 --> 00:22:12.480 an engine. And housing is the fuel. If you run 00:22:12.480 --> 00:22:15.059 out of fuel, the engine stops. Okay, we've laid 00:22:15.059 --> 00:22:17.619 out the problem. It's expensive, it's regulated 00:22:17.619 --> 00:22:20.079 to death, it's hurting millions, and it's global. 00:22:20.829 --> 00:22:23.549 I want to pivot to solutions. Good. If regulations 00:22:23.549 --> 00:22:27.089 are the problem, can design be the fix? Can we 00:22:27.089 --> 00:22:29.650 build our way out of this with clever architecture? 00:22:30.130 --> 00:22:32.309 There are definitely architectural movements 00:22:32.309 --> 00:22:35.569 trying to hack the system. If you look at the 00:22:35.569 --> 00:22:38.329 US landscape recently, you might have noticed 00:22:38.329 --> 00:22:41.049 a very specific type of building popping up everywhere. 00:22:41.289 --> 00:22:43.089 Oh, I know exactly what you mean. They're usually 00:22:43.089 --> 00:22:45.809 five stories tall, look a bit boxy, maybe have 00:22:45.809 --> 00:22:47.609 different colored panels on the outside. They 00:22:47.609 --> 00:22:49.730 feel like they're built out of Lego blocks. They 00:22:49.730 --> 00:22:51.829 are everywhere in every mid -sized city. They 00:22:51.829 --> 00:22:55.130 all look kind of the same. Those are called five 00:22:55.130 --> 00:22:58.049 -over -ones. The name refers to the construction 00:22:58.049 --> 00:23:01.529 style. Five stories of wood framing sitting on 00:23:01.529 --> 00:23:04.210 top of a one -story concrete podium. And the 00:23:04.210 --> 00:23:06.250 podium usually has parking or a Chipotle in it? 00:23:06.450 --> 00:23:09.890 Usually retail or parking, yes. The reason these 00:23:09.890 --> 00:23:11.589 are everywhere is that they are a code hack. 00:23:11.920 --> 00:23:14.400 A code hack. Explain that. Well, international 00:23:14.400 --> 00:23:17.160 building codes change to allow wood frame construction 00:23:17.160 --> 00:23:19.319 up to a certain height, usually about five or 00:23:19.319 --> 00:23:21.299 six stories, as long as you have sprinklers and 00:23:21.299 --> 00:23:23.700 fire safety measures. Okay. By putting the wood 00:23:23.700 --> 00:23:26.339 on a concrete pedestal, developers can maximize 00:23:26.339 --> 00:23:28.720 density without having to build with steel and 00:23:28.720 --> 00:23:30.700 glass. Because steel and glass are expensive, 00:23:30.960 --> 00:23:33.200 wood is cheap. Exactly. It allows them to hit 00:23:33.200 --> 00:23:36.559 a sweet spot of density and cost. It's not the 00:23:36.559 --> 00:23:39.180 most beautiful architecture in history. Architects 00:23:39.180 --> 00:23:41.720 often hate them, calling them fast, casual architecture. 00:23:42.200 --> 00:23:44.779 But it is incredibly effective at creating supply. 00:23:45.039 --> 00:23:47.099 It's the Honda Civic of apartment buildings. 00:23:47.619 --> 00:23:51.180 Reliable everywhere gets the job done. And right 00:23:51.180 --> 00:23:53.880 now, we need reliable transportation, not Ferraris. 00:23:53.880 --> 00:23:57.160 We need units. What about reusing old buildings? 00:23:57.339 --> 00:23:59.779 I love the idea of turning an old factory into 00:23:59.779 --> 00:24:02.440 lofts. It feels very romantic. Adaptive reuse. 00:24:02.700 --> 00:24:05.359 This is huge. The greenest building is the one 00:24:05.359 --> 00:24:07.759 that is already built. We have all these underused 00:24:07.759 --> 00:24:10.259 structures, old factories, and now especially 00:24:10.259 --> 00:24:12.940 empty office buildings and motels. Right. The 00:24:12.940 --> 00:24:15.079 post -pandemic office apocalypse. We have all 00:24:15.079 --> 00:24:17.099 these empty glass towers. Can we live in them? 00:24:17.380 --> 00:24:19.559 It's harder than it sounds. Plumbing is a nightmare 00:24:19.559 --> 00:24:21.799 in office buildings because the bathrooms are 00:24:21.799 --> 00:24:24.240 all in the center core. Oh, right. Whereas apartments 00:24:24.240 --> 00:24:26.690 need... bathrooms in every unit. But it is scaling 00:24:26.690 --> 00:24:30.049 up. There's a forecast that suggests 90 % of 00:24:30.049 --> 00:24:33.069 U .S. real estate growth by 2033 will involve 00:24:33.069 --> 00:24:36.150 adaptive reuse. 90%. That is a complete takeover. 00:24:36.309 --> 00:24:39.150 It makes sense. We have a surplus of retail space 00:24:39.150 --> 00:24:42.009 and office space and a shortage of housing. In 00:24:42.009 --> 00:24:44.170 Los Angeles, for example, they passed legislation 00:24:44.170 --> 00:24:46.630 allowing motels to be converted into affordable 00:24:46.630 --> 00:24:49.900 housing regardless of the zoning. That is smart. 00:24:50.119 --> 00:24:52.420 Motels already have plumbing in every room. They're 00:24:52.420 --> 00:24:54.660 basically studio apartments already. Exactly. 00:24:55.019 --> 00:24:57.759 It bypasses that right to build cost we talked 00:24:57.759 --> 00:25:00.400 about because the building already exists. It's 00:25:00.400 --> 00:25:02.579 a massive shortcut. I saw a note here about a 00:25:02.579 --> 00:25:05.240 soap factory in Brussels. Yes, a great example. 00:25:05.579 --> 00:25:08.440 An architectural firm took an old soap factory 00:25:08.440 --> 00:25:11.799 and turned it into a mix of lofts, studios, and 00:25:11.799 --> 00:25:14.339 massive six -bedroom apartments. It's energy 00:25:14.339 --> 00:25:16.900 efficient, it preserved the history, and it added 00:25:16.900 --> 00:25:18.920 density to the city without knocking anything 00:25:18.920 --> 00:25:21.339 down. And it gives the city character, which 00:25:21.339 --> 00:25:23.740 those five over ones sometimes lack. It does. 00:25:23.940 --> 00:25:26.200 I have to ask about shipping containers. I feel 00:25:26.200 --> 00:25:28.420 like 10 years ago, every design blog was saying 00:25:28.420 --> 00:25:30.119 we'd all be living in shipping containers by 00:25:30.119 --> 00:25:32.460 now. Is that still a thing? It's complicated. 00:25:32.579 --> 00:25:34.960 The cool factor is high. It looks industrial 00:25:34.960 --> 00:25:38.200 and chic. But the reality is that standard shipping 00:25:38.200 --> 00:25:41.579 containers are metal boxes. Which means they 00:25:41.579 --> 00:25:43.980 turn into ovens in the summer and freezers in 00:25:43.980 --> 00:25:47.000 the winter. Correct. They are terrible at temperature 00:25:47.000 --> 00:25:49.960 control. By the time you insulate them, cut holes 00:25:49.960 --> 00:25:52.500 for windows, which compromises their structural 00:25:52.500 --> 00:25:54.819 integrity so you have to reinforce them, you 00:25:54.819 --> 00:25:57.180 often haven't saved much money compared to just 00:25:57.180 --> 00:25:59.579 building a normal wall. So it's more of an aesthetic 00:25:59.579 --> 00:26:03.079 choice than a practical solution. Often, yes. 00:26:03.480 --> 00:26:06.599 However, there is a subcategory called reefer 00:26:06.599 --> 00:26:09.119 containers refrigerated units. Like the ones 00:26:09.119 --> 00:26:11.940 they ship bananas in? Yes. They already have 00:26:11.940 --> 00:26:14.519 insulation in the walls, ceilings, and floors. 00:26:15.190 --> 00:26:17.369 Those are much more viable for housing because 00:26:17.369 --> 00:26:19.190 they solve the thermal problem right out of the 00:26:19.190 --> 00:26:21.910 gate. Interesting. Reefer housing. I'm sure the 00:26:21.910 --> 00:26:24.170 marketing team can work on the name. Small laugh. 00:26:24.950 --> 00:26:28.470 Perhaps chilled living might work. But aside 00:26:28.470 --> 00:26:30.630 from the materials, we need to talk about the 00:26:30.630 --> 00:26:33.349 type of housing. We have a problem called the 00:26:33.349 --> 00:26:35.430 missing middle. This is the idea that we build 00:26:35.430 --> 00:26:38.670 single family homes on one side and giant skyscrapers 00:26:38.670 --> 00:26:41.089 on the other and nothing in between. Exactly. 00:26:41.660 --> 00:26:43.980 We have illegalized the middle. Think of the 00:26:43.980 --> 00:26:45.500 triple -deckers in New England. Three floors, 00:26:45.700 --> 00:26:49.960 three families. Or duplexes, row houses, cottage 00:26:49.960 --> 00:26:52.579 courts. The stuff that makes old neighborhoods 00:26:52.579 --> 00:26:55.579 feel cozy and walkable. These used to be the 00:26:55.579 --> 00:26:58.200 backbone of affordable housing. But zoning laws 00:26:58.200 --> 00:27:00.880 in the mid -20th century largely banned them 00:27:00.880 --> 00:27:03.920 in favor of single -family sprawl. Bringing those 00:27:03.920 --> 00:27:06.220 back seems like a no -brainer. It fits into existing 00:27:06.220 --> 00:27:08.299 neighborhoods without changing the character 00:27:08.299 --> 00:27:11.529 too much. It increases density gently. You aren't 00:27:11.529 --> 00:27:13.829 dropping a 40 -story tower in the suburbs. You're 00:27:13.829 --> 00:27:16.369 just adding a duplex. It blends in. I also love 00:27:16.369 --> 00:27:18.230 the self -built concept mentioned in the notes, 00:27:18.289 --> 00:27:20.890 the Tasmanian house. Yes. This is a project in 00:27:20.890 --> 00:27:23.450 Australia. It's a low -tech approach. They provide 00:27:23.450 --> 00:27:26.230 manuals for owners to build their own homes using 00:27:26.230 --> 00:27:29.690 local materials. So it's DIY housing. It's assortable 00:27:29.690 --> 00:27:32.869 because you are substituting your own labor for 00:27:32.869 --> 00:27:35.509 the cost of a construction crew. It empowers 00:27:35.509 --> 00:27:38.710 people to solve their own housing needs. It's 00:27:38.710 --> 00:27:41.289 a return to how we used to do things before housing 00:27:41.289 --> 00:27:43.710 became a specialized industry. It's like Ikea 00:27:43.710 --> 00:27:46.250 furniture, but for your entire life. Ideally 00:27:46.250 --> 00:27:48.549 with fewer leftover screws at the end. Let's 00:27:48.549 --> 00:27:50.849 hope. Okay, so we have the math, the economics, 00:27:51.049 --> 00:27:53.750 the human cost, and the design ideas. But none 00:27:53.750 --> 00:27:56.069 of this happens without the rules changing. Let's 00:27:56.069 --> 00:27:58.529 talk about policy. The big one. What actually 00:27:58.529 --> 00:28:01.089 works. Because whenever anyone mentions housing 00:28:01.089 --> 00:28:05.130 success stories, one city always comes up. Vienna. 00:28:05.289 --> 00:28:08.319 The Vienna model. It is the gold standard for 00:28:08.319 --> 00:28:11.440 a reason. Why? What are they doing that we aren't? 00:28:11.500 --> 00:28:13.940 In Vienna, housing is not seen as a commodity 00:28:13.940 --> 00:28:18.660 first. It is seen as a right. About 46 % of the 00:28:18.660 --> 00:28:20.799 city's housing stock is either government owned 00:28:20.799 --> 00:28:22.980 or part of a public -private partnership. Almost 00:28:22.980 --> 00:28:25.000 half the city. That is wildly different from 00:28:25.000 --> 00:28:27.000 the U .S. model. But the key difference isn't 00:28:27.000 --> 00:28:29.700 just the percentage. It's the philosophy. In 00:28:29.700 --> 00:28:32.259 the U .S. or U .K., public housing is often housing 00:28:32.259 --> 00:28:35.059 of last resort. It's stigmatized. Right. It's 00:28:35.059 --> 00:28:36.940 where you go when you have failed in the private 00:28:36.940 --> 00:28:39.099 market. It's the projects. It's concentrated 00:28:39.099 --> 00:28:42.420 poverty. Exactly. In Vienna, it is desirable. 00:28:42.700 --> 00:28:45.099 Doctors and lawyers live next to factory workers. 00:28:45.420 --> 00:28:48.380 It is mixed income. The architecture is beautiful. 00:28:48.680 --> 00:28:51.759 Some of it looks like a palace. So they removed 00:28:51.759 --> 00:28:54.180 the stigma by making it high quality and available 00:28:54.180 --> 00:28:56.539 to the middle class, not just the poor. Exactly. 00:28:56.859 --> 00:28:59.380 When the middle class lives there, the political 00:28:59.380 --> 00:29:02.349 will to maintain the quality stays high. Because 00:29:02.349 --> 00:29:04.069 the voters live there. It's not something you 00:29:04.069 --> 00:29:06.950 do for them. It's something you do for us. That's 00:29:06.950 --> 00:29:09.750 a crucial point. If only the poor use a service, 00:29:09.769 --> 00:29:12.250 the service tends to get cut. If the middle class 00:29:12.250 --> 00:29:15.109 uses it, it gets funded. Singapore does something 00:29:15.109 --> 00:29:18.029 similar. Citizens across a huge income range 00:29:18.029 --> 00:29:21.009 live in public housing. They call them HDB flats. 00:29:21.289 --> 00:29:24.230 It is a mainstream tenure choice, not a safety 00:29:24.230 --> 00:29:26.420 net. You aren't looked down upon for living in 00:29:26.420 --> 00:29:28.700 public housing. It's the norm. So that seems 00:29:28.700 --> 00:29:30.859 to be the secret sauce universality. What about 00:29:30.859 --> 00:29:33.200 Germany? I see notes here on Hamburg and Berlin. 00:29:33.519 --> 00:29:35.579 They rely heavily on public -private partnerships. 00:29:36.359 --> 00:29:38.480 Hamburg has this fascinating agreement where 00:29:38.480 --> 00:29:40.240 developers commit to building a certain number 00:29:40.240 --> 00:29:44.480 of units, say 3 ,500 a year. But 30 % of them 00:29:44.480 --> 00:29:46.759 must be for low - or middle -income households. 00:29:46.819 --> 00:29:49.700 That's inclusionary zoning. If you want to build 00:29:49.700 --> 00:29:51.900 your luxury tower, you have to build for the 00:29:51.900 --> 00:29:54.660 teachers and nurses, too. Yes. And the city helps 00:29:54.660 --> 00:29:57.299 by providing the land or simplifying the regulations. 00:29:57.680 --> 00:30:01.400 It's a deal. It's not adversarial. In Berlin, 00:30:01.519 --> 00:30:03.640 they formed an alliance for housing construction 00:30:03.640 --> 00:30:06.700 involving private landlords and public utilities 00:30:06.700 --> 00:30:09.720 to agree on targets. It's about getting everyone 00:30:09.720 --> 00:30:12.619 at the table rather than fighting in court. Exactly. 00:30:12.920 --> 00:30:15.680 Now, bringing it back to the U .S., we've... 00:30:15.900 --> 00:30:17.880 Seen some shifts. So we talked about homelessness 00:30:17.880 --> 00:30:21.460 earlier. There was a mention of the housing first 00:30:21.460 --> 00:30:23.599 approach. Can you explain that? Housing first 00:30:23.599 --> 00:30:26.599 is a major policy shift. For a long time, the 00:30:26.599 --> 00:30:29.380 model was treatment first. You had to get sober 00:30:29.380 --> 00:30:31.500 or get on medication before you earned housing. 00:30:31.660 --> 00:30:34.380 Which seems incredibly hard to do if you are 00:30:34.380 --> 00:30:36.160 sleeping under a bridge and keeping your shoes 00:30:36.160 --> 00:30:38.680 on so they don't get stolen. Exactly. It's almost 00:30:38.680 --> 00:30:41.519 impossible. Housing first flips it. It says you 00:30:41.519 --> 00:30:43.539 can't solve a person's mental health or addiction 00:30:43.539 --> 00:30:45.480 issues while they're surviving on the street. 00:30:45.769 --> 00:30:48.730 You give them the housing first without preconditions 00:30:48.730 --> 00:30:51.589 and then offer services. Stabilize the chaos, 00:30:51.789 --> 00:30:54.289 then treat the problem. Right. Although it is 00:30:54.289 --> 00:30:55.910 worth noting that during the Trump administration, 00:30:56.230 --> 00:30:58.730 there were reforms to this approach that allowed 00:30:58.730 --> 00:31:01.509 communities to impose service participation requirements. 00:31:01.990 --> 00:31:05.089 Essentially saying, we will help you, but you 00:31:05.089 --> 00:31:07.730 need to engage with the recovery process. It 00:31:07.730 --> 00:31:10.029 brought a different philosophy to the table regarding. 00:31:10.700 --> 00:31:12.980 accountability versus unconditional support. 00:31:13.519 --> 00:31:16.460 It's an ongoing debate in policy circles about 00:31:16.460 --> 00:31:18.859 which method yields better long -term results. 00:31:19.160 --> 00:31:21.740 And we had some temporary relief during COVID, 00:31:21.859 --> 00:31:24.500 right? The emergency housing voucher. Yes. The 00:31:24.500 --> 00:31:27.059 EHV program was a lifeline during the pandemic. 00:31:27.259 --> 00:31:29.059 It showed that when the government puts money 00:31:29.059 --> 00:31:32.099 on the table, we can house people. But as per 00:31:32.099 --> 00:31:34.460 HUD announcements, that funding is set to end 00:31:34.460 --> 00:31:38.500 by 2026. So we are facing a cliff. We are. And 00:31:38.500 --> 00:31:40.900 if that support disappears, it could exacerbate 00:31:40.900 --> 00:31:43.200 the crisis we discussed earlier. It's a real 00:31:43.200 --> 00:31:45.180 moment of reckoning for U .S. housing policy. 00:31:45.460 --> 00:31:47.180 But there is some hope on the grassroots level. 00:31:47.259 --> 00:31:50.019 We are seeing the rise of the YMBYs. Yes, in 00:31:50.019 --> 00:31:52.880 my backyard. The countermovement to NIMBY, not 00:31:52.880 --> 00:31:56.799 in my backyard. Exactly. The YMBYs are a coalition 00:31:56.799 --> 00:31:59.920 of people, often younger, who are pushing for 00:31:59.920 --> 00:32:02.299 upzoning. They are the ones showing up to city 00:32:02.299 --> 00:32:05.039 council meetings saying, please build this. And 00:32:05.039 --> 00:32:09.170 they argue that we need to build more. everything 00:32:09.170 --> 00:32:12.210 everywhere to lower prices for everyone. They 00:32:12.210 --> 00:32:14.329 are fighting those parking minimums and height 00:32:14.329 --> 00:32:15.950 limits. They're trying to break the scarcity 00:32:15.950 --> 00:32:18.720 model. It's a fascinating generational battle, 00:32:18.859 --> 00:32:21.359 really. The homeowners who want to preserve their 00:32:21.359 --> 00:32:23.839 neighborhood character versus the renters who 00:32:23.839 --> 00:32:25.779 just want a place to live. And that conflict 00:32:25.779 --> 00:32:27.960 is where the future of our cities will be decided. 00:32:28.299 --> 00:32:30.819 So we have covered a massive amount of ground 00:32:30.819 --> 00:32:33.940 here. We've gone from the 30 % rule to the $600 00:32:33.940 --> 00:32:36.859 K permitting costs to the slums of Mexico and 00:32:36.859 --> 00:32:40.119 the social palaces of Vienna. If we had to summarize 00:32:40.119 --> 00:32:42.839 this complexity for the learner, how do we wrap 00:32:42.839 --> 00:32:45.230 our heads around the solution? I think the takeaway 00:32:45.230 --> 00:32:47.730 is that there is no silver bullet. You cannot 00:32:47.730 --> 00:32:50.829 just build more if the regulations make building 00:32:50.829 --> 00:32:53.450 impossible. You cannot just deregulate without 00:32:53.450 --> 00:32:55.829 protecting the vulnerable. It requires a silver 00:32:55.829 --> 00:32:58.750 buckshot approach. A mix of everything. Exactly. 00:32:58.829 --> 00:33:02.109 You need to deregulate land use fix, that right 00:33:02.109 --> 00:33:04.490 to build. You need better transportation so the 00:33:04.490 --> 00:33:06.789 H plus T index works. You need innovation like 00:33:06.789 --> 00:33:09.349 adaptive reuse. And fundamentally, you need the 00:33:09.349 --> 00:33:12.509 political will to treat housing differently like 00:33:12.509 --> 00:33:14.549 they do in Vienna. And you mentioned earlier 00:33:14.549 --> 00:33:16.650 that this isn't just about charity. It's about 00:33:16.650 --> 00:33:19.549 the economy. That's the expert's final takeaway 00:33:19.549 --> 00:33:22.990 here. Housing affordability creates what economists 00:33:22.990 --> 00:33:25.869 call labor market impediments. Talk to us about 00:33:25.869 --> 00:33:28.869 that. If your barista, your nurse, your teacher, 00:33:28.930 --> 00:33:31.609 and your firefighter cannot afford to live within 00:33:31.609 --> 00:33:34.369 30 miles of your community, your local economy 00:33:34.369 --> 00:33:37.789 eventually breaks. It grinds to a halt. Businesses 00:33:37.789 --> 00:33:40.029 can't find workers. Schools can't find teachers. 00:33:40.569 --> 00:33:42.990 It is a public health issue, an education issue, 00:33:43.130 --> 00:33:46.069 and an economic survival issue. It reminds me 00:33:46.069 --> 00:33:48.230 of that saying, a city that pushes out its workers 00:33:48.230 --> 00:33:51.210 is a city that is dying. It becomes a theme park 00:33:51.210 --> 00:33:53.970 for the rich, but it ceases to function as a 00:33:53.970 --> 00:33:56.089 city. Precisely. So we want to leave you with 00:33:56.089 --> 00:33:58.730 a thought to mull over. We've looked at all the 00:33:58.730 --> 00:34:00.589 data, but at the bottom of this deep dive is 00:34:00.589 --> 00:34:03.829 a philosophical question. Article 25 of the Universal 00:34:03.829 --> 00:34:06.329 Declaration of Human Rights states that housing 00:34:06.329 --> 00:34:09.070 is a fundamental human right. But our economic 00:34:09.070 --> 00:34:11.429 system... treats it primarily as a commodity. 00:34:12.110 --> 00:34:14.869 It is an investment vehicle. It is a retirement 00:34:14.869 --> 00:34:18.010 plan. And that is the tension. Can housing ever 00:34:18.010 --> 00:34:20.429 truly be affordable for everyone as long as we 00:34:20.429 --> 00:34:22.429 also expect it to be a high -yield investment 00:34:22.429 --> 00:34:25.590 for owners? Can it be both a basic human right 00:34:25.590 --> 00:34:28.510 and a way to get rich? It feels like those two 00:34:28.510 --> 00:34:31.190 goals are fundamentally at odds. It's a question 00:34:31.190 --> 00:34:33.489 that requires us to rethink what a home is actually 00:34:33.489 --> 00:34:38.400 for. Is it a nest egg or is it a nest? On that 00:34:38.400 --> 00:34:40.219 note, we encourage you to take a walk around 00:34:40.219 --> 00:34:42.260 your own neighborhood. Look at the empty lots, 00:34:42.500 --> 00:34:44.239 look at the parking garages, and look at the 00:34:44.239 --> 00:34:46.719 zoning. Once you see the matrix, you can't unsee 00:34:46.719 --> 00:34:49.679 it. Thanks for listening to The Deep Dive. Stay 00:34:49.679 --> 00:34:49.980 curious.