WEBVTT 00:00:00.000 --> 00:00:02.919 So I was looking at the stack of research for 00:00:02.919 --> 00:00:05.500 today and I kept getting stuck on, you know, 00:00:05.500 --> 00:00:09.000 this one single fundamental contradiction. It's 00:00:09.000 --> 00:00:10.640 a question that feels like it breaks the gears 00:00:10.640 --> 00:00:13.179 of, well, modern economics every time we try 00:00:13.179 --> 00:00:15.359 to answer it. I think I know exactly which contradiction 00:00:15.359 --> 00:00:17.480 you're talking about. The identity crisis of 00:00:17.480 --> 00:00:21.839 the house itself is a home, a basic human right, 00:00:21.980 --> 00:00:26.359 a utility like water or electricity that everyone 00:00:26.359 --> 00:00:29.079 must have access to. Or is it an agit class? 00:00:29.719 --> 00:00:33.179 Because the data suggests we are trying to treat 00:00:33.179 --> 00:00:36.060 it as both. Simultaneously. And you can't. And 00:00:36.060 --> 00:00:38.420 that is tearing the system apart. It is the ultimate 00:00:38.420 --> 00:00:40.500 conflict of interest. I mean, if housing is a 00:00:40.500 --> 00:00:42.939 basic need, the goal of public policy should 00:00:42.939 --> 00:00:45.359 be to drive prices down to zero. Or as close 00:00:45.359 --> 00:00:47.320 to zero as possible. Right. Or as close to the 00:00:47.320 --> 00:00:49.159 cost of construction as you can possibly get. 00:00:49.340 --> 00:00:52.539 But if it's the primary retirement vehicle for 00:00:52.539 --> 00:00:55.000 the middle class, which, let's be honest, it 00:00:55.000 --> 00:00:56.939 has been in the West since the post -war era, 00:00:57.060 --> 00:01:00.200 then the goal is the exact opposite. The goal 00:01:00.200 --> 00:01:03.920 is for prices to go up. Forever. You cannot solve 00:01:03.920 --> 00:01:06.319 for affordable and high return on investment 00:01:06.319 --> 00:01:09.120 at the same time. The goals are mutually exclusive. 00:01:09.439 --> 00:01:12.319 And today we are going to look at the wreckage 00:01:12.319 --> 00:01:15.920 caused by trying to solve for both. We're unpacking 00:01:15.920 --> 00:01:19.640 the global affordable housing crisis. And I want 00:01:19.640 --> 00:01:21.420 to be clear right off the top, this isn't just 00:01:21.420 --> 00:01:23.739 about high rent or, you know, complaining about 00:01:23.739 --> 00:01:26.060 landlords. No, this is much deeper. We are looking 00:01:26.060 --> 00:01:28.519 at a stack of sources that covers everything 00:01:28.519 --> 00:01:31.319 from the hidden mathematical formulas that dictate 00:01:31.319 --> 00:01:33.659 where you can live to the philosophical right 00:01:33.659 --> 00:01:36.920 to build all the way to, I mean, the slums of 00:01:36.920 --> 00:01:39.400 Nezachalcowitza. It's a massive scope. We have 00:01:39.400 --> 00:01:42.040 reports from the Council of Economic Advisors, 00:01:42.120 --> 00:01:44.719 granular data on zoning from the the Center for 00:01:44.719 --> 00:01:47.519 Neighborhood Technology and case studies from 00:01:47.519 --> 00:01:50.040 Vienna to Singapore, a really global perspective. 00:01:50.359 --> 00:01:52.040 The mission for this deep dive is to get past 00:01:52.040 --> 00:01:53.819 the headlines. We all know rent is too high. 00:01:53.900 --> 00:01:56.459 Right. That's a boring observation. We want to 00:01:56.459 --> 00:01:59.260 know why the math is broken, who broke it, whether 00:01:59.260 --> 00:02:01.659 that was intentional or accidental, and what 00:02:01.659 --> 00:02:03.780 the actual mechanics of a solution look like. 00:02:03.920 --> 00:02:06.079 And we need to start with the scale of this breakage, 00:02:06.120 --> 00:02:08.319 because if you are just looking at your own Zillow 00:02:08.319 --> 00:02:11.719 feed. You are completely missing the forest for 00:02:11.719 --> 00:02:13.780 the trees. The big number from the U .N. report 00:02:13.780 --> 00:02:19.300 is 1 .6 billion. 1 .6 billion people. It's almost 00:02:19.300 --> 00:02:21.939 impossible to conceptualize a number that big. 00:02:22.099 --> 00:02:25.280 And that is not just people who rent. That is 00:02:25.280 --> 00:02:27.620 the number of people globally living in inadequate 00:02:27.620 --> 00:02:30.280 housing. Yeah. And we should define inadequate 00:02:30.280 --> 00:02:32.159 because it's a really important distinction. 00:02:32.300 --> 00:02:34.659 Right. Inadequate here isn't I don't like my 00:02:34.659 --> 00:02:37.840 countertops or the bathroom is a bit dated. Not 00:02:37.840 --> 00:02:40.379 at all. We are talking about lack of basic sanitation, 00:02:40.819 --> 00:02:43.919 severe overcrowding, actual structural danger, 00:02:44.099 --> 00:02:47.080 or no security of tenure. Meaning you can be 00:02:47.080 --> 00:02:49.219 kicked out at any moment. No lease, no rights. 00:02:49.479 --> 00:02:52.520 Correct. And if we stay on the current trajectory 00:02:52.520 --> 00:02:55.500 by 2030, which is essentially tomorrow in terms 00:02:55.500 --> 00:02:57.599 of infrastructure planning. It's just a few years 00:02:57.599 --> 00:03:00.479 away. One in four people on this planet may live 00:03:00.479 --> 00:03:03.139 in a slum or an informal settlement. Think about 00:03:03.139 --> 00:03:05.960 that ratio. One in four. So while we sit here 00:03:05.960 --> 00:03:08.500 in our comfortable home. agonizing over whether 00:03:08.500 --> 00:03:12.800 a 30 -year fixed mortgage is at 6 % or 7%. A 00:03:12.800 --> 00:03:14.960 quarter of the human population is just trying 00:03:14.960 --> 00:03:18.000 to construct a physical barrier between themselves 00:03:18.000 --> 00:03:19.939 and the elements. It's a completely different 00:03:19.939 --> 00:03:22.939 reality. It puts our local complaints into perspective, 00:03:23.039 --> 00:03:25.439 but, you know, it doesn't make the local crisis 00:03:25.439 --> 00:03:28.349 in developed nations any less painful. Not at 00:03:28.349 --> 00:03:30.849 all. And the mechanics are actually surprisingly 00:03:30.849 --> 00:03:35.270 similar, whether you are in a favela or a suburb 00:03:35.270 --> 00:03:37.669 of Seattle. How so? It's fundamentally about 00:03:37.669 --> 00:03:40.889 the gap, the gap between income and the cost 00:03:40.889 --> 00:03:43.889 of the roof. That's the universal constant. So 00:03:43.889 --> 00:03:46.050 let's start there. Let's try to define this word 00:03:46.050 --> 00:03:49.090 affordable, because looking at these documents, 00:03:49.289 --> 00:03:52.590 the definition seems to be a moving target. It 00:03:52.590 --> 00:03:55.009 feels like gaslighting sometimes. It does. The 00:03:55.009 --> 00:03:56.830 government tells you housing is affordable if 00:03:56.830 --> 00:03:59.009 it hits a certain metric, but you still feel 00:03:59.009 --> 00:04:00.689 broke at the end of the month. That's because 00:04:00.689 --> 00:04:03.050 the metric itself is, well, it's pretty arbitrary. 00:04:03.289 --> 00:04:05.490 The gold standard that most listeners in North 00:04:05.490 --> 00:04:08.090 America will know is the 30 percent rule. Right. 00:04:08.150 --> 00:04:10.550 The idea that if you spend more than 30 percent 00:04:10.550 --> 00:04:13.430 of your gross income on rent and utilities, you're 00:04:13.430 --> 00:04:15.810 officially housing burdened. And if you spend 00:04:15.810 --> 00:04:18.170 more than 50 percent, you're severely burdened. 00:04:18.430 --> 00:04:21.230 Which sounds so clinical. It is. But here's the 00:04:21.230 --> 00:04:23.189 nugget that usually gets left out of the nightly 00:04:23.189 --> 00:04:26.350 news. Where did that 30 percent number actually 00:04:26.350 --> 00:04:29.110 come from? It wasn't handed down on a stone tablet. 00:04:29.329 --> 00:04:31.610 It wasn't derived from a nutritional study of 00:04:31.610 --> 00:04:34.050 what a human needs to survive. No, it came from 00:04:34.050 --> 00:04:36.930 the Senate floor in 1969. It was politics. Exactly. 00:04:37.089 --> 00:04:39.550 The Brooke Amendment, named after Senator Edward 00:04:39.550 --> 00:04:42.470 Brooke. Initially, the cap for public housing 00:04:42.470 --> 00:04:45.129 rent was set at 25 percent of income. And the 00:04:45.129 --> 00:04:47.350 logic for that 25 percent was pretty sound. It 00:04:47.350 --> 00:04:50.370 was. The logic was that a family needed the other 00:04:50.370 --> 00:04:52.610 75 percent of their income for, you know, everything 00:04:52.610 --> 00:04:55.930 else, food. clothes, transportation, the basics 00:04:55.930 --> 00:04:58.810 of life. Which makes sense in 1969. But then 00:04:58.810 --> 00:05:01.009 the 80s happened. Then the 80s happened. Budget 00:05:01.009 --> 00:05:03.949 cuts in 1981. To reduce the federal subsidy for 00:05:03.949 --> 00:05:06.550 public housing, Congress just pushed the tenants' 00:05:06.629 --> 00:05:09.550 contribution up from 25 % to 30%. So it wasn't 00:05:09.550 --> 00:05:11.970 an economic decision based on affordability research? 00:05:12.370 --> 00:05:14.490 Not at all. It was a budget hawk decision to 00:05:14.490 --> 00:05:17.089 save federal dollars. And that number 30 %... 00:05:17.240 --> 00:05:19.699 Just calcified. It somehow became the standard 00:05:19.699 --> 00:05:22.040 definition of affordability for the entire market, 00:05:22.160 --> 00:05:24.620 public and private. So we are measuring our financial 00:05:24.620 --> 00:05:27.560 health with a ruler that was literally forged 00:05:27.560 --> 00:05:30.860 from 1980s budget cuts. That's a great way to 00:05:30.860 --> 00:05:33.100 put it. And the problem with a flat percentage, 00:05:33.339 --> 00:05:36.139 any flat percentage, is that it completely ignores 00:05:36.139 --> 00:05:38.480 the absolute value of money. Yeah. I mean, if 00:05:38.480 --> 00:05:40.519 I make a million dollars a year and spend 50 00:05:40.519 --> 00:05:42.899 percent on housing, I still have $500 ,000 to 00:05:42.899 --> 00:05:46.009 live on. You're doing just fine. I'm not. severely 00:05:46.009 --> 00:05:49.290 burdened. But if you make $20 ,000 a year and 00:05:49.290 --> 00:05:52.310 you spend that affordable 30 % on housing, you 00:05:52.310 --> 00:05:56.310 have $14 ,000 left. For the whole year, that 00:05:56.310 --> 00:05:58.649 remaining 70 percent might not even cover food 00:05:58.649 --> 00:06:00.689 and medicine, let alone a car payment or saving 00:06:00.689 --> 00:06:03.129 for an emergency. The percentage is regressive. 00:06:03.269 --> 00:06:05.550 It hurts the poor more than the rich. Which is 00:06:05.550 --> 00:06:08.689 why the data from 2022 is flashing red all over 00:06:08.689 --> 00:06:11.089 the place. About half of U .S. renters are in 00:06:11.089 --> 00:06:13.790 the so -called safe zone under that 30 percent 00:06:13.790 --> 00:06:15.970 threshold. But that means half aren't. And inside 00:06:15.970 --> 00:06:18.660 that half. A massive chunk one in four renters 00:06:18.660 --> 00:06:21.660 in the entire country is paying over 50%. That 00:06:21.660 --> 00:06:24.480 is the danger zone. When half your income vanishes 00:06:24.480 --> 00:06:26.560 to the landlord on the first of the month, the 00:06:26.560 --> 00:06:28.800 math for the rest of your life just breaks. It 00:06:28.800 --> 00:06:31.100 doesn't work. You aren't saving for retirement. 00:06:31.379 --> 00:06:33.800 You aren't fixing your car when the check engine 00:06:33.800 --> 00:06:36.199 light comes on. You're definitely not. You are 00:06:36.199 --> 00:06:39.779 one minor emergency, a sick kid, a flat tire 00:06:39.779 --> 00:06:41.959 away from addiction. I noticed in the research 00:06:41.959 --> 00:06:44.660 that... Australia takes a different approach 00:06:44.660 --> 00:06:47.540 to this, which seems, I don't know, much more 00:06:47.540 --> 00:06:50.459 humane. They use what they call a residual income 00:06:50.459 --> 00:06:53.339 model. Yes. It's a much smarter way of looking 00:06:53.339 --> 00:06:56.339 at it. Instead of a cold percentage, the Australian 00:06:56.339 --> 00:06:59.860 model asks a very simple question. After you 00:06:59.860 --> 00:07:02.699 pay for housing, do you have enough money left 00:07:02.699 --> 00:07:05.920 to meet your other basic needs? So it focuses 00:07:05.920 --> 00:07:08.670 on what remains in your wallet. Which is what 00:07:08.670 --> 00:07:10.870 actually matters to a family. It's not about 00:07:10.870 --> 00:07:13.129 the percentage. It's about what you have left 00:07:13.129 --> 00:07:15.589 to live on. It treats housing as the first eater. 00:07:15.730 --> 00:07:18.269 The first eater. I like that. It eats first, 00:07:18.389 --> 00:07:20.629 and you have to survive on the crumbs. If the 00:07:20.629 --> 00:07:22.370 crumbs aren't enough to buy a loaf of bread, 00:07:22.550 --> 00:07:24.649 then the housing wasn't affordable, regardless 00:07:24.649 --> 00:07:27.910 of what percentage it was. Precisely. Now, for 00:07:27.910 --> 00:07:29.990 the people trying to buy the aspiring homeowners 00:07:29.990 --> 00:07:32.269 out there, there's another metric in our stack 00:07:32.269 --> 00:07:33.990 that explains why everyone feels so hopeless. 00:07:34.170 --> 00:07:37.050 It's called the median multiple. This is the 00:07:37.050 --> 00:07:39.529 World Bank and U .N. standard, right? It is. 00:07:39.649 --> 00:07:42.529 And it's brutally simple division. You take the 00:07:42.529 --> 00:07:45.189 median house price in a city and you divide it 00:07:45.189 --> 00:07:47.649 by the median household income. And historically, 00:07:47.850 --> 00:07:51.810 a healthy market, a sane market, had a multiple 00:07:51.810 --> 00:07:55.069 of about 3 .0. Right. Meaning the average house 00:07:55.069 --> 00:07:58.300 cost three times the average annual salary. And 00:07:58.300 --> 00:07:59.720 there's reason for that number, isn't there? 00:07:59.800 --> 00:08:02.100 It connects back to how banks used to underwrite 00:08:02.100 --> 00:08:04.480 mortgages. It does. There was the old rule of 00:08:04.480 --> 00:08:07.100 28 in banking. It generally said your mortgage 00:08:07.100 --> 00:08:09.339 payment shouldn't exceed 28 % of your income. 00:08:09.519 --> 00:08:11.500 Which is pretty close to that 30 % rule we were 00:08:11.500 --> 00:08:13.500 just talking about. Exactly. And at reasonable 00:08:13.500 --> 00:08:15.879 interest rates, a 3 .0 price to income ratio 00:08:15.879 --> 00:08:18.620 fits perfectly into that box. It creates sustainable 00:08:18.620 --> 00:08:20.939 debt. You can pay it off without bankrupting 00:08:20.939 --> 00:08:23.420 yourself. But looking at the data for major global 00:08:23.420 --> 00:08:26.759 cities today, 3 .0 is a fantasy. It's a fairy 00:08:26.759 --> 00:08:29.939 tale. It's ancient history. We are seeing multiples 00:08:29.939 --> 00:08:33.320 of 10, 15, even 20 in places like Hong Kong, 00:08:33.539 --> 00:08:36.980 Vancouver, Sydney, and large parts of California. 00:08:37.200 --> 00:08:39.419 So just to do the math for the listener, if you 00:08:39.419 --> 00:08:41.940 make $100 ,000 a year, which is a great salary 00:08:41.940 --> 00:08:43.940 in most places. A very good salary. A healthy 00:08:43.940 --> 00:08:47.480 house for you should cost around $300 ,000. But 00:08:47.480 --> 00:08:50.399 in these markets, that starter home is $1 .5 00:08:50.399 --> 00:08:53.879 million. Right. Or $2 million. Which means the 00:08:53.879 --> 00:08:56.360 local wages have completely disconnected from 00:08:56.360 --> 00:08:58.620 the local housing stock. The people who work 00:08:58.620 --> 00:09:00.440 in the city, the teachers, the firefighters, 00:09:00.740 --> 00:09:03.340 the nurses, can literally never earn enough in 00:09:03.340 --> 00:09:05.620 wages to buy a piece of the city they maintain. 00:09:05.879 --> 00:09:07.879 This leads to the classic debate, the one you 00:09:07.879 --> 00:09:09.980 hear all the time. Is this an income problem 00:09:09.980 --> 00:09:12.980 or a price problem? Are houses too expensive 00:09:12.980 --> 00:09:16.029 or are we just too poor? Well, the obvious answer 00:09:16.029 --> 00:09:18.409 is it's both. But the income inequality argument 00:09:18.409 --> 00:09:20.870 is really strong. For the bottom 60 percent of 00:09:20.870 --> 00:09:23.809 earners, real wages have been relatively stagnant 00:09:23.809 --> 00:09:26.029 for decades when you adjust for inflation. Right. 00:09:26.149 --> 00:09:28.429 The paycheck just doesn't stretch as far. Meanwhile, 00:09:28.730 --> 00:09:31.389 the asset class housing has appreciated wildly 00:09:31.389 --> 00:09:34.990 far outpacing inflation or wage growth. But there 00:09:34.990 --> 00:09:37.629 is a hidden variable here, one that I think is 00:09:37.629 --> 00:09:41.840 the biggest aha. moment in this entire deep dive 00:09:41.840 --> 00:09:44.059 you're talking about the h plus t index the housing 00:09:44.059 --> 00:09:47.200 plus transportation index developed by the center 00:09:47.200 --> 00:09:50.629 for neighborhood technology this This changes 00:09:50.629 --> 00:09:52.590 the map completely. Let's walk through this because 00:09:52.590 --> 00:09:54.870 this just destroys the standard advice given 00:09:54.870 --> 00:09:57.070 to every young family for generations. It really 00:09:57.070 --> 00:09:59.909 does. And that advice is drive till you qualify. 00:10:00.129 --> 00:10:02.389 Drive till you qualify. Exactly. Can't afford 00:10:02.389 --> 00:10:04.490 the city center. Okay, move to the suburbs. Can't 00:10:04.490 --> 00:10:06.909 afford the inner ring suburbs. Move to the exurbs. 00:10:07.009 --> 00:10:09.750 Move an hour away. The rent drops. You get a 00:10:09.750 --> 00:10:11.450 yard for the kids. And if you're just looking 00:10:11.450 --> 00:10:14.330 on Zillow or Redfin, that looks like a huge win. 00:10:14.649 --> 00:10:17.049 You trade a $3 ,000 a month two -bedroom apartment 00:10:17.049 --> 00:10:20.230 for a $1 ,500 a month mortgage on a house. You 00:10:20.230 --> 00:10:22.730 think you just saved $1 ,500 a month. You think 00:10:22.730 --> 00:10:25.289 you're a financial genius. But you didn't. You 00:10:25.289 --> 00:10:27.470 didn't save a dime. Because transportation is 00:10:27.470 --> 00:10:29.590 the second largest expense for American households 00:10:29.590 --> 00:10:32.509 right after housing. When you move that far out, 00:10:32.570 --> 00:10:35.129 you are now legally married to your car. Or, 00:10:35.149 --> 00:10:37.970 more likely, two cars for a household with two 00:10:37.970 --> 00:10:39.990 working adults. And we aren't just talking about 00:10:39.990 --> 00:10:41.990 the cost of gas. That's what people focus on. 00:10:42.110 --> 00:10:43.909 No, it's so much more. We're talking insurance, 00:10:44.230 --> 00:10:46.210 which is not cheap. We're talking maintenance, 00:10:46.389 --> 00:10:49.950 repairs, tires, depreciation. And the time cost. 00:10:50.190 --> 00:10:52.730 We tend to value our commute time at $0 in our 00:10:52.730 --> 00:10:55.529 personal accounting. But it's not zero. It is 00:10:55.529 --> 00:10:58.090 absolutely not zero. It's time away from your 00:10:58.090 --> 00:11:00.549 kids. It's time you aren't working a side gig 00:11:00.549 --> 00:11:02.809 or learning a new skill. It's stress on your 00:11:02.809 --> 00:11:04.860 body and your mental health. So the Center for 00:11:04.860 --> 00:11:07.659 Neighborhood Technology ran the numbers. They 00:11:07.659 --> 00:11:10.320 said, OK, let's stop looking at just the 30 % 00:11:10.320 --> 00:11:12.740 housing rule. That's a broken metric. Let's look 00:11:12.740 --> 00:11:15.580 at housing plus transportation combined. And 00:11:15.580 --> 00:11:18.039 they set a new benchmark for affordability. 45 00:11:18.039 --> 00:11:21.399 % of income. So roughly 30 % for the roof, 15 00:11:21.399 --> 00:11:24.440 % for the wheels. That seems reasonable. It seems 00:11:24.440 --> 00:11:26.559 very reasonable. But when you apply that filter 00:11:26.559 --> 00:11:29.500 to the map of the United States. The map of affordable 00:11:29.500 --> 00:11:33.879 America shrinks. It's a shock. If you just look 00:11:33.879 --> 00:11:37.019 at housing costs alone, about 55 % of neighborhoods 00:11:37.019 --> 00:11:39.580 in the U .S. look affordable. So more than half 00:11:39.580 --> 00:11:41.759 the country seems okay. Seems okay. But when 00:11:41.759 --> 00:11:44.299 you add the transportation costs of those cheap 00:11:44.299 --> 00:11:47.700 exurbs, the affordable inventory drops to just 00:11:47.700 --> 00:11:51.120 26%. Wait, run that by me again so we lose nearly 00:11:51.120 --> 00:11:53.440 30 percentage points. We lose more than that. 00:11:53.500 --> 00:11:56.419 The number of neighborhoods drops from 55 % to 00:11:56.419 --> 00:11:59.759 26%. They are illusionary affordable. We lose 00:11:59.759 --> 00:12:18.399 nearly 60 ,000 neighborhoods. That is the trap. 00:12:18.580 --> 00:12:20.799 The drive -to -you -qualify advice is actually 00:12:20.799 --> 00:12:23.179 a mechanism for capping social mobility. That's 00:12:23.179 --> 00:12:28.740 it, exactly. while the odometer destroys the 00:12:28.740 --> 00:12:31.320 resale value of your primary asset besides the 00:12:31.320 --> 00:12:34.159 house, your car. Exactly. It explains why so 00:12:34.159 --> 00:12:36.519 many people feel so squeezed even when they move 00:12:36.519 --> 00:12:40.379 to so -called low cost of living areas. The cost 00:12:40.379 --> 00:12:42.460 of living isn't low. It's just shifted from the 00:12:42.460 --> 00:12:44.960 landlord to the auto mechanic and the oil company. 00:12:45.220 --> 00:12:47.279 So we've established that the demand side is 00:12:47.279 --> 00:12:49.659 messy wages are low, our metrics are broken, 00:12:49.759 --> 00:12:52.950 and the hidden cost of transport is high. But 00:12:52.950 --> 00:12:55.149 let's pivot to the thing that really, I mean, 00:12:55.169 --> 00:12:57.509 it makes my blood boil when you read this research, 00:12:57.669 --> 00:13:01.389 the supply side. Yes. The why can't we just build 00:13:01.389 --> 00:13:04.830 more question. Exactly. If 1 .6 billion people 00:13:04.830 --> 00:13:07.509 need homes, that sounds like a massive business 00:13:07.509 --> 00:13:10.250 opportunity. Why aren't developers flooding the 00:13:10.250 --> 00:13:12.529 zone with cheap apartments? Is it just pure greed? 00:13:12.850 --> 00:13:15.129 It's not just greed. I mean, greed is a factor 00:13:15.129 --> 00:13:17.830 in any market. But the real issue is that we 00:13:17.830 --> 00:13:20.289 have made it incredibly. prohibitively expensive 00:13:20.289 --> 00:13:22.590 to even ask for permission to build, we have 00:13:22.590 --> 00:13:24.549 to talk about the right to build tax. Yeah, to 00:13:24.549 --> 00:13:26.669 be clear, this isn't a tax you see on a receipt. 00:13:26.789 --> 00:13:28.929 This isn't a line item. No, it's an invisible 00:13:28.929 --> 00:13:31.909 tax. Yeah. This comes from a 2007 study by Glazer 00:13:31.909 --> 00:13:34.549 and Tobio. Right. And what they wanted to do 00:13:34.549 --> 00:13:38.129 was isolate the cost of bureaucracy, not the 00:13:38.129 --> 00:13:40.610 cost of lumber, not the cost of labor, not even 00:13:40.610 --> 00:13:42.769 the cost of the land itself, just the cost of 00:13:42.769 --> 00:13:45.529 the regulatory apparatus. The red tape. How did 00:13:45.529 --> 00:13:47.899 they even calculate that? Because that seems 00:13:47.899 --> 00:13:49.960 so intangible. It's a very clever methodology. 00:13:50.299 --> 00:13:53.500 They compared the cost of homes on quarter acre 00:13:53.500 --> 00:13:56.039 lots versus half acre lots in the same area. 00:13:56.200 --> 00:13:58.539 OK. By stripping away the difference in the quantity 00:13:58.539 --> 00:14:00.899 of land and the construction costs, which are 00:14:00.899 --> 00:14:02.740 basically the same. Right. They could isolate 00:14:02.740 --> 00:14:05.720 the regulatory premium, the cost of the permit, 00:14:05.860 --> 00:14:07.759 the zoning delays, the environmental reviews, 00:14:08.000 --> 00:14:10.679 the legal battles with neighbors. And the numbers 00:14:10.679 --> 00:14:13.320 they found for a city like San Francisco were 00:14:13.320 --> 00:14:16.799 startling. That's an understatement. In San Francisco, 00:14:17.039 --> 00:14:19.860 the right to build, meaning just the cost of 00:14:19.860 --> 00:14:22.500 navigating the bureaucracy to get the green light 00:14:22.500 --> 00:14:25.120 added, approximately $600 ,000 to the cost of 00:14:25.120 --> 00:14:28.200 a single new house. $600 ,000. Yes. That's a 00:14:28.200 --> 00:14:30.919 luxury home in most of the country. In San Francisco, 00:14:31.100 --> 00:14:33.860 that is just the cost of paper and time. It's 00:14:33.860 --> 00:14:36.740 mostly time. If a project takes five, six, seven 00:14:36.740 --> 00:14:39.080 years to get approved, you are paying interest 00:14:39.080 --> 00:14:41.279 on the land loan that whole time. You're paying 00:14:41.279 --> 00:14:44.000 lawyers. You're paying consultants and architects 00:14:44.000 --> 00:14:47.080 to tweak the plans over and over. All of that 00:14:47.080 --> 00:14:49.019 gets baked into the final price of the home. 00:14:49.240 --> 00:14:51.659 So when people scream at developers for building 00:14:51.659 --> 00:14:54.740 luxury condos, they're kind of missing the point. 00:14:54.860 --> 00:14:56.659 They're pointing the finger at the wrong villain. 00:14:57.200 --> 00:15:00.639 If the entry fee just to break ground is $600 00:15:00.639 --> 00:15:04.230 ,000, you can't build affordable housing. It's 00:15:04.230 --> 00:15:07.190 not possible. You literally cannot build a $200 00:15:07.190 --> 00:15:10.490 ,000 unit if the permit cost is triple that. 00:15:10.769 --> 00:15:13.809 Precisely. Regulation sets a floor price. If 00:15:13.809 --> 00:15:16.070 you make it illegal or prohibitively expensive 00:15:16.070 --> 00:15:18.909 to build, you won't get cheap housing. You'll 00:15:18.909 --> 00:15:20.929 only get housing for the people who can afford 00:15:20.929 --> 00:15:23.710 the $600 ,000 premium on top of everything else. 00:15:23.889 --> 00:15:26.529 And this leads us directly to zoning, the invisible 00:15:26.529 --> 00:15:29.129 lines on the map that dictate everything. Zoning 00:15:29.129 --> 00:15:31.230 is often presented as this benign safety measure. 00:15:31.769 --> 00:15:33.570 We don't want a coal plant next to a kindergarten. 00:15:33.830 --> 00:15:35.929 Which, sure, I agree with that. No one wants 00:15:35.929 --> 00:15:38.049 that. Industrial and residential should be separate. 00:15:38.230 --> 00:15:42.070 Of course. But it has morphed over decades into 00:15:42.070 --> 00:15:45.370 a tool to effectively outlaw the bottom end of 00:15:45.370 --> 00:15:48.289 the housing market. And we see this most clearly 00:15:48.289 --> 00:15:51.730 with things like minimum unit sizes. The 400 00:15:51.730 --> 00:15:54.419 square foot rule. Right. Many cities mandate 00:15:54.419 --> 00:15:57.139 that a new apartment must be at least 400 square 00:15:57.139 --> 00:16:00.480 feet. Now on the surface, that sounds nice. Everyone 00:16:00.480 --> 00:16:02.779 deserves space. That sounds humane. It does. 00:16:03.120 --> 00:16:05.840 But what if I only have $600 a month for rent? 00:16:06.279 --> 00:16:09.399 I can't afford 400 square feet. I might be perfectly 00:16:09.399 --> 00:16:12.259 happy in a 200 square foot micro studio with 00:16:12.259 --> 00:16:14.799 a shared kitchen. But the city says, no, that's 00:16:14.799 --> 00:16:16.200 too small. You're not allowed to live there. 00:16:16.320 --> 00:16:18.559 So where do I go? You don't go to the micro studio 00:16:18.559 --> 00:16:20.240 because it was never built. It was illegal to 00:16:20.240 --> 00:16:23.279 build. So you go to the street. Or you cram three 00:16:23.279 --> 00:16:26.240 people into a one -bedroom illegal sublet. By 00:16:26.240 --> 00:16:29.000 outlawing small, cheap legal options, we haven't 00:16:29.000 --> 00:16:31.019 raised standards. We've just removed the bottom 00:16:31.019 --> 00:16:32.740 rung of the ladder. And then you add the car 00:16:32.740 --> 00:16:34.740 back into the mix. This is where it gets really 00:16:34.740 --> 00:16:37.500 crazy. Parking minimums. The silent killer of 00:16:37.500 --> 00:16:39.799 affordability. I was reading about Los Angeles 00:16:39.799 --> 00:16:43.039 in the research. In some new developments, a 00:16:43.039 --> 00:16:46.759 single parking space can cost $75 ,000 to build. 00:16:47.159 --> 00:16:49.919 Is that real? It's very real. If you are building 00:16:49.919 --> 00:16:52.980 an underground parking structure, yes, concrete 00:16:52.980 --> 00:16:55.940 is expensive. Digging giant holes in the ground 00:16:55.940 --> 00:16:58.679 is expensive. So if the city code requires. one 00:16:58.679 --> 00:17:01.620 or even two parking spots per apartment unit. 00:17:01.799 --> 00:17:03.779 You're forcing the developer to build a bedroom 00:17:03.779 --> 00:17:05.880 for the tenant and a bedroom for their Toyota. 00:17:06.079 --> 00:17:08.240 And the tenant pays for both, of course, even 00:17:08.240 --> 00:17:11.599 if they don't own a car. That $75 ,000 cost is 00:17:11.599 --> 00:17:14.319 amortized into the rent of every single unit 00:17:14.319 --> 00:17:16.799 in the building. So it's a subsidy. It's a massive 00:17:16.799 --> 00:17:18.900 hidden subsidy from renters who don't own cars 00:17:18.900 --> 00:17:21.700 to renters who do. And it's mandated by the government. 00:17:21.940 --> 00:17:23.799 It's just wild when you look at it that way. 00:17:23.880 --> 00:17:27.180 We are prioritizing the housing of automobiles 00:17:27.180 --> 00:17:29.900 over that. And then you have the pure politics 00:17:29.900 --> 00:17:35.660 of it all. NIMB -ism. Not in my backyard. This 00:17:35.660 --> 00:17:37.799 story blew my mind. It sounds like something 00:17:37.799 --> 00:17:40.240 from the Middle Ages, not modern America. It 00:17:40.240 --> 00:17:43.299 was almost futile. Until 2018, if you wanted 00:17:43.299 --> 00:17:45.180 to build an affordable housing project in the 00:17:45.180 --> 00:17:48.200 city of Los Angeles, you needed a letter of acknowledgement 00:17:48.200 --> 00:17:50.660 from the specific city council member of that 00:17:50.660 --> 00:17:53.900 district. And they could just not sign it. For 00:17:53.900 --> 00:17:56.220 any reason. They could just pocket veto it. No 00:17:56.220 --> 00:17:59.119 reason given. Just silence. And the project dies 00:17:59.119 --> 00:18:02.500 on the vine. It gave a single politician unilateral 00:18:02.500 --> 00:18:05.599 power to block housing for thousands of people. 00:18:05.740 --> 00:18:08.880 And they would use that power to appease local 00:18:08.880 --> 00:18:11.019 homeowners who didn't want those people moving 00:18:11.019 --> 00:18:14.079 into their neighborhood. Those people being teachers, 00:18:14.319 --> 00:18:16.960 nurses, baristas, restaurant workers, the people 00:18:16.960 --> 00:18:19.759 who make the city actually run. Exactly. We want 00:18:19.759 --> 00:18:21.460 our labor during the day. We just don't want 00:18:21.460 --> 00:18:24.299 their presence after 5 .00 p .m. We want them 00:18:24.299 --> 00:18:26.299 to have a two -hour commute. That's the implicit 00:18:26.299 --> 00:18:28.480 message. So we have a system where the math is 00:18:28.480 --> 00:18:31.079 hidden, the commute is bankrupting us, and the 00:18:31.079 --> 00:18:33.420 regulations make it illegal to build what we 00:18:33.420 --> 00:18:35.960 actually need. But if you think the situation 00:18:35.960 --> 00:18:39.369 in San Francisco or L .A. is bad... We need to 00:18:39.369 --> 00:18:41.250 widen the aperture. We need to talk about the 00:18:41.250 --> 00:18:44.170 megacities. This is where the sheer numbers become 00:18:44.170 --> 00:18:46.670 overwhelming. For the first time in human history, 00:18:46.890 --> 00:18:50.349 the majority of humans now live in cities. And 00:18:50.349 --> 00:18:52.230 we aren't just talking about cities like Paris 00:18:52.230 --> 00:18:55.789 or Chicago. We are talking about urban agglomerations. 00:18:56.349 --> 00:18:58.769 The Yangtze Delta region in China is approaching 00:18:58.769 --> 00:19:02.130 80 million people. 80 million. The Tokyo -Yokohama 00:19:02.130 --> 00:19:06.269 region is at 100 million. A single contiguous 00:19:06.269 --> 00:19:09.609 urban area. And when that many people flood into 00:19:09.609 --> 00:19:12.150 a system that isn't building enough formal housing, 00:19:12.750 --> 00:19:14.930 or where the formal housing is completely unaffordable 00:19:14.930 --> 00:19:17.490 for new arrivals, you get the informal settlement, 00:19:17.769 --> 00:19:20.009 the slum. The source material highlights Neza 00:19:20.009 --> 00:19:22.950 Chalcoitza in Mexico. It sits on the sprawling 00:19:22.950 --> 00:19:25.730 outskirts of Mexico City. It is the largest slum 00:19:25.730 --> 00:19:28.410 in the world. It's home to nearly 4 million people. 00:19:28.569 --> 00:19:30.930 4 million people. That's larger than the population 00:19:30.930 --> 00:19:33.410 of roughly half the states in the U .S., just 00:19:33.410 --> 00:19:36.029 in one informal sprawl. And these places form 00:19:36.029 --> 00:19:39.160 because of rural to urban migration. People leave 00:19:39.160 --> 00:19:41.259 the countryside looking for economic opportunity, 00:19:41.579 --> 00:19:44.380 but the city's economic stagnation or lack of 00:19:44.380 --> 00:19:47.579 planning leaves them with nowhere to go. So they 00:19:47.579 --> 00:19:49.680 build where they can, often without title to 00:19:49.680 --> 00:19:52.599 the land or access to basic utilities like water 00:19:52.599 --> 00:19:55.380 and electricity. And this brings us to the most 00:19:55.380 --> 00:19:58.400 visible, visceral edge of the crisis, at least 00:19:58.400 --> 00:20:01.779 in developed countries, homelessness. We have 00:20:01.779 --> 00:20:03.859 a report here from the Council of Economic Advisers 00:20:03.859 --> 00:20:06.680 from 2019, and it breaks down the drivers of 00:20:06.680 --> 00:20:09.299 homelessness in a way that is Honestly, it's 00:20:09.299 --> 00:20:11.099 a bit cold, but it's very revealing. It's an 00:20:11.099 --> 00:20:14.000 economic analysis of a human tragedy. And they 00:20:14.000 --> 00:20:16.799 identified four main drivers. The first one we 00:20:16.799 --> 00:20:19.640 just beat to death, overregulation. The report 00:20:19.640 --> 00:20:21.980 makes a pretty stunning claim. It claims that 00:20:21.980 --> 00:20:24.460 if we deregulated housing markets in just 11 00:20:24.460 --> 00:20:27.019 constrained metros. homelessness would drop by 00:20:27.019 --> 00:20:29.880 54 % in San Francisco. That's what their model 00:20:29.880 --> 00:20:32.240 suggests. It puts forward the idea that homelessness 00:20:32.240 --> 00:20:34.839 isn't just a social pathology. It is primarily 00:20:34.839 --> 00:20:37.480 a supply problem, a housing price problem. The 00:20:37.480 --> 00:20:39.940 idea being that if housing is cheap enough, most 00:20:39.940 --> 00:20:42.220 people, even though struggling, find a way to 00:20:42.220 --> 00:20:44.779 pay for it. But when the absolute bottom rung 00:20:44.779 --> 00:20:46.960 of the ladder is a $2 ,000 a month apartment, 00:20:47.279 --> 00:20:49.240 people just fall off. There's no safety net. 00:20:49.440 --> 00:20:51.819 But then there are the other drivers. The second 00:20:51.819 --> 00:20:54.549 one is climate. It's grim physics, really. It 00:20:54.549 --> 00:20:58.029 is physically easier to survive sleeping on the 00:20:58.029 --> 00:21:01.109 street in Los Angeles or San Diego than it is 00:21:01.109 --> 00:21:03.950 in Chicago or Boston in February. You're less 00:21:03.950 --> 00:21:07.230 likely to freeze to death. Exactly. So the unsheltered 00:21:07.230 --> 00:21:10.289 population naturally skews toward warmer climates. 00:21:10.309 --> 00:21:13.170 It's a rational choice under irrational circumstances. 00:21:13.470 --> 00:21:16.309 But driver number three. This is the one that's 00:21:16.309 --> 00:21:18.569 going to make some listeners uncomfortable. It's 00:21:18.569 --> 00:21:21.549 the right to shelter paradox. This one is very 00:21:21.549 --> 00:21:23.609 counterintuitive. There are places like New York 00:21:23.609 --> 00:21:25.750 City or the state of Massachusetts that have 00:21:25.750 --> 00:21:28.269 a legal right to shelter. If you are homeless, 00:21:28.430 --> 00:21:30.789 the government must provide you a bed. Which 00:21:30.789 --> 00:21:32.769 sounds like the most humane and decent thing 00:21:32.769 --> 00:21:35.450 to do. It is. It comes from a place of compassion. 00:21:35.730 --> 00:21:37.970 But the economic argument in the report is that 00:21:37.970 --> 00:21:40.049 because the quality of that shelter is relatively 00:21:40.049 --> 00:21:43.690 high, it has heat, security, food services, it 00:21:43.690 --> 00:21:46.029 becomes a viable substitute for the bottom end 00:21:46.029 --> 00:21:48.450 of the private market housing. So if my only 00:21:48.450 --> 00:21:52.220 private market option... is a dangerous illegal 00:21:52.220 --> 00:21:55.900 basement apartment for $800 a month that eats 00:21:55.900 --> 00:21:58.740 half my income. Right. Or I can go to a free 00:21:58.740 --> 00:22:02.140 shelter bed that is safe and warm. I might choose 00:22:02.140 --> 00:22:04.789 the shelter. That's the theory. It increases 00:22:04.789 --> 00:22:07.049 the demand for shelter beds because the shelter 00:22:07.049 --> 00:22:09.430 starts to compete with the private market. And 00:22:09.430 --> 00:22:11.849 it can create this feedback loop where having 00:22:11.849 --> 00:22:14.329 a right to shelter can statistically increase 00:22:14.329 --> 00:22:16.910 the sheltered homeless population. Not necessarily 00:22:16.910 --> 00:22:18.829 the total homeless population, but the number 00:22:18.829 --> 00:22:21.410 of people in the system. It's a difficult tradeoff. 00:22:21.410 --> 00:22:23.990 You want to help, but the help itself changes 00:22:23.990 --> 00:22:27.269 the incentives. But we absolutely can't ignore 00:22:27.269 --> 00:22:30.150 the fourth driver. the individual factors. Mental 00:22:30.150 --> 00:22:32.049 illness and substance abuse. The numbers are 00:22:32.049 --> 00:22:35.089 high. The report says about 20 % of the homeless 00:22:35.089 --> 00:22:37.329 population suffers from a severe mental illness. 00:22:37.509 --> 00:22:40.730 Another 16 % have a chronic substance abuse problem. 00:22:40.950 --> 00:22:42.609 And this is where the policy of housing first 00:22:42.609 --> 00:22:44.970 comes into the conversation. For a long time, 00:22:44.970 --> 00:22:47.450 the model was treatment first. You know, solve 00:22:47.450 --> 00:22:49.250 your addiction, get your mental health in order, 00:22:49.329 --> 00:22:51.569 then you get a house. Which sounds logical on 00:22:51.569 --> 00:22:54.630 paper. But housing first, flip that on its head. 00:22:54.730 --> 00:22:57.150 It said... Give them the house first, give them 00:22:57.150 --> 00:22:59.769 a stable foundation, then solve the addiction. 00:23:00.029 --> 00:23:02.410 Because it's really, really hard to get sober 00:23:02.410 --> 00:23:04.269 when you're living under a bridge. It's nearly 00:23:04.269 --> 00:23:07.349 impossible. You need stability first. But now 00:23:07.349 --> 00:23:09.589 we are seeing a bit of a shift, a refinement 00:23:09.589 --> 00:23:12.650 of that model back toward housing plus services. 00:23:12.970 --> 00:23:15.549 Because a roof alone doesn't cure schizophrenia. 00:23:16.150 --> 00:23:18.650 You need the support structure to go along with 00:23:18.650 --> 00:23:20.490 the physical structure. And there is a ticking 00:23:20.490 --> 00:23:22.609 clock in the U .S. right now regarding this. 00:23:23.049 --> 00:23:25.210 the emergency housing vouchers from the pandemic. 00:23:25.470 --> 00:23:28.390 The EHV funding, a lot of that is expected to 00:23:28.390 --> 00:23:31.390 expire by the end of 2026. If that funding dries 00:23:31.390 --> 00:23:34.009 up without a replacement, we could see a massive 00:23:34.009 --> 00:23:36.529 spike in homelessness numbers right when we think 00:23:36.529 --> 00:23:38.390 we're starting to get a handle on them. Now, 00:23:38.450 --> 00:23:40.710 we've talked a lot about the people directly 00:23:40.710 --> 00:23:43.529 experiencing this crisis, the burdened renters, 00:23:43.569 --> 00:23:46.190 the homeless. But the housing crisis doesn't 00:23:46.190 --> 00:23:49.220 just stay inside the house. It ripples out. It 00:23:49.220 --> 00:23:51.440 infects the rest of society. It affects everything. 00:23:51.640 --> 00:23:54.019 Let's start with public health. Housing is health. 00:23:54.180 --> 00:23:56.880 They are inextricable. This is huge. If your 00:23:56.880 --> 00:23:59.720 house is damp or cold because you can't afford 00:23:59.720 --> 00:24:02.619 proper heating or repairs, you get respiratory 00:24:02.619 --> 00:24:05.920 diseases. Asthma rates in children skyrocket. 00:24:06.000 --> 00:24:08.500 Exactly. We already mentioned homelessness is 00:24:08.500 --> 00:24:10.519 officially recognized as a public health issue. 00:24:10.920 --> 00:24:12.839 But even beyond that, think about education. 00:24:13.220 --> 00:24:15.119 There was a study in Boston that looked at this. 00:24:15.180 --> 00:24:18.240 It showed that foreclosures and frequent moves 00:24:18.240 --> 00:24:21.400 have a direct negative impact on student test 00:24:21.400 --> 00:24:24.000 scores and attendance. It makes total sense. 00:24:24.220 --> 00:24:26.079 If a kid doesn't know where they are going to 00:24:26.079 --> 00:24:28.500 be sleeping next month, how can they possibly 00:24:28.500 --> 00:24:31.039 be expected to focus on algebra? They can't. 00:24:31.039 --> 00:24:34.240 But here is the kicker from that study. It affects 00:24:34.240 --> 00:24:37.180 the other kids too, the ones who are stably housed. 00:24:37.690 --> 00:24:40.150 How? Teachers in classrooms with high student 00:24:40.150 --> 00:24:42.470 turnover have to slow down the instructional 00:24:42.470 --> 00:24:45.069 pacing for everyone to accommodate the new kids 00:24:45.069 --> 00:24:47.869 coming in and the old kids leaving. So if your 00:24:47.869 --> 00:24:50.269 neighbor's housing is unstable, your child's 00:24:50.269 --> 00:24:53.470 education literally slows down. That is a powerful 00:24:53.470 --> 00:24:56.250 point. High rent in your community makes the 00:24:56.250 --> 00:24:58.670 whole class learn slower. It's a collective problem. 00:24:58.910 --> 00:25:01.130 Then there's the labor market, what economists 00:25:01.130 --> 00:25:04.259 call the spatial mismatch. This is when businesses 00:25:04.259 --> 00:25:06.400 complain they can't find workers. You hear it 00:25:06.400 --> 00:25:08.799 all the time. Nobody wants to work. The workers 00:25:08.799 --> 00:25:11.160 are there. They exist. They just live two hours 00:25:11.160 --> 00:25:12.640 away because that's the only place they could 00:25:12.640 --> 00:25:14.980 afford. And they can't afford the gas and the 00:25:14.980 --> 00:25:17.579 time for a four -hour round -trip commute for 00:25:17.579 --> 00:25:21.779 a $15 an hour job. So when housing pushes labor 00:25:21.779 --> 00:25:24.700 away from capital, businesses lose competitiveness. 00:25:24.819 --> 00:25:27.779 They can't staff their shops. And the whole regional 00:25:27.779 --> 00:25:31.000 economy suffers. Okay, we have depressed everyone 00:25:31.000 --> 00:25:34.339 sufficiently. Let's pivot. Let's open the toolkit. 00:25:35.000 --> 00:25:37.819 Because people are trying to solve this. And 00:25:37.819 --> 00:25:39.900 there's some really cool innovation happening, 00:25:40.000 --> 00:25:42.400 both in design and in policy. Let's start with 00:25:42.400 --> 00:25:45.220 the physical stuff, the actual buildings. If 00:25:45.220 --> 00:25:47.480 you live in a U .S. city, you have seen the 5 00:25:47.480 --> 00:25:50.660 over 1. Oh, yeah. The boxy, colorful apartment 00:25:50.660 --> 00:25:53.259 buildings that seem to pop up overnight on every 00:25:53.259 --> 00:25:55.740 vacant lot. Sometimes called the Texas donut, 00:25:55.960 --> 00:25:59.630 it refers to a specific construction style. Five 00:25:59.630 --> 00:26:02.210 stories of wood framing sitting on top of a one 00:26:02.210 --> 00:26:05.349 -story concrete podium. Five over one. Why is 00:26:05.349 --> 00:26:07.950 this specific shape taking over the entire country? 00:26:08.029 --> 00:26:10.410 What's so special about it? It exploits a sweet 00:26:10.410 --> 00:26:12.869 spot in the international building code. Wood 00:26:12.869 --> 00:26:16.299 is cheap. Concrete is expensive. By putting the 00:26:16.299 --> 00:26:18.660 parking and the ground floor retail in the concrete 00:26:18.660 --> 00:26:21.480 base and then using fire -treated wood for the 00:26:21.480 --> 00:26:24.259 residential units above, you maximize density 00:26:24.259 --> 00:26:27.259 while keeping construction costs as low as possible. 00:26:27.460 --> 00:26:29.160 So it's the most efficient way we currently have 00:26:29.160 --> 00:26:31.619 to build mid -rise density. By far. And then 00:26:31.619 --> 00:26:34.380 we have a classic making a comeback, the triple 00:26:34.380 --> 00:26:37.720 -decker. The New England classic. It's all over 00:26:37.720 --> 00:26:41.170 Boston and Providence. Three floors, three distinct 00:26:41.170 --> 00:26:44.390 family units. It fits on a standard single -family 00:26:44.390 --> 00:26:47.269 lot, but it triples the housing supply. It's 00:26:47.269 --> 00:26:49.710 what urban planners call gentle density. You 00:26:49.710 --> 00:26:51.829 don't have to build a giant tower. No, it fits 00:26:51.829 --> 00:26:53.690 right into the neighborhood fabric. And what 00:26:53.690 --> 00:26:55.980 about container housing? I feel like shipping 00:26:55.980 --> 00:26:58.000 container homes were a huge trend on Instagram 00:26:58.000 --> 00:27:00.339 and Pinterest for a while. But are they actually 00:27:00.339 --> 00:27:03.000 practical? Standard shipping containers are actually 00:27:03.000 --> 00:27:05.559 terrible for housing. They're just steel boxes. 00:27:05.740 --> 00:27:07.799 You freeze in the winter and you bake in the 00:27:07.799 --> 00:27:10.039 summer and they're full of toxic paint. Right. 00:27:10.240 --> 00:27:13.180 Not ideal. But there is a specific type of container 00:27:13.180 --> 00:27:15.440 that works really well. They're called reefer 00:27:15.440 --> 00:27:18.789 containers. As in refrigerated? Yes. They are 00:27:18.789 --> 00:27:21.230 the ones used to transport food, produce, things 00:27:21.230 --> 00:27:23.789 that need to be kept cold. So they already have 00:27:23.789 --> 00:27:26.609 high -grade insulation built directly into the 00:27:26.609 --> 00:27:29.509 walls, the ceiling, and the floor. Ah, so they 00:27:29.509 --> 00:27:31.670 solve the biggest problem from the start. Exactly. 00:27:32.009 --> 00:27:34.849 Using reefer containers is a very viable path 00:27:34.849 --> 00:27:37.849 for quick, modular, well -insulated housing. 00:27:38.130 --> 00:27:40.349 And then there's adaptive reuse. We have all 00:27:40.349 --> 00:27:43.029 these empty office buildings downtown post -pandemic. 00:27:43.089 --> 00:27:45.369 This is going to be huge. Some estimates suggest 00:27:45.369 --> 00:27:48.390 that 90 % of U .S. real estate growth by 2033 00:27:48.390 --> 00:27:51.690 will come from adaptive reuse. Why build a whole 00:27:51.690 --> 00:27:53.890 new shell when you have a perfectly good concrete 00:27:53.890 --> 00:27:56.269 frame sitting empty downtown? It's greener, it's 00:27:56.269 --> 00:27:58.470 faster, and it's often cheaper. Now let's talk 00:27:58.470 --> 00:28:00.309 policy, because you can build a cool container 00:28:00.309 --> 00:28:03.029 home, but if the ownership model is predatory, 00:28:03.230 --> 00:28:06.089 it doesn't really help. What is NOA? NOA stands 00:28:06.089 --> 00:28:09.349 for Naturally Occurring Affordable Housing. This 00:28:09.349 --> 00:28:11.230 isn't a government program. This refers to the 00:28:11.230 --> 00:28:15.259 existing older housing stock. The dingy 1970s 00:28:15.259 --> 00:28:18.059 apartment buildings with the avocado green appliances. 00:28:18.680 --> 00:28:21.240 Exactly. The stuff that is affordable just because 00:28:21.240 --> 00:28:24.519 it isn't brand new and shiny. The strategy here 00:28:24.519 --> 00:28:27.480 is preservation. Instead of letting that building 00:28:27.480 --> 00:28:30.640 get torn down for luxury condos, a nonprofit 00:28:30.640 --> 00:28:34.000 or a public -private partnership buys these units 00:28:34.000 --> 00:28:37.339 specifically to keep them as they are. You preserve 00:28:37.339 --> 00:28:40.019 the existing affordability. I love the concept 00:28:40.019 --> 00:28:43.460 of community land trusts or CLTs. This feels 00:28:43.460 --> 00:28:46.220 like a really... deep structural fix. This is 00:28:46.220 --> 00:28:49.740 a game changer. In a CLT, a nonprofit owns the 00:28:49.740 --> 00:28:51.960 land underneath the house. The homeowner owns 00:28:51.960 --> 00:28:53.740 the house itself that's sitting on it. So you 00:28:53.740 --> 00:28:55.400 take the cost of the land, which is often the 00:28:55.400 --> 00:28:57.619 most expensive part, completely out of the mortgage 00:28:57.619 --> 00:29:00.220 equation. Exactly. And because the trust owns 00:29:00.220 --> 00:29:02.619 the land in perpetuity, they can put restrictions 00:29:02.619 --> 00:29:05.059 on the resale price of the house. So if you sell, 00:29:05.140 --> 00:29:07.220 you get some modest profit, but the house has 00:29:07.220 --> 00:29:09.180 to remain affordable for the next low -income 00:29:09.180 --> 00:29:11.440 family. You kill speculation. You can't flip 00:29:11.440 --> 00:29:14.049 a CLT home for a massive profit. You can't. It 00:29:14.049 --> 00:29:16.569 treats housing as a community asset to be stewarded, 00:29:16.569 --> 00:29:18.930 not as a winning lottery ticket. And co -ops, 00:29:19.009 --> 00:29:22.730 specifically mutual aid co -ops. The outline 00:29:22.730 --> 00:29:26.029 mentions FUCVM in Uruguay. This is an incredible 00:29:26.029 --> 00:29:30.170 story. FUCVM is amazing. It's a federation of 00:29:30.170 --> 00:29:32.890 housing cooperatives, and their model is based 00:29:32.890 --> 00:29:35.950 on sweat equity. So you pay with your own labor 00:29:35.950 --> 00:29:37.750 instead of just cash. A big chunk of it, yes. 00:29:38.539 --> 00:29:40.900 Families contribute a set number of hours of 00:29:40.900 --> 00:29:43.819 labor per week to actually build the homes. This 00:29:43.819 --> 00:29:46.440 lowers the financial cost significantly, but 00:29:46.440 --> 00:29:48.119 maybe more importantly, it builds a powerful 00:29:48.119 --> 00:29:50.779 community. You know your neighbors because you 00:29:50.779 --> 00:29:53.299 poured their foundation with them. Wow. They 00:29:53.299 --> 00:29:56.619 have housed over 25 ,000 families this way in 00:29:56.619 --> 00:29:59.900 Uruguay. It's a massive success. That is inspiring. 00:30:00.420 --> 00:30:02.019 Let's look at who else is doing it differently 00:30:02.019 --> 00:30:05.250 on a national or citywide scale. We always hear 00:30:05.250 --> 00:30:07.930 about Vienna, Austria. It's always cited as the 00:30:07.930 --> 00:30:10.869 gold standard of housing. It really is. In Vienna, 00:30:10.990 --> 00:30:13.289 social housing isn't stigmatized. It isn't the 00:30:13.289 --> 00:30:16.089 projects. It's just housing, high quality housing. 00:30:16.190 --> 00:30:17.470 And that's because it's for the middle class, 00:30:17.470 --> 00:30:19.009 too, right? It's not just for the very poor. 00:30:19.089 --> 00:30:21.950 Yes. The income limits to qualify are quite high. 00:30:22.289 --> 00:30:25.730 As a result, about 46 percent of the entire city's 00:30:25.730 --> 00:30:28.670 housing stock is either government owned or subsidized 00:30:28.670 --> 00:30:30.809 public private partnerships. Almost half the 00:30:30.809 --> 00:30:34.150 city. And because so many people from all walks 00:30:34.150 --> 00:30:37.069 of life live there, doctors, teachers, mechanics, 00:30:37.529 --> 00:30:40.990 artists, it is maintained to a very high standard. 00:30:41.210 --> 00:30:43.769 And because it's nearly half the market, private 00:30:43.769 --> 00:30:46.769 landlords can't price gouge. They have to compete 00:30:46.769 --> 00:30:49.029 with the high quality public option. Exactly. 00:30:49.049 --> 00:30:51.829 It acts as a massive anchor on prices for the 00:30:51.829 --> 00:30:54.710 entire city. What about Germany? I know Berlin 00:30:54.710 --> 00:30:56.529 has had some major issues with rent control, 00:30:56.670 --> 00:30:58.829 but the city of Hamburg has an interesting model. 00:30:59.279 --> 00:31:01.160 They have something called the Alliance for Housing 00:31:01.160 --> 00:31:03.759 Construction. It's basically a grand bargain. 00:31:03.940 --> 00:31:06.720 The city says to private developers, we will 00:31:06.720 --> 00:31:09.039 give you city -owned land and fast -track your 00:31:09.039 --> 00:31:11.839 permits, no seven -year delays. And in exchange? 00:31:12.240 --> 00:31:15.319 In exchange, you agree to build X number of units 00:31:15.319 --> 00:31:18.240 per year, and 30 % of them must be permanently 00:31:18.240 --> 00:31:20.460 reserved for low - and middle -income households. 00:31:20.839 --> 00:31:23.779 It's a trade. Efficiency for affordability. And 00:31:23.779 --> 00:31:26.000 in China, they have a fascinating system called 00:31:26.000 --> 00:31:28.900 tradable land quotas. This allows development 00:31:28.900 --> 00:31:31.200 on the city outspurts, which increases supply. 00:31:31.500 --> 00:31:34.660 But it's done in exchange for protecting agricultural 00:31:34.660 --> 00:31:37.920 land somewhere else. It's a way to balance the 00:31:37.920 --> 00:31:39.880 massive urbanization we talked about with the 00:31:39.880 --> 00:31:42.940 need to still grow food for 1 .4 billion people. 00:31:43.119 --> 00:31:45.779 So we have solutions. We have the technology, 00:31:45.940 --> 00:31:48.380 the reefers, the five over ones. We have the 00:31:48.380 --> 00:31:51.740 policy models, the CLTs, the Vienna style social 00:31:51.740 --> 00:31:54.950 housing. But it all comes down to political will. 00:31:55.069 --> 00:31:57.309 It always does. And that brings us to the outro. 00:31:57.509 --> 00:31:59.470 I want to return to that philosophical question 00:31:59.470 --> 00:32:01.569 we started with. The litmus test. One of our 00:32:01.569 --> 00:32:03.970 sources had this beautiful haunting line. It 00:32:03.970 --> 00:32:06.769 said that society's housing policy reveals the 00:32:06.769 --> 00:32:09.730 warmth or coldness of heart toward those of lower 00:32:09.730 --> 00:32:12.150 socioeconomic status. That hits home, doesn't 00:32:12.150 --> 00:32:14.769 it? Are we warm or are we cold to the people 00:32:14.769 --> 00:32:16.910 who serve our coffee, teach our children, and 00:32:16.910 --> 00:32:19.630 clean our offices? Our zoning map suggests we 00:32:19.630 --> 00:32:23.500 are. Pretty cold. And here is a final provocative 00:32:23.500 --> 00:32:25.579 thought for you to chew on. We talked about supply. 00:32:26.539 --> 00:32:29.960 Most of the sources suggest that increasing supply, 00:32:30.279 --> 00:32:34.019 even building market rate luxury housing, eventually 00:32:34.019 --> 00:32:36.480 helps affordability across the board. Right, 00:32:36.559 --> 00:32:38.799 through a process called filtering. If a rich 00:32:38.799 --> 00:32:41.559 person buys a new luxury condo, they move out 00:32:41.559 --> 00:32:43.960 of a slightly older, slightly less luxurious 00:32:43.960 --> 00:32:46.839 premium unit. An upper middle class person moves 00:32:46.839 --> 00:32:49.400 into that. They vacate a middle class unit. It 00:32:49.400 --> 00:32:51.539 creates this chain reaction that eventually opens 00:32:51.539 --> 00:32:53.420 up a unit at the bottom. It frees up inventory 00:32:53.420 --> 00:32:57.119 at every price point. So if that's true, why 00:32:57.119 --> 00:33:00.809 is there such intense resistance? to building 00:33:00.809 --> 00:33:03.990 anything, even luxury housing in so many communities. 00:33:04.150 --> 00:33:06.410 We often hear people say they want to preserve 00:33:06.410 --> 00:33:08.150 the character of their neighborhood. And the 00:33:08.150 --> 00:33:10.509 question that leaves me with is, what is the 00:33:10.509 --> 00:33:13.569 tradeoff we are making between character, which 00:33:13.569 --> 00:33:16.029 often means the aesthetic look of a street, and 00:33:16.029 --> 00:33:18.589 the ability for actual human beings to live there? 00:33:18.829 --> 00:33:20.990 If a neighborhood has perfect character, but 00:33:20.990 --> 00:33:22.970 no one can afford to live in it except for the 00:33:22.970 --> 00:33:25.650 ultra wealthy, is it really a neighborhood or 00:33:25.650 --> 00:33:28.170 is it just a museum? That is the question we 00:33:28.170 --> 00:33:30.390 have to answer as a society. We want you to do 00:33:30.390 --> 00:33:33.549 one thing for us this week. Look up your local 00:33:33.549 --> 00:33:36.470 zoning map. Just Google it for your town or city. 00:33:36.910 --> 00:33:39.150 See what your neighborhood is actually zoned 00:33:39.150 --> 00:33:42.349 for. Is it illegal to build a duplex next to 00:33:42.349 --> 00:33:44.930 you? Is there a minimum lot size? Is there a 00:33:44.930 --> 00:33:47.250 parking minimum? You might be really surprised 00:33:47.250 --> 00:33:49.309 by what those invisible lines on the map are 00:33:49.309 --> 00:33:51.289 doing to your community and to your own rent 00:33:51.289 --> 00:33:53.950 check. Thanks for diving deep with us. Take care.