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0:01:57 Episode 325. 325 is the area covering parts of West Central Texas in 1925. The world’s
0:02:02 first motel opened. True story, last week I checked into a Western hotel and I asked
0:02:21 if the porn be disabled. Guy looked at me and said, “It’s just regular porn, you sick fuck.”
0:02:25 Welcome to the 325th episode of The Prop G Pod. In today’s episode, we speak with Dr.
0:02:30 Jenny Shutz, a nationally renowned economist, author, and policy expert on housing and land
0:02:36 use. We discussed with Jenny Trent’s instructional shifts occurring in the housing market, America’s
0:02:41 broken housing system, along with policy solutions. Okay, what’s happening? Federal Trade Commission
0:02:46 Chair Lena Kahn’s future might be determined by Trump’s biggest cheerleader, Elon Musk,
0:02:51 or as I like to call him, the first lady, Elania. In the days leading up to the election,
0:02:57 Elon Musk wrote on X that she will be fired soon. Oh, great. We have a guy who is addicted
0:03:03 to a non-associative drug determining antitrust and FTC regulation. That makes sense. That
0:03:08 totally makes sense. Both Republicans and some high-profile Democrats, including Reid
0:03:13 Hoffman and Mark Cuban, have openly criticized Lena Kahn, accusing her of pushing a far left
0:03:18 gender and using the FTC power to aggressively at the same time. She has a lot of, I think
0:03:23 they’re called cons, a rubber cons. She’s like Matt Gaetz, some unlikely fans on the
0:03:29 right, and she’s, everyone’s mad at big tech right now. There are a few bipartisan issues.
0:03:32 One of them is wanting to break up or punish big tech, although not even get their shit
0:03:35 together to actually do that. It feels as if the only things that the far left and the
0:03:41 far right can agree on and get the five or six centrist people to come along with them
0:03:45 on is one, anti-Semitism, the far left and the far right are both anti-Semitic, and two,
0:03:52 reckless spending, $7 trillion in expenditures on $5 trillion in revenues. Imagine the U.S.
0:03:58 as a household making $50,000 a year spending $70,000, and our debt is $320,000, but don’t
0:04:03 worry. We get to keep racking up debt because they keep sending us more and more credit
0:04:08 cards, at least China does, or overseas investors, and guess what? When we die, we’re going to
0:04:11 have all the champagne and cocaine, and we’re going to live large, but our kids get to inherit
0:04:14 the household debt. Well, that is what we are talking about now.
0:04:19 Anyways, a little off-script. Meanwhile, Trump’s transition team has tapped the anti-trustler
0:04:24 Gale Slater to help determine cons potential successor. I thought Lena was going to survive
0:04:29 this. I thought it would soften his image. She’s done a lot of work. I don’t think he’s
0:04:34 going to have the patience or understand things like numbers and concepts and legal jargon.
0:04:38 No joke in the first administration, when people were coached on how to present to them, they
0:04:42 would say fewer words, more pictures. I just don’t think he’s going to have the staying
0:04:46 power here. Maybe he’ll hand it over to JD Vance. JD Vance could probably do something
0:04:51 different, but what is it they want from her? I don’t get it. Oh, they want a kleptocrat.
0:04:56 They want her to back the fuck off if you made a campaign contribution. If you said
0:05:01 nice things about him, and you said money in, fine, you can do whatever you want, including
0:05:04 consolidate the industry and drive up prices, which will be inflationary, folks. By the
0:05:08 way, the most deflationary thing we could do right now would be, one, to kiss and make
0:05:14 up with China, and two, to break up big chicken, big pharma, big ag, big tech. It’s pretty
0:05:19 simple when there’s two or three players, they figure out a way to charge higher rents
0:05:24 on consumers. Notice how airline tickets have skyrocketed in the last few years. Why? Because
0:05:29 there’s basically two or three big airlines now, and they kind of wink at each other and
0:05:33 coordinate, such that they can jack up prices. If you notice that every flight has been full
0:05:37 for about the last five years, they keep taking out supply, and then they wink at each other,
0:05:42 and they don’t create more supply. Why? That would create pricing pressure, and the CEOs
0:05:46 of these companies who took about $100 or $150 million in compensation, pre-pandemic,
0:05:50 and then cried, cried poor when the pandemic came along and said that we’re all in this
0:05:56 together until the market is booming again, and then it’s free market capitalism, and
0:06:00 I should make $150 million when I’m paying my flight attendant $78,000 a year. Anyway,
0:06:05 another talk show. Who’s on the list of candidates? It’s Slater’s Assembling. Reportedly, the
0:06:09 list includes former Justice Department attorney Mark Meador. Meador, it’s not Mark Meador.
0:06:13 I know that. It’s Mark Meador with an R, probably an entirely different person with
0:06:18 a different complexion and personality. George Mason University law professor Todd Zawicki.
0:06:23 Don’t know Todd. Don’t know Professor Zawicki. That’s a pretty awesome name, though. Alex
0:06:27 Oculiar, a partner of Morrison Forrester, or as I like to call it, MoFo, and the FTC’s
0:06:33 two Republican commissioners, Melissa Holyoke, and Andrew Ferguson. Jesus Christ, I’m bored.
0:06:38 I’m bored listening to this shit. Are we going to have to cover the fucking Trump cabinet
0:06:42 for the next two or three weeks? Can you just start imposing tariffs? By the way, what
0:06:47 a shocker. He wants to raise tariffs on Mexico, who, by the way, has become a lot more important
0:06:52 to us. I think has become our biggest trading partner, our biggest import, or the country
0:06:55 we now import the most from. What’s really interesting about trade, or I find it really
0:06:59 interesting, and this was blew me away when my colleagues, Pankaj Gemawad, did the study
0:07:03 on trade and he found that trade is a function of proximity. Generally speaking, almost every
0:07:06 nation in the world, their biggest trading partner is one they share a border with.
0:07:13 I guess transportation kind of gets in the way, or people intermarry and have no people
0:07:18 over there and they develop business relationships, or just struck me that in a digital age, proximity
0:07:27 is still the primary driver of trade. Anyways, we are about to enter into a trade war. He’s
0:07:31 talking about a massive deportation force. Jesus, have you seen these people that are
0:07:35 lining up for the deportation force? It’s literally like, okay, what happens when you’re
0:07:39 bullied in high school and you finally get your revenge on people? These people just
0:07:45 seem so fucking angry. This is really nuts, but let’s take inflation and how do we reverse
0:07:50 engineer inflation? I know. Let’s reduce competition. Okay, we’re doing that. We’re going to get
0:07:58 rid of Lena Kahn. Let’s make our imports more expensive. Okay, we’re doing that. And let’s
0:08:04 find our most flexible agile workforce and terrorize them and make it such that immigrants
0:08:08 don’t want to come in. And here’s the dirty secret. The migrant problem is out of fucking
0:08:14 control and the asylum system that was set up or exploited under the Biden administration
0:08:19 was unforgivable and was probably a reason that, I don’t know, she lost one brick in
0:08:23 the blue wall. This was handled incredibly poorly for the last 30 years and especially
0:08:28 poorly the last four years. However, however, when no one wants to say out loud, is that
0:08:32 immigration while being the secret sauce of America, the most profitable part of immigration
0:08:37 is illegal immigration. They commit crimes at a low rate and they’re so worried about
0:08:40 getting caught. They don’t call the fire or police department. They don’t use our services.
0:08:43 They don’t go to the hospital. And what do they do? But they also get to pay taxes. They
0:08:48 pay their taxes. And then when the work or the crops, when the work dries up, you know,
0:08:55 grandma dies or restaurants go into recession or the crops are picked, this flexible workforce
0:09:00 heads back to their country of origin. This is literally the thing that has kept on giving
0:09:03 or the gift that has kept on giving for the last 20 or 30 years. And that is the reason,
0:09:08 actually the last 40 years, why no one ever gets that serious about immigration reform
0:09:12 and how it comes. So let’s politicize and it never gets reformed. It’s really interesting
0:09:15 if that bipartisan immigration reform bill actually goes through. It probably will now.
0:09:21 So Trump can take credit for it. The big picture, with Trump’s return to office sectors constrained
0:09:25 by strict antitrust oversight, including tech and healthcare, could see a new wave of merger
0:09:29 and acquisition activity. I would imagine Goldman Sachs and Morgan Stanley Stocker
0:09:35 thinking that M&A is going to have its sort of M&A Palooza in 2025. The markets have already
0:09:40 gone crazy since the election. This week alone, mega cap tech companies added $773 million,
0:09:43 that’s right, three quarters of a trillion dollars to the collective market cap, as dealmakers hope
0:09:48 Trump’s FTC will be more open to M&A than Biden. So according to data from DealLogic,
0:09:53 last year hit a low for M&A deals targeting U.S. companies, a low since 2015. And this year’s pay
0:09:59 suggests even fewer deals might be going through. All right, what’s going on here? Why is the market
0:10:03 screaming up? Is it because they think there’s going to be some sort of sustainable or fundamental
0:10:06 growth in companies? Have we made massive investments in R&D? Are our products more
0:10:11 attractive to overseas? Have we figured out more free trade that’ll increase the purchase of our
0:10:18 products? No. This is nothing but the following. Trump is a vessel for the transfer of wealth
0:10:25 from young people to old people. The credit markets know it. The tenure spiked about the moment
0:10:29 he was going to get elected. The moment I knew he was elected, a friend of mine who runs,
0:10:34 he was the chief investment officer from the M&A, $75 billion hedge fund called me and said,
0:10:36 he’s won. And I said, how do you know this? I don’t see this. They said the credit markets
0:10:41 are spiking, which means they know that he’s won because his policies will be more inflationary.
0:10:46 Trump is nothing but a vessel. Actually, there’s a bunch of things, including he is a vessel for
0:10:51 the transfer of wealth from young people to people like me. By the way, I have made a
0:10:56 shit ton of money in the last four or five days. And I love it. It’s great. I’m happy for it. But
0:11:03 guess what? My kids, my kids, well, that’s another story. We have to stop this war on the young.
0:11:07 Old people keep voting themselves. More money. And young people and middle-class people are
0:11:12 only the impression that, hey, the deficit never matters. And if a guy’s angry and if a guy’s
0:11:17 really offensive, he must be a leader. Let’s get a strong man. And on the fucking far left,
0:11:23 we have decided we’re self-appointed social justice cops. No, no one asked us to do that.
0:11:31 What is America? America is a platform. It’s a platform for two things. One, protect our borders,
0:11:36 Army, Navy, Air Force, Marines. Make sure that we are, that Americans are incredibly safe and that
0:11:41 we continue to spend more on our military than the next 10 biggest military spenders combined. Why?
0:11:46 Because despite what Coca-Cola or Ben and Jerry’s would like you to believe, or people on the far
0:11:50 left, the moment a group of people can come for us and kill us and take our Netflix and
0:11:58 Espresso away, be clear, they will. Job number one of this platform, defend our shores. Job
0:12:03 number two, to create atmospherics and an environment that provides prosperity, opportunity,
0:12:09 growth, innovation, capitalism, boom, profits, such that we can tax them at a fair rate,
0:12:13 at a lower rate, hopefully over time, a lower rate such that we can fund the government with
0:12:19 an even lower tax rate because of the growth, such that, such that young people can have some fucking
0:12:26 hope of buying a home, forming a family, having sex, having kids, and getting to the whole shooting
0:12:30 match. What is the whole shooting match? It’s not AI. It’s not innovation. It’s not tax rates.
0:12:36 It’s not GDP. It’s deep and meaningful relationships. And this guy is going to decrease, continue to
0:12:42 decrease the number of households that are formed. We’re going to continue to see a continued decline
0:12:46 in birth rates. Why? Because all of this economic sugar high, guess where it’s going? It’s going to
0:12:53 the top 1%. Oh my God, the market’s touching new highs. Guess what? Who owns 90% of the market?
0:12:59 The top 1%. So yeah, it’s great for me. It’s great for your boss. You know who it sucks for?
0:13:07 Everyone else, a vessel for the transfer of wealth from young to old, President Trump.
0:13:13 We’ll be right back for our conversation with Dr. Jenny Schoetz.
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0:16:45 Welcome back. Here’s our conversation with Dr. Jenny Shutz, a nationally renowned economist,
0:16:51 author, and policy expert on housing and land use. Jenny, where does this podcast find you?
0:16:56 I’m in my office in Arnold Ventures. We’re close to downtown DC.
0:17:01 All right. So, you recently joined Arnold Ventures where you’re addressing the nation’s
0:17:05 challenge of housing supply shortages and rapidly increasing rents and home prices.
0:17:11 Let’s talk about this head on. How can we repair America’s broken housing systems?
0:17:16 Well, the policy side is actually not that complicated. We need to make it easier to build
0:17:22 housing and build more types of housing, especially in high demand locations. It turns out that the
0:17:27 tricky part of this is the politics. We’ve essentially delegated a lot of control over housing
0:17:32 production to local governments and to neighborhoods. And people who live in a neighborhood often
0:17:38 don’t want to have more housing built. So, my sense is, and you tell me if this is correct,
0:17:43 the incumbents, the people who already own homes, have a vested interest in not having more supply,
0:17:47 so they get involved in local review boards and basically make it near impossible for new housing
0:17:53 permits. Is that a safe thesis? It’s true that there are at least some number of incumbent residents
0:17:58 who don’t want more housing and don’t want their neighborhoods to change. One of the questions
0:18:03 we’re sort of grappling with is how widespread is this resistance to new housing? We’re sort of
0:18:09 ingrained to believe that NIMBYism is widespread. Basically, everybody who already owns a home
0:18:14 doesn’t want more housing. But what we’re starting to learn as we do more polling and surveys is
0:18:20 that NIMBYism may not be as widespread as people thought before. The NIMBYs are loud and they’re
0:18:25 often very politically well connected. But there are often a lot of people, including longtime
0:18:29 homeowners, who understand that their communities need to grow, need to change. And so part of the
0:18:36 challenge is figuring out how to tell politicians that this median voter may actually be comfortable
0:18:41 with more growth than they assumed. Yeah, I think what’s happening, I think a lot of people have
0:18:46 children who are either renting or looking for a home and they just realize how bad it’s become.
0:18:52 What are some ideas or innovative policy solutions or economic solutions for—my understanding is
0:18:57 it’s—a lot of it’s a supply problem. We just aren’t building as many homes as we need to. What
0:19:01 are some policy ideas that you’ve seen that you think might address the issue?
0:19:06 There’s sort of three buckets of policy changes that we know are likely to be effective.
0:19:13 One is just to make it possible to build a more diverse set of housing types. So roughly three
0:19:18 quarters of the land, even in major urban areas, is set aside exclusively for single family detached
0:19:24 homes. Those take up a lot of land. They’re the most expensive type to buy or to rent. And they
0:19:28 also just occupy a lot of space. And so we have neighborhoods that are built out as single family
0:19:34 homes and you can’t add any more until you change the zoning. So legalizing everything from townhouses,
0:19:39 accessory dwelling units, all the way up to apartment buildings adds more capacity and more
0:19:43 diversity to the housing stock. We also have to look at sort of things like the dimensional
0:19:49 requirements. So legalizing an apartment building but capping it at two stories doesn’t actually
0:19:54 make it feasible. So making it possible to build taller buildings, smaller setbacks,
0:19:59 getting rid of off-strait parking requirements, all of those sort of details can matter.
0:20:03 And then probably the most important thing is actually the process. We have gone to a system
0:20:10 where there’s a lot of complex discretionary approvals. Neighborhood by neighborhood gets to
0:20:15 weigh in on what gets built to provide feedback on everything from the landscaping and the design,
0:20:20 the size of the project. Writing down a set of rules that are consistent and objective and
0:20:25 letting developers build according to the rules without having this community engagement process
0:20:30 that drags on forever would shorten the process and would allow more housing to get built more
0:20:34 quickly, which means that those units can then be sold or rented at lower prices.
0:20:40 Yeah, I have some experience with this firsthand. I bought a piece of land down here in Delray,
0:20:45 Florida, and we were planning to develop on it. And you have to go to the local review board
0:20:51 and a woman showed up and said, “I don’t know if I want that land developed. I walked my dog over
0:20:56 there.” And I’m like, “Okay, that’s called trespassing.” But they delayed the decision for
0:21:02 a month or three months. These things don’t meet that often to do some sort of review or study
0:21:08 based on the fact this woman was walking her dog over there. And it just felt like anyone who shows
0:21:14 up can not necessarily kill it, but delay it forever. So my question is, I mean, on a very
0:21:18 reductive level, my sense is permits have been taken out of the hands of officials who think big
0:21:24 picture and put into the hands or at least of homeowners who can have a lot of influence and
0:21:28 just delay this shit. And everything I’ve done around this stuff or everything I’ve seen,
0:21:35 they basically just delay, delay, delay. And any objection results in the delay of them finally
0:21:41 issuing the permits, what can be done? Because my sense is it’s very state by state or even
0:21:46 community by community. How do you address this? Is there some sort of federal law or state law
0:21:52 that expedites, if you will, is a laxative to the constipation here of housing permits?
0:21:58 Yeah, there’s very little the federal government can do. The Constitution doesn’t give the federal
0:22:05 government control over land use or development or zoning. So that’s a power that’s held by
0:22:11 the states. And sort of what we’ve seen is this delegation downwards states delegated land use
0:22:16 authority to local governments, local governments have in turn kind of outsourced this to individual
0:22:22 neighborhoods, either formally or informally. And so we’ve pushed the approval process or at
0:22:28 least the veto power down to the lowest level of geography and the people who are most impacted by
0:22:34 it. So one thing that local governments can do is just move the timing of when you get community
0:22:39 engagement instead of doing this for every single permit, every single parcel that gets changed,
0:22:44 move it upstream to something like the comprehensive planning process. So like every 10 years,
0:22:48 the city comes together and says, where do we want to grow? What do we want to add? And once
0:22:51 that’s written down in the plan, then you don’t get to protest every single development in every
0:22:57 project. That would make things a little easier. One trend we’ve seen in the last five or six years
0:23:01 is that state governments are starting to reclaim some of the power they delegated to localities
0:23:07 because states are recognizing the real economic harms of not building enough housing.
0:23:11 If you look at places like California and Massachusetts and New York, the state level
0:23:17 economy can’t grow. They can’t attract and retain enough workers because there isn’t housing
0:23:21 that’s affordable at different kinds of income levels. And so state governments are starting
0:23:26 to put guardrails around what localities can do, setting quantitative targets for how many homes
0:23:31 they have to allow, or telling them you’re not allowed to ban, for instance, apartment buildings
0:23:36 near transit stations. So I think this is a really promising trend because state governments do have
0:23:42 this bigger picture economic impact. And they have the power if they want to use it to push back
0:23:47 against all of the local NIMBYs. I think I’ve heard people reference the mayors in Austin and
0:23:54 Minneapolis are trying to be innovative around expanding the housing stock, the stock of housing.
0:23:58 A, do you know anything specifically about those, or can you point to other examples of
0:24:01 where local officials have shown leadership around this issue?
0:24:07 Yeah, those are both good examples. Minneapolis was the first city to legalize duplexes and
0:24:12 triplexes in all of its residential neighborhoods, which is kind of a modest step. It’s a little
0:24:18 bit more symbolic. But they also did a lot of upzoning around their new light rail system.
0:24:23 So it’s very easy and straightforward to build apartments near the transit stations in Minneapolis.
0:24:27 And they’ve in fact built a lot of apartments nearby. And that’s been very helpful to providing
0:24:33 more supply. Austin is just a growth friendly city. I was there in February of this year,
0:24:38 and there are cranes everywhere. They are building, building, building. Austin has really embraced the
0:24:44 sort of change from being kind of a smallish city, college town, to being a big city in its own right.
0:24:49 And a lot of what this is telling us is if elected officials want more housing to get built,
0:24:53 they’ll figure out ways to make it happen. If elected officials don’t want to build housing,
0:24:57 they’ll figure out ways to stop it. I noticed the same thing when I was in Austin,
0:25:03 that they have this sort of growth mindset. What about the idea? Could the CHIPS Act be a role
0:25:07 or be a model? And that, as they just said, we’re going to provide subsidies to inspire
0:25:13 more domestic manufacturing of key semiconductor technology. What about just straight subsidies
0:25:19 that say to a developer, if you figure out a way to navigate these local zoning laws and build more
0:25:26 than 8, 10, 12 units, we’ll give you 3, 5, 10% tax credit? I mean, the problem isn’t that developers
0:25:31 don’t want to build. It’s that they can’t, and that developers don’t control the development
0:25:38 process. So, you know, there’s always a worry about subsidizing either demand or giving subsidy to
0:25:45 providers to developers without relaxing the rules may just wind up driving up prices even more.
0:25:51 Let’s zoom out. Give us your impression as some of the housing trends by market, because people
0:25:58 will say, you know, it’s difficult to, I think, make statements about housing across the U.S.
0:26:01 because housing in St. Louis, I would imagine, is an entirely different situation than it is in
0:26:08 Phoenix or San Francisco. If you were as a housing analyst, what markets do you think reflect the
0:26:13 most strengths right now, the most weakness, what types of real estate or asset classes are you
0:26:18 keeping your eye on? Give us sort of breakdown, if you will. Give us a lay of the land, but be
0:26:25 more segmented by region and property type. So, in the last five years or so, really since the
0:26:31 start of the pandemic, we’ve seen affordability go from being mostly a regional problem in the
0:26:36 high-cost coastal markets to being almost a national problem. And it’s not as acute everywhere,
0:26:42 but, you know, California, Seattle, Boston, New York for something like 40 years have been
0:26:46 underbuilding and have been very expensive, and that’s just sort of baked into expectations.
0:26:53 Places like Austin, Denver, Nashville, a lot of the Sunbelt metros have historically been really
0:26:57 affordable. They build a lot of housing when there is more demand and prices haven’t gone up.
0:27:03 That sort of broke in the pandemic, and it’s unclear whether that’s a short-term problem.
0:27:08 Lots of people moving away from California to places like Phoenix because they could buy
0:27:13 cheaper homes. Maybe this is going to correct itself. The worry is that some of those places
0:27:17 are going to become more like California. You know, if Austin and Phoenix start making it
0:27:21 harder to build, and in the long run they stay expensive, that’s going to be a real problem
0:27:26 for a lot of people. It is certainly still true that a lot of the traditional sort of rust belt
0:27:32 metros, St. Louis, Cleveland, Pittsburgh, I mean, housing is still objectively a lot cheaper there
0:27:38 than it is in most of the country, but those places are also seeing tightening. So we’re seeing,
0:27:43 you know, Pittsburgh is redoing their comprehensive plan now. They’ve seen vacancy rates drop in a
0:27:47 way that they’re not used to seeing and are trying to figure out how do we get out in front of this.
0:27:53 So we’ve seen this sort of geographic convergence, in a sense, on spillover, looking at sort of
0:28:00 different kinds of home types. The single-family home building completely collapsed in the Great
0:28:04 Recession. People couldn’t get qualified for mortgages, developers couldn’t get money to build,
0:28:10 and so if you map single-family permits and multi-family permits, they both dropped off a cliff
0:28:15 in the Great Recession. Multi-family has picked up a lot, and single-family has just not gotten back
0:28:20 to the levels that it was. Some of this is that, you know, you need more land to build single-family.
0:28:25 There’s a lot of demand for living in the urban core where there are amenities, and there you’re
0:28:30 going to be building more multi-family, but some of it also seems to be that it’s just harder for
0:28:35 people to qualify for mortgages than it used to be, and so there’s less building of single-family
0:28:37 that’s designed for especially entry-level home ownership.
0:28:43 Do you think that young people not being able to pursue “the American Dream”
0:28:50 is leading to our polarization and dissatisfaction with life in America?
0:28:56 It definitely doesn’t help. When I talk to people under the age of 40, they are really
0:29:01 pessimistic about their ability to buy a house in a neighborhood that’s close to jobs and amenities,
0:29:06 and people are just sort of resigned. I’m going to be a renter forever,
0:29:10 which isn’t necessarily terrible, right? If there’s good quality rental housing in neighborhoods
0:29:16 that you like, being a renter allows you to be more flexible, to move someplace for another job,
0:29:21 but we’re so conditioned to believe that sort of part of becoming an adult is buying a house and
0:29:25 having part of the American Dream and building wealth, and so people who feel like that’s not
0:29:29 going to be a possibility are really embittered and not feeling like the system is working for them.
0:29:36 Do you think we need to break out of this kind of zeitgeist that you’ve failed as an adult or
0:29:42 you’re not that successful unless you own? My podcast co-host on my other pod, Raging Moderates,
0:29:46 is successful. She and her husband make really good money. They live in New York,
0:29:50 and they’ve made the conscious decision to leave their money in the market as opposed to put it
0:29:55 buying a very expensive place in Tribeca or wherever, because they’ve said the yield,
0:30:00 it’s just not economic. It’s a better deal to rent than to buy. Do you think we just need
0:30:08 a change in mentality or mindset? I think we should be a lot more honest about the financial
0:30:14 risks and downsides of owning. There’s a long tradition among our elected officials from both
0:30:19 parties of pushing this idea that home ownership is the American Dream, and we should get people
0:30:25 into home ownership as quickly as possible and renting a second-class status. I will say that
0:30:31 for a lot of people, the biggest benefit of home ownership is not that you’re going to build a ton
0:30:35 of wealth through the equity, but that you have stability and predictability of your housing
0:30:40 payments for a fairly long period of time. If you rent every year when your lease rolls over,
0:30:46 the landlord can raise the rent. If you own, the principal and interest on the mortgage are fixed
0:30:52 over generally 30 years. One of the things that’s coming up though with climate change is that
0:30:58 property insurance and property taxes are going up faster because local governments have to pay
0:31:02 for a lot of these repairs, and insurance companies are raising rates pretty quickly.
0:31:07 That makes home ownership a little bit less attractive as just a stability of your housing
0:31:13 payment system. It’s really important that before people buy a home that they look at where else
0:31:17 they could be investing their money, in a lot of markets, particularly these sort of Midwestern
0:31:22 cities, the stock market would have performed better than putting your money in real estate and
0:31:28 having it all in a down payment. It’s inherently risky to invest all of your savings in one piece
0:31:34 of property in one location in the same regional job market where you work. There’s a lot of risk
0:31:39 involved, and we haven’t really been that upfront with people about it. Generally speaking, looking
0:31:46 at the yields or the ratio of rent to ownership, is it generally speaking better to rent now
0:31:50 across the nation or have rents kept pace with the same escalation at home prices?
0:31:57 That really varies across markets. Places like Austin that have built a ton of housing,
0:32:01 rent inflation topped out during the pandemic and has slowed, and some of them are actually
0:32:06 seeing softening of rents. You might be able to get, say, one or two months free rent when you
0:32:11 sign a new lease, but in places like California and New York that have not built enough housing,
0:32:15 rents continue to go up much faster than income. It’s still the case that
0:32:19 home ownership is a better deal financially in some markets than others.
0:32:25 What about in these climate affected areas where people can’t get insurance? How is that
0:32:32 impacting the housing market? We’re just starting to see that now. Florida is certainly ground zero
0:32:39 for this. Insurance premiums are going up on owner-occupied properties and going up on rental
0:32:43 properties. Landlords are having to pay higher rates as well. In some places, people are going
0:32:47 to have a hard time getting insurance at all, or the insurance is not going to cover the full
0:32:53 replacement cost if there’s damage. We are seeing some people who just choose not to have
0:32:57 insurance. If you don’t have a mortgage, nobody forces you to buy property insurance and you may
0:33:03 just go without. We see, unfortunately, a lot of that among some of the older mobile home parks
0:33:08 because people don’t have a mortgage, they don’t have to have insurance, but then they have nothing
0:33:14 when a disaster strikes. We may also see some wealthy people who just choose to fully self-ensure.
0:33:19 If you have a lot of money saved up and you really want to live close to the ocean, you might be
0:33:22 willing to live there and just accept that you’re going to have to rebuild your house from time to
0:33:32 time and pay for it out of pocket. We’ll be right back. Support for Prop G comes from Quince.
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0:36:53 holiday shop ever, also available at skims.com. So back in 2022, you spoke with Ezra Klein about
0:36:58 how progressive states struggle more with homelessness. Why do you think that is? And why
0:37:04 haven’t things changed? I mean, you just hear so much about the home. I see it when I’m in Seattle,
0:37:11 when I’m on these west coasts, “progressive cities,” you just see such an extraordinary
0:37:17 homeless problem. Why is that? Many of the progressive cities and states are the ones that
0:37:22 have made it the most difficult to build housing. Fundamentally, the number of homeless people is
0:37:27 a function of the number of people who can’t afford the rent or the mortgage. So expensive places have
0:37:33 higher rates of homelessness. People are falling into homelessness much faster because they’re
0:37:38 housing unstable and they’re spending a lot of money on income. There’s this weird relationship
0:37:44 with why progressive places have made it the hardest to build. Some of this goes back to
0:37:50 some of the big social trends in the 1960s and ’70s. Giving communities a voice in what gets
0:37:56 built and in what gets torn down very much comes out of a reaction to urban renewal. The federal
0:38:01 government tore down a bunch of black and brown neighborhoods and cities to run highways into
0:38:05 the downtown areas and they didn’t talk to the communities that were displaced. The federal
0:38:10 government just came in and took your house and tore it down and ran in a highway. So the sort of
0:38:15 community empowerment comes out of a reaction to that. In California, California was the first
0:38:23 state to pass a statewide environmental protection law, CEQA, which initially was supposed to protect
0:38:29 environmentally vulnerable places, but now has really become weaponized so that people can sue
0:38:34 to stop a bike lane or infill development or affordable housing on the grounds that it’s
0:38:39 going to create more traffic or that it’s going to disturb their view. So a lot of the sort of
0:38:44 good impulses in the progressive movement have now been weaponized by some of the most affluent
0:38:49 and well-organized communities to stop poor people and to block projects often that have big
0:38:55 environmental benefits. There’s been a lot of controversy about institutional buyers coming
0:39:01 in buying up apartments or housing. And one, do you see it as a bad thing or is it just additional
0:39:08 source of capital that should inspire more supply? So I don’t think we should worry about the sort of
0:39:13 legal entities that are buying housing as much as we worry about the ways that housing is being
0:39:19 provided. There are sort of a couple of reasonable pushbacks against private equity in particular
0:39:23 buying up homes. One is that in some cases they’ve not been great landlords. They provide
0:39:27 poor quality housing. They don’t fix maintenance issues. They’re not responsive to their tenants.
0:39:33 And tenants have a right to good quality housing and good treatment. But that’s true whether your
0:39:38 landlord is a private equity firm or a mom and pops landlord or for that matter a public housing
0:39:42 agency or a nonprofit. And we should enforce these rules across all kinds of landlords.
0:39:47 There’s also been concern that private equity has a lot of cash. And when they go in and they’re
0:39:53 buying up properties for cash, they can outcompete first-time home buyers who need to get a mortgage.
0:39:57 Again, understand that that’s definitely a pain point. But then we should also worry about things
0:40:03 like boomers who are retiring and selling their primary home and using cash to buy a second home.
0:40:07 If it’s cash buyers, then again, this applies across all different kinds of entities.
0:40:12 So my sense is we’re scapegoating private equity because it’s a convenient villain.
0:40:17 But even if you banned all of private equity from buying up housing, that wouldn’t alleviate the
0:40:23 housing shortage and that wouldn’t reduce rents and prices by very much. And I think people forget,
0:40:28 didn’t a lot of the institutional buyers get basically their face ripped off and had to sell
0:40:33 these things at a loss creating more cheap supply? Doesn’t it swing both ways when you have institutional
0:40:38 buyers? It does. Some of them are good at buying at the bottom and selling at the top and others
0:40:43 mistime the market just like any other investor. In the wake of the Great Recession, there were a
0:40:48 number of markets that had really high vacancies and a lot of foreclosures. And remember that nobody
0:40:52 could get a mortgage. And so you had to have cash to be able to buy. A bunch of the big institutional
0:40:57 investors went into neighborhoods that had foreclosed and boarded up homes, bought them,
0:41:02 and at least rehabbed them enough to be habitable, got renters in. So they stabilized some of the
0:41:08 neighborhoods that were hardest hit. You may argue, we’d like them to sell to homeowners once the
0:41:12 mortgage market’s loosened up, but they did perform a really important service because they
0:41:16 have access to capital when other people don’t. What do you think of these sort of cities and
0:41:21 startups? And my understanding is there’s certain big swaths of land in California and other states
0:41:26 that have been incorporated by investors. And my understanding is one of the motivations or the
0:41:31 opportunities they see is a lack of zoning and the ability to just kind of build, baby, build.
0:41:37 What do you think of these sort of startup cities? So there’s a big one outside of the Bay Area that’s
0:41:44 gotten a lot of political pushback. My sense as part of the problem there is that there was
0:41:50 intentional secrecy on the front end. So they were buying up a lot of land and trying to
0:41:56 develop plans for this without revealing who was behind it. And that comes across as
0:42:02 secretive and undemocratic. And so people are kind of nervous about this. We do have older
0:42:08 examples of planned cities, so Celebration in Florida, Columbia, Maryland, Reston, Town Center
0:42:14 in Virginia, where there was a big master plan city. Many of those are lovely places to build,
0:42:20 and people want to be in a place that has housing and restaurants and public space and parks.
0:42:26 And there’s some efficiencies to doing these in kind of large scale. We see that also within
0:42:30 neighborhoods within cities. In Washington, D.C., where I live, a number of the big new
0:42:35 neighborhoods around Union Market and the Navy Yards Ballpark, those were done as big master
0:42:40 plan communities. So those can be really nice places, and you have some economies of scale in
0:42:46 the infrastructure provided. I think the sort of concern of our private companies doing this going
0:42:52 to be accountable to voters is worth a conversation. I’m also a little skeptical that you can build
0:42:57 a city and fill it with tenants who won’t at some point then want to take control over the
0:43:03 democratic process. So maybe you build Forever, California, 10 years down the line, the people
0:43:06 who’ve moved in there decide they actually don’t want to continue building housing and they turn
0:43:10 into nimbies. That strikes me as a very plausible outcome down the line.
0:43:16 When I look at the impacts in the economy coming out of COVID, it feels like the real
0:43:22 structural enduring change is remote work, more so in the U.S. than in Europe and other parts of
0:43:26 the world where you see vacancy rates are back to kind of the normal levels in commercial real
0:43:31 estate. But in the U.S., it seems that a lot of people have gotten very used to remote work.
0:43:38 Is there perhaps just an entire structural shift that will step change up the value of
0:43:42 housing because people are just spending a lot more of their waking hours in their home?
0:43:49 Yes, and we have probably seen some of that already. So there’s some good research that shows
0:43:57 that about 20% of the increase in prices nationally is due to remote work by high-income
0:44:01 workers. So it’s not just that people are working from home, but it’s the most affluent workers
0:44:06 who want more space to have a home office or just more space to spread out, and they’re really
0:44:13 driving that. So in metro areas with higher rates of work from home, we see bigger spikes in housing
0:44:19 prices. I will say that they’re sort of a flip side, which is the opportunity from reimagining a
0:44:25 lot of the office-heavy downtowns. It’s not quick and easy to convert an office building
0:44:29 into residential, but this does open up more buildings. And in some of the city centers that
0:44:34 have a lot of amenities, it’s probably going to take five to 10 years before we see substantial
0:44:38 numbers of homes, and they’re not going to be cheap. But that does mean that we’ve got some
0:44:45 places we can reimagine. And I realize this isn’t your domain, but I can’t resist asking
0:44:52 any thoughts. About a year ago, there was all of this speculation that some of the second tier
0:44:55 regional banks were going to go out of business because they had all this commercial real estate
0:44:59 on their balance sheet. And it doesn’t feel as if we’ve seen them melt down. We’ve seen
0:45:05 vacancy rates be stubbornly high in commercial real estate, but we haven’t seen this sort of meltdown
0:45:09 similar to the subprime crisis in 2008 that was being predicted in the commercial real estate
0:45:13 market. Any thoughts on the state of commercial real estate right now?
0:45:19 That’s going to look different across markets too. Even for things like office vacancy and retail
0:45:25 vacancy, some cities have held up better than others. So places like San Francisco and New York
0:45:30 still have some of the highest office vacancy rates, but that’s fundamentally very expensive land,
0:45:34 and somebody is going to figure out something to do with that land and those buildings to make
0:45:42 money off of it. Many of the smaller markets, the Sun Belt never had as much work from home,
0:45:49 and those office markets have held up much better. Regional banks tend to loan both for acquisition
0:45:56 and for development and the loans on commercial properties in their home region. So maybe the
0:46:00 regional banks that are lending on San Francisco real estate are going to take more of a hit,
0:46:07 but again, those are pretty diversified in big economies. And so without speculating too much,
0:46:11 it’s not clear that we’re going to see a giant wave of bank failures primarily because of
0:46:17 commercial real estate. So just a couple of theses, and I want you to respond to them. One,
0:46:24 it feels as if, so life happens, death, disease, divorce, that all of these homes are these kind
0:46:29 of unexploded devices called a mortgage at 2.5% where they can’t leave. At some point,
0:46:35 as those mortgages start to come due or they need to turn them or refinance them, at some point,
0:46:39 when you just got to move back to be closer to your aging parents or you need a bigger house,
0:46:46 there’s my understanding is the housing, we’ve never seen where kind of a historic trough in
0:46:52 terms of housing sales right now. Do you see pent up demand and what might be like a kind of a
0:46:57 housing liquidity or sales boom in the next one to three years? It just feels at some point,
0:47:02 the dam has to break or is this just a structural shift where people are going to stay in their
0:47:09 homes for much longer? People will move eventually. People do decide they’re just going to take the
0:47:13 hit and they will move to something that’s going to have a higher interest rate if they really
0:47:17 need to. I think that’s right. When people have life circumstances, they will change.
0:47:23 Interest rates will come down in the next couple of years. We don’t know how quickly and how far,
0:47:27 but that loosening up is probably going to open the spicket a little bit and people will get more
0:47:33 flexible. The other option is that people do what they did in the greater session. You have to move
0:47:38 for a job related change or a family change, but rather than sell your old house, you rent it out,
0:47:44 so part of the uptick in single family rentals is actually just normal people who are renting
0:47:49 out their other home that they used to live in. I’m curious to get your take on a specific type
0:47:55 of property. My thesis is that the fastest growing demographic isn’t seniors or Latinos,
0:48:00 it’s billionaires or very, very rich people. I think income inequality is only going to get worse
0:48:06 and you’re going to continue to see the quote unquote really aspirational high end places,
0:48:13 whether it’s certain parts of LA, certain parts of New York, although as someone who’s owned in
0:48:18 New York, the middle-state market has been kind of flat for the last decade, but the 1% communities
0:48:22 are going to outpace everywhere else just because of income inequality. Your thoughts?
0:48:29 We’re seeing that in markets that really cater to high-end homes. One of the other trends that
0:48:34 came out of the pandemic was a real spike in demand for housing in places like Aspen,
0:48:39 in upstate New York, in a lot of the rural resort communities. Those are some of the hardest places
0:48:44 to grapple with this because you have very wealthy people buying vacation homes and second homes with
0:48:50 essentially no price cap. You also need to have a bunch of not very well-paid workers who serve in
0:48:55 hospitality and retail and food service who can’t live anywhere close to there. I think those are
0:49:01 sort of one of the early examples that we’re going to see this inequality. You may get to some
0:49:08 broader realization that we have to have workforce housing for regional economies to work,
0:49:13 including in some of these resort areas and in major cities. The regional economy just doesn’t
0:49:19 function well. If you don’t have enough housing, middle income, and for lower-wage workers,
0:49:23 we may get to a breaking point in sort of political realization, but I don’t think we’re quite there yet.
0:49:28 Dr. Jenny Schütz is a nationally renowned economist, author, and policy expert on housing
0:49:33 in Lanias. She recently joined Arnold Ventures as vice president of infrastructure for housing.
0:49:38 She joins us from her office in Washington, D.C. I love how just sort of sober you are about this.
0:49:43 Really enjoyed the conversation. It’s such an important topic and we need more thoughtful
0:49:54 voices weighing in. Appreciate your time. Thank you.
0:50:01 I was a bit of happiness. This has been a rough week for me. I didn’t realize how much the election
0:50:07 was going to fuck with me. I was very invested. Was I invested in Vice President Harris? Not really,
0:50:13 but I have never supported a candidate initially that ended up getting the nomination. I supported
0:50:20 Michael Dukakis in 1992. Ask your parents. Most recently, in the 2020 election or 2020,
0:50:26 I supported Michael Bennett. So I don’t have a great track record of picking candidates and Vice
0:50:31 President Harris wouldn’t have been my pick. I’m not here to talk about why she lost or how he won.
0:50:36 I’m here to talk about what I do and I feel myself going into a bit of a tailspin. I’ve
0:50:42 talked about this before. My acronym is SCAFA. Now, how do I identify? I start getting quiet.
0:50:48 I start getting angry. I start being curt. I start getting very upset at myself and I feel
0:50:57 I recognize, okay, I’m going into a tailspin. I implement this acronym called SCAFA to try
0:51:03 and snap out of it. SCAFA. S for sweat. I find working out and sweating kind of resets your
0:51:09 system, if you will. C for clean. I try to eat at home. When you eat out, it’s buttery. It’s salty.
0:51:13 It’s sugary. It’s just not good for you. A, abstinence. Not the abstinence. Most people think
0:51:18 but abstinence from alcohol and THC. I like alcohol. I like THC. I’m good at both of those things.
0:51:23 They’ve enhanced my life, but when I’m not doing well, I try to just give my sensors a bit of a
0:51:30 break. F is for family. I try and be around my family, specifically my boys. Not because they’re
0:51:35 so wonderful, but mostly because they’re oftentimes very awful and being around my kids forces me to
0:51:41 be out of my head thinking about how bad I feel because they command or demand, I should say,
0:51:45 my total attention. And also on occasion, they are pretty wonderful. And then A is for affection.
0:51:49 I get a lot of affection. It sounds weird for my dogs. My dogs are always up for
0:51:55 laying on me and playing with me and letting me pet them. And I think my kids sense when I’m not
0:51:59 feeling well. And I’ll say, I’m not doing great. Can we watch TV or something? And they’ll sit out
0:52:05 and just sort of instinctively flop their legs over mine. And it just feels very nice. And most
0:52:11 recently, this time, something that gave me real moments of peace, real moments of peace, was music.
0:52:16 And I’m going to play some of that music now. We had these two, I found, I stumbled upon these two
0:52:24 wonderful songs. The first is the cover or a cover for the English Beat Save It For Later from their
0:52:29 Special Beat Service album. Was it called Special Beat Service? Anyways, great album. Reminds me
0:52:34 of my friend Lee. We used to go to Vegas and his red jet. I get $40 of the ATM and head to Vegas.
0:52:39 And we’d listen to that album the whole way out. And Eddie Vedder at Pearl Jam does a wonderful
0:53:02 job covering it. And then this other one I found on threads, and we’ll play it for a few seconds
0:53:09 as well, is a cover of America’s Ventura Highway by this band called Penelope Road.
0:53:12 And they look like three high school boys. And it’s just so lovely.
0:53:41 Anyway, so I hope that you are doing well this week. I am doing better. I’m getting out of the
0:53:46 house. I’m getting more sunshine. I’m socializing, which helps. And I can feel myself back on an
0:53:53 upward spiral. But if you are struggling with this or anything else, find a recognize it,
0:53:59 admit it, and find your own acronym and spin your way out. But in the meantime, enjoy these two
0:54:05 wonderful covers. This episode was produced by Jennifer Sanchez and Caroline Shagrin.
0:54:08 Drew Burroughs is our technical director. Thank you for listening to the Prop G Pod from the Vox
0:54:13 Media Podcast Network. We will catch you on Saturday for Nomersino-Mellis, as read by George
0:54:18 Hahn. And please follow our Prop G Markets pod wherever you get your pods for new episodes every
0:54:26 Monday and Thursday. Do you feel like your leads never lead anywhere? And you’re making content
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0:54:37 It’s an AI-powered customer platform that builds campaigns for you, tells you which leads are
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0:00:09 new season featuring marketing executives from the world’s most influential brands.
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0:00:40 Current at TheCurrent.com or wherever you get your podcasts.
0:00:45 Support for this podcast comes from Anthropik. It’s not always easy to harness the power
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0:01:57 Episode 325. 325 is the area covering parts of West Central Texas in 1925. The world’s
0:02:02 first motel opened. True story, last week I checked into a Western hotel and I asked
0:02:21 if the porn be disabled. Guy looked at me and said, “It’s just regular porn, you sick fuck.”
0:02:25 Welcome to the 325th episode of The Prop G Pod. In today’s episode, we speak with Dr.
0:02:30 Jenny Shutz, a nationally renowned economist, author, and policy expert on housing and land
0:02:36 use. We discussed with Jenny Trent’s instructional shifts occurring in the housing market, America’s
0:02:41 broken housing system, along with policy solutions. Okay, what’s happening? Federal Trade Commission
0:02:46 Chair Lena Kahn’s future might be determined by Trump’s biggest cheerleader, Elon Musk,
0:02:51 or as I like to call him, the first lady, Elania. In the days leading up to the election,
0:02:57 Elon Musk wrote on X that she will be fired soon. Oh, great. We have a guy who is addicted
0:03:03 to a non-associative drug determining antitrust and FTC regulation. That makes sense. That
0:03:08 totally makes sense. Both Republicans and some high-profile Democrats, including Reid
0:03:13 Hoffman and Mark Cuban, have openly criticized Lena Kahn, accusing her of pushing a far left
0:03:18 gender and using the FTC power to aggressively at the same time. She has a lot of, I think
0:03:23 they’re called cons, a rubber cons. She’s like Matt Gaetz, some unlikely fans on the
0:03:29 right, and she’s, everyone’s mad at big tech right now. There are a few bipartisan issues.
0:03:32 One of them is wanting to break up or punish big tech, although not even get their shit
0:03:35 together to actually do that. It feels as if the only things that the far left and the
0:03:41 far right can agree on and get the five or six centrist people to come along with them
0:03:45 on is one, anti-Semitism, the far left and the far right are both anti-Semitic, and two,
0:03:52 reckless spending, $7 trillion in expenditures on $5 trillion in revenues. Imagine the U.S.
0:03:58 as a household making $50,000 a year spending $70,000, and our debt is $320,000, but don’t
0:04:03 worry. We get to keep racking up debt because they keep sending us more and more credit
0:04:08 cards, at least China does, or overseas investors, and guess what? When we die, we’re going to
0:04:11 have all the champagne and cocaine, and we’re going to live large, but our kids get to inherit
0:04:14 the household debt. Well, that is what we are talking about now.
0:04:19 Anyways, a little off-script. Meanwhile, Trump’s transition team has tapped the anti-trustler
0:04:24 Gale Slater to help determine cons potential successor. I thought Lena was going to survive
0:04:29 this. I thought it would soften his image. She’s done a lot of work. I don’t think he’s
0:04:34 going to have the patience or understand things like numbers and concepts and legal jargon.
0:04:38 No joke in the first administration, when people were coached on how to present to them, they
0:04:42 would say fewer words, more pictures. I just don’t think he’s going to have the staying
0:04:46 power here. Maybe he’ll hand it over to JD Vance. JD Vance could probably do something
0:04:51 different, but what is it they want from her? I don’t get it. Oh, they want a kleptocrat.
0:04:56 They want her to back the fuck off if you made a campaign contribution. If you said
0:05:01 nice things about him, and you said money in, fine, you can do whatever you want, including
0:05:04 consolidate the industry and drive up prices, which will be inflationary, folks. By the
0:05:08 way, the most deflationary thing we could do right now would be, one, to kiss and make
0:05:14 up with China, and two, to break up big chicken, big pharma, big ag, big tech. It’s pretty
0:05:19 simple when there’s two or three players, they figure out a way to charge higher rents
0:05:24 on consumers. Notice how airline tickets have skyrocketed in the last few years. Why? Because
0:05:29 there’s basically two or three big airlines now, and they kind of wink at each other and
0:05:33 coordinate, such that they can jack up prices. If you notice that every flight has been full
0:05:37 for about the last five years, they keep taking out supply, and then they wink at each other,
0:05:42 and they don’t create more supply. Why? That would create pricing pressure, and the CEOs
0:05:46 of these companies who took about $100 or $150 million in compensation, pre-pandemic,
0:05:50 and then cried, cried poor when the pandemic came along and said that we’re all in this
0:05:56 together until the market is booming again, and then it’s free market capitalism, and
0:06:00 I should make $150 million when I’m paying my flight attendant $78,000 a year. Anyway,
0:06:05 another talk show. Who’s on the list of candidates? It’s Slater’s Assembling. Reportedly, the
0:06:09 list includes former Justice Department attorney Mark Meador. Meador, it’s not Mark Meador.
0:06:13 I know that. It’s Mark Meador with an R, probably an entirely different person with
0:06:18 a different complexion and personality. George Mason University law professor Todd Zawicki.
0:06:23 Don’t know Todd. Don’t know Professor Zawicki. That’s a pretty awesome name, though. Alex
0:06:27 Oculiar, a partner of Morrison Forrester, or as I like to call it, MoFo, and the FTC’s
0:06:33 two Republican commissioners, Melissa Holyoke, and Andrew Ferguson. Jesus Christ, I’m bored.
0:06:38 I’m bored listening to this shit. Are we going to have to cover the fucking Trump cabinet
0:06:42 for the next two or three weeks? Can you just start imposing tariffs? By the way, what
0:06:47 a shocker. He wants to raise tariffs on Mexico, who, by the way, has become a lot more important
0:06:52 to us. I think has become our biggest trading partner, our biggest import, or the country
0:06:55 we now import the most from. What’s really interesting about trade, or I find it really
0:06:59 interesting, and this was blew me away when my colleagues, Pankaj Gemawad, did the study
0:07:03 on trade and he found that trade is a function of proximity. Generally speaking, almost every
0:07:06 nation in the world, their biggest trading partner is one they share a border with.
0:07:13 I guess transportation kind of gets in the way, or people intermarry and have no people
0:07:18 over there and they develop business relationships, or just struck me that in a digital age, proximity
0:07:27 is still the primary driver of trade. Anyways, we are about to enter into a trade war. He’s
0:07:31 talking about a massive deportation force. Jesus, have you seen these people that are
0:07:35 lining up for the deportation force? It’s literally like, okay, what happens when you’re
0:07:39 bullied in high school and you finally get your revenge on people? These people just
0:07:45 seem so fucking angry. This is really nuts, but let’s take inflation and how do we reverse
0:07:50 engineer inflation? I know. Let’s reduce competition. Okay, we’re doing that. We’re going to get
0:07:58 rid of Lena Kahn. Let’s make our imports more expensive. Okay, we’re doing that. And let’s
0:08:04 find our most flexible agile workforce and terrorize them and make it such that immigrants
0:08:08 don’t want to come in. And here’s the dirty secret. The migrant problem is out of fucking
0:08:14 control and the asylum system that was set up or exploited under the Biden administration
0:08:19 was unforgivable and was probably a reason that, I don’t know, she lost one brick in
0:08:23 the blue wall. This was handled incredibly poorly for the last 30 years and especially
0:08:28 poorly the last four years. However, however, when no one wants to say out loud, is that
0:08:32 immigration while being the secret sauce of America, the most profitable part of immigration
0:08:37 is illegal immigration. They commit crimes at a low rate and they’re so worried about
0:08:40 getting caught. They don’t call the fire or police department. They don’t use our services.
0:08:43 They don’t go to the hospital. And what do they do? But they also get to pay taxes. They
0:08:48 pay their taxes. And then when the work or the crops, when the work dries up, you know,
0:08:55 grandma dies or restaurants go into recession or the crops are picked, this flexible workforce
0:09:00 heads back to their country of origin. This is literally the thing that has kept on giving
0:09:03 or the gift that has kept on giving for the last 20 or 30 years. And that is the reason,
0:09:08 actually the last 40 years, why no one ever gets that serious about immigration reform
0:09:12 and how it comes. So let’s politicize and it never gets reformed. It’s really interesting
0:09:15 if that bipartisan immigration reform bill actually goes through. It probably will now.
0:09:21 So Trump can take credit for it. The big picture, with Trump’s return to office sectors constrained
0:09:25 by strict antitrust oversight, including tech and healthcare, could see a new wave of merger
0:09:29 and acquisition activity. I would imagine Goldman Sachs and Morgan Stanley Stocker
0:09:35 thinking that M&A is going to have its sort of M&A Palooza in 2025. The markets have already
0:09:40 gone crazy since the election. This week alone, mega cap tech companies added $773 million,
0:09:43 that’s right, three quarters of a trillion dollars to the collective market cap, as dealmakers hope
0:09:48 Trump’s FTC will be more open to M&A than Biden. So according to data from DealLogic,
0:09:53 last year hit a low for M&A deals targeting U.S. companies, a low since 2015. And this year’s pay
0:09:59 suggests even fewer deals might be going through. All right, what’s going on here? Why is the market
0:10:03 screaming up? Is it because they think there’s going to be some sort of sustainable or fundamental
0:10:06 growth in companies? Have we made massive investments in R&D? Are our products more
0:10:11 attractive to overseas? Have we figured out more free trade that’ll increase the purchase of our
0:10:18 products? No. This is nothing but the following. Trump is a vessel for the transfer of wealth
0:10:25 from young people to old people. The credit markets know it. The tenure spiked about the moment
0:10:29 he was going to get elected. The moment I knew he was elected, a friend of mine who runs,
0:10:34 he was the chief investment officer from the M&A, $75 billion hedge fund called me and said,
0:10:36 he’s won. And I said, how do you know this? I don’t see this. They said the credit markets
0:10:41 are spiking, which means they know that he’s won because his policies will be more inflationary.
0:10:46 Trump is nothing but a vessel. Actually, there’s a bunch of things, including he is a vessel for
0:10:51 the transfer of wealth from young people to people like me. By the way, I have made a
0:10:56 shit ton of money in the last four or five days. And I love it. It’s great. I’m happy for it. But
0:11:03 guess what? My kids, my kids, well, that’s another story. We have to stop this war on the young.
0:11:07 Old people keep voting themselves. More money. And young people and middle-class people are
0:11:12 only the impression that, hey, the deficit never matters. And if a guy’s angry and if a guy’s
0:11:17 really offensive, he must be a leader. Let’s get a strong man. And on the fucking far left,
0:11:23 we have decided we’re self-appointed social justice cops. No, no one asked us to do that.
0:11:31 What is America? America is a platform. It’s a platform for two things. One, protect our borders,
0:11:36 Army, Navy, Air Force, Marines. Make sure that we are, that Americans are incredibly safe and that
0:11:41 we continue to spend more on our military than the next 10 biggest military spenders combined. Why?
0:11:46 Because despite what Coca-Cola or Ben and Jerry’s would like you to believe, or people on the far
0:11:50 left, the moment a group of people can come for us and kill us and take our Netflix and
0:11:58 Espresso away, be clear, they will. Job number one of this platform, defend our shores. Job
0:12:03 number two, to create atmospherics and an environment that provides prosperity, opportunity,
0:12:09 growth, innovation, capitalism, boom, profits, such that we can tax them at a fair rate,
0:12:13 at a lower rate, hopefully over time, a lower rate such that we can fund the government with
0:12:19 an even lower tax rate because of the growth, such that, such that young people can have some fucking
0:12:26 hope of buying a home, forming a family, having sex, having kids, and getting to the whole shooting
0:12:30 match. What is the whole shooting match? It’s not AI. It’s not innovation. It’s not tax rates.
0:12:36 It’s not GDP. It’s deep and meaningful relationships. And this guy is going to decrease, continue to
0:12:42 decrease the number of households that are formed. We’re going to continue to see a continued decline
0:12:46 in birth rates. Why? Because all of this economic sugar high, guess where it’s going? It’s going to
0:12:53 the top 1%. Oh my God, the market’s touching new highs. Guess what? Who owns 90% of the market?
0:12:59 The top 1%. So yeah, it’s great for me. It’s great for your boss. You know who it sucks for?
0:13:07 Everyone else, a vessel for the transfer of wealth from young to old, President Trump.
0:13:13 We’ll be right back for our conversation with Dr. Jenny Schoetz.
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0:16:45 Welcome back. Here’s our conversation with Dr. Jenny Shutz, a nationally renowned economist,
0:16:51 author, and policy expert on housing and land use. Jenny, where does this podcast find you?
0:16:56 I’m in my office in Arnold Ventures. We’re close to downtown DC.
0:17:01 All right. So, you recently joined Arnold Ventures where you’re addressing the nation’s
0:17:05 challenge of housing supply shortages and rapidly increasing rents and home prices.
0:17:11 Let’s talk about this head on. How can we repair America’s broken housing systems?
0:17:16 Well, the policy side is actually not that complicated. We need to make it easier to build
0:17:22 housing and build more types of housing, especially in high demand locations. It turns out that the
0:17:27 tricky part of this is the politics. We’ve essentially delegated a lot of control over housing
0:17:32 production to local governments and to neighborhoods. And people who live in a neighborhood often
0:17:38 don’t want to have more housing built. So, my sense is, and you tell me if this is correct,
0:17:43 the incumbents, the people who already own homes, have a vested interest in not having more supply,
0:17:47 so they get involved in local review boards and basically make it near impossible for new housing
0:17:53 permits. Is that a safe thesis? It’s true that there are at least some number of incumbent residents
0:17:58 who don’t want more housing and don’t want their neighborhoods to change. One of the questions
0:18:03 we’re sort of grappling with is how widespread is this resistance to new housing? We’re sort of
0:18:09 ingrained to believe that NIMBYism is widespread. Basically, everybody who already owns a home
0:18:14 doesn’t want more housing. But what we’re starting to learn as we do more polling and surveys is
0:18:20 that NIMBYism may not be as widespread as people thought before. The NIMBYs are loud and they’re
0:18:25 often very politically well connected. But there are often a lot of people, including longtime
0:18:29 homeowners, who understand that their communities need to grow, need to change. And so part of the
0:18:36 challenge is figuring out how to tell politicians that this median voter may actually be comfortable
0:18:41 with more growth than they assumed. Yeah, I think what’s happening, I think a lot of people have
0:18:46 children who are either renting or looking for a home and they just realize how bad it’s become.
0:18:52 What are some ideas or innovative policy solutions or economic solutions for—my understanding is
0:18:57 it’s—a lot of it’s a supply problem. We just aren’t building as many homes as we need to. What
0:19:01 are some policy ideas that you’ve seen that you think might address the issue?
0:19:06 There’s sort of three buckets of policy changes that we know are likely to be effective.
0:19:13 One is just to make it possible to build a more diverse set of housing types. So roughly three
0:19:18 quarters of the land, even in major urban areas, is set aside exclusively for single family detached
0:19:24 homes. Those take up a lot of land. They’re the most expensive type to buy or to rent. And they
0:19:28 also just occupy a lot of space. And so we have neighborhoods that are built out as single family
0:19:34 homes and you can’t add any more until you change the zoning. So legalizing everything from townhouses,
0:19:39 accessory dwelling units, all the way up to apartment buildings adds more capacity and more
0:19:43 diversity to the housing stock. We also have to look at sort of things like the dimensional
0:19:49 requirements. So legalizing an apartment building but capping it at two stories doesn’t actually
0:19:54 make it feasible. So making it possible to build taller buildings, smaller setbacks,
0:19:59 getting rid of off-strait parking requirements, all of those sort of details can matter.
0:20:03 And then probably the most important thing is actually the process. We have gone to a system
0:20:10 where there’s a lot of complex discretionary approvals. Neighborhood by neighborhood gets to
0:20:15 weigh in on what gets built to provide feedback on everything from the landscaping and the design,
0:20:20 the size of the project. Writing down a set of rules that are consistent and objective and
0:20:25 letting developers build according to the rules without having this community engagement process
0:20:30 that drags on forever would shorten the process and would allow more housing to get built more
0:20:34 quickly, which means that those units can then be sold or rented at lower prices.
0:20:40 Yeah, I have some experience with this firsthand. I bought a piece of land down here in Delray,
0:20:45 Florida, and we were planning to develop on it. And you have to go to the local review board
0:20:51 and a woman showed up and said, “I don’t know if I want that land developed. I walked my dog over
0:20:56 there.” And I’m like, “Okay, that’s called trespassing.” But they delayed the decision for
0:21:02 a month or three months. These things don’t meet that often to do some sort of review or study
0:21:08 based on the fact this woman was walking her dog over there. And it just felt like anyone who shows
0:21:14 up can not necessarily kill it, but delay it forever. So my question is, I mean, on a very
0:21:18 reductive level, my sense is permits have been taken out of the hands of officials who think big
0:21:24 picture and put into the hands or at least of homeowners who can have a lot of influence and
0:21:28 just delay this shit. And everything I’ve done around this stuff or everything I’ve seen,
0:21:35 they basically just delay, delay, delay. And any objection results in the delay of them finally
0:21:41 issuing the permits, what can be done? Because my sense is it’s very state by state or even
0:21:46 community by community. How do you address this? Is there some sort of federal law or state law
0:21:52 that expedites, if you will, is a laxative to the constipation here of housing permits?
0:21:58 Yeah, there’s very little the federal government can do. The Constitution doesn’t give the federal
0:22:05 government control over land use or development or zoning. So that’s a power that’s held by
0:22:11 the states. And sort of what we’ve seen is this delegation downwards states delegated land use
0:22:16 authority to local governments, local governments have in turn kind of outsourced this to individual
0:22:22 neighborhoods, either formally or informally. And so we’ve pushed the approval process or at
0:22:28 least the veto power down to the lowest level of geography and the people who are most impacted by
0:22:34 it. So one thing that local governments can do is just move the timing of when you get community
0:22:39 engagement instead of doing this for every single permit, every single parcel that gets changed,
0:22:44 move it upstream to something like the comprehensive planning process. So like every 10 years,
0:22:48 the city comes together and says, where do we want to grow? What do we want to add? And once
0:22:51 that’s written down in the plan, then you don’t get to protest every single development in every
0:22:57 project. That would make things a little easier. One trend we’ve seen in the last five or six years
0:23:01 is that state governments are starting to reclaim some of the power they delegated to localities
0:23:07 because states are recognizing the real economic harms of not building enough housing.
0:23:11 If you look at places like California and Massachusetts and New York, the state level
0:23:17 economy can’t grow. They can’t attract and retain enough workers because there isn’t housing
0:23:21 that’s affordable at different kinds of income levels. And so state governments are starting
0:23:26 to put guardrails around what localities can do, setting quantitative targets for how many homes
0:23:31 they have to allow, or telling them you’re not allowed to ban, for instance, apartment buildings
0:23:36 near transit stations. So I think this is a really promising trend because state governments do have
0:23:42 this bigger picture economic impact. And they have the power if they want to use it to push back
0:23:47 against all of the local NIMBYs. I think I’ve heard people reference the mayors in Austin and
0:23:54 Minneapolis are trying to be innovative around expanding the housing stock, the stock of housing.
0:23:58 A, do you know anything specifically about those, or can you point to other examples of
0:24:01 where local officials have shown leadership around this issue?
0:24:07 Yeah, those are both good examples. Minneapolis was the first city to legalize duplexes and
0:24:12 triplexes in all of its residential neighborhoods, which is kind of a modest step. It’s a little
0:24:18 bit more symbolic. But they also did a lot of upzoning around their new light rail system.
0:24:23 So it’s very easy and straightforward to build apartments near the transit stations in Minneapolis.
0:24:27 And they’ve in fact built a lot of apartments nearby. And that’s been very helpful to providing
0:24:33 more supply. Austin is just a growth friendly city. I was there in February of this year,
0:24:38 and there are cranes everywhere. They are building, building, building. Austin has really embraced the
0:24:44 sort of change from being kind of a smallish city, college town, to being a big city in its own right.
0:24:49 And a lot of what this is telling us is if elected officials want more housing to get built,
0:24:53 they’ll figure out ways to make it happen. If elected officials don’t want to build housing,
0:24:57 they’ll figure out ways to stop it. I noticed the same thing when I was in Austin,
0:25:03 that they have this sort of growth mindset. What about the idea? Could the CHIPS Act be a role
0:25:07 or be a model? And that, as they just said, we’re going to provide subsidies to inspire
0:25:13 more domestic manufacturing of key semiconductor technology. What about just straight subsidies
0:25:19 that say to a developer, if you figure out a way to navigate these local zoning laws and build more
0:25:26 than 8, 10, 12 units, we’ll give you 3, 5, 10% tax credit? I mean, the problem isn’t that developers
0:25:31 don’t want to build. It’s that they can’t, and that developers don’t control the development
0:25:38 process. So, you know, there’s always a worry about subsidizing either demand or giving subsidy to
0:25:45 providers to developers without relaxing the rules may just wind up driving up prices even more.
0:25:51 Let’s zoom out. Give us your impression as some of the housing trends by market, because people
0:25:58 will say, you know, it’s difficult to, I think, make statements about housing across the U.S.
0:26:01 because housing in St. Louis, I would imagine, is an entirely different situation than it is in
0:26:08 Phoenix or San Francisco. If you were as a housing analyst, what markets do you think reflect the
0:26:13 most strengths right now, the most weakness, what types of real estate or asset classes are you
0:26:18 keeping your eye on? Give us sort of breakdown, if you will. Give us a lay of the land, but be
0:26:25 more segmented by region and property type. So, in the last five years or so, really since the
0:26:31 start of the pandemic, we’ve seen affordability go from being mostly a regional problem in the
0:26:36 high-cost coastal markets to being almost a national problem. And it’s not as acute everywhere,
0:26:42 but, you know, California, Seattle, Boston, New York for something like 40 years have been
0:26:46 underbuilding and have been very expensive, and that’s just sort of baked into expectations.
0:26:53 Places like Austin, Denver, Nashville, a lot of the Sunbelt metros have historically been really
0:26:57 affordable. They build a lot of housing when there is more demand and prices haven’t gone up.
0:27:03 That sort of broke in the pandemic, and it’s unclear whether that’s a short-term problem.
0:27:08 Lots of people moving away from California to places like Phoenix because they could buy
0:27:13 cheaper homes. Maybe this is going to correct itself. The worry is that some of those places
0:27:17 are going to become more like California. You know, if Austin and Phoenix start making it
0:27:21 harder to build, and in the long run they stay expensive, that’s going to be a real problem
0:27:26 for a lot of people. It is certainly still true that a lot of the traditional sort of rust belt
0:27:32 metros, St. Louis, Cleveland, Pittsburgh, I mean, housing is still objectively a lot cheaper there
0:27:38 than it is in most of the country, but those places are also seeing tightening. So we’re seeing,
0:27:43 you know, Pittsburgh is redoing their comprehensive plan now. They’ve seen vacancy rates drop in a
0:27:47 way that they’re not used to seeing and are trying to figure out how do we get out in front of this.
0:27:53 So we’ve seen this sort of geographic convergence, in a sense, on spillover, looking at sort of
0:28:00 different kinds of home types. The single-family home building completely collapsed in the Great
0:28:04 Recession. People couldn’t get qualified for mortgages, developers couldn’t get money to build,
0:28:10 and so if you map single-family permits and multi-family permits, they both dropped off a cliff
0:28:15 in the Great Recession. Multi-family has picked up a lot, and single-family has just not gotten back
0:28:20 to the levels that it was. Some of this is that, you know, you need more land to build single-family.
0:28:25 There’s a lot of demand for living in the urban core where there are amenities, and there you’re
0:28:30 going to be building more multi-family, but some of it also seems to be that it’s just harder for
0:28:35 people to qualify for mortgages than it used to be, and so there’s less building of single-family
0:28:37 that’s designed for especially entry-level home ownership.
0:28:43 Do you think that young people not being able to pursue “the American Dream”
0:28:50 is leading to our polarization and dissatisfaction with life in America?
0:28:56 It definitely doesn’t help. When I talk to people under the age of 40, they are really
0:29:01 pessimistic about their ability to buy a house in a neighborhood that’s close to jobs and amenities,
0:29:06 and people are just sort of resigned. I’m going to be a renter forever,
0:29:10 which isn’t necessarily terrible, right? If there’s good quality rental housing in neighborhoods
0:29:16 that you like, being a renter allows you to be more flexible, to move someplace for another job,
0:29:21 but we’re so conditioned to believe that sort of part of becoming an adult is buying a house and
0:29:25 having part of the American Dream and building wealth, and so people who feel like that’s not
0:29:29 going to be a possibility are really embittered and not feeling like the system is working for them.
0:29:36 Do you think we need to break out of this kind of zeitgeist that you’ve failed as an adult or
0:29:42 you’re not that successful unless you own? My podcast co-host on my other pod, Raging Moderates,
0:29:46 is successful. She and her husband make really good money. They live in New York,
0:29:50 and they’ve made the conscious decision to leave their money in the market as opposed to put it
0:29:55 buying a very expensive place in Tribeca or wherever, because they’ve said the yield,
0:30:00 it’s just not economic. It’s a better deal to rent than to buy. Do you think we just need
0:30:08 a change in mentality or mindset? I think we should be a lot more honest about the financial
0:30:14 risks and downsides of owning. There’s a long tradition among our elected officials from both
0:30:19 parties of pushing this idea that home ownership is the American Dream, and we should get people
0:30:25 into home ownership as quickly as possible and renting a second-class status. I will say that
0:30:31 for a lot of people, the biggest benefit of home ownership is not that you’re going to build a ton
0:30:35 of wealth through the equity, but that you have stability and predictability of your housing
0:30:40 payments for a fairly long period of time. If you rent every year when your lease rolls over,
0:30:46 the landlord can raise the rent. If you own, the principal and interest on the mortgage are fixed
0:30:52 over generally 30 years. One of the things that’s coming up though with climate change is that
0:30:58 property insurance and property taxes are going up faster because local governments have to pay
0:31:02 for a lot of these repairs, and insurance companies are raising rates pretty quickly.
0:31:07 That makes home ownership a little bit less attractive as just a stability of your housing
0:31:13 payment system. It’s really important that before people buy a home that they look at where else
0:31:17 they could be investing their money, in a lot of markets, particularly these sort of Midwestern
0:31:22 cities, the stock market would have performed better than putting your money in real estate and
0:31:28 having it all in a down payment. It’s inherently risky to invest all of your savings in one piece
0:31:34 of property in one location in the same regional job market where you work. There’s a lot of risk
0:31:39 involved, and we haven’t really been that upfront with people about it. Generally speaking, looking
0:31:46 at the yields or the ratio of rent to ownership, is it generally speaking better to rent now
0:31:50 across the nation or have rents kept pace with the same escalation at home prices?
0:31:57 That really varies across markets. Places like Austin that have built a ton of housing,
0:32:01 rent inflation topped out during the pandemic and has slowed, and some of them are actually
0:32:06 seeing softening of rents. You might be able to get, say, one or two months free rent when you
0:32:11 sign a new lease, but in places like California and New York that have not built enough housing,
0:32:15 rents continue to go up much faster than income. It’s still the case that
0:32:19 home ownership is a better deal financially in some markets than others.
0:32:25 What about in these climate affected areas where people can’t get insurance? How is that
0:32:32 impacting the housing market? We’re just starting to see that now. Florida is certainly ground zero
0:32:39 for this. Insurance premiums are going up on owner-occupied properties and going up on rental
0:32:43 properties. Landlords are having to pay higher rates as well. In some places, people are going
0:32:47 to have a hard time getting insurance at all, or the insurance is not going to cover the full
0:32:53 replacement cost if there’s damage. We are seeing some people who just choose not to have
0:32:57 insurance. If you don’t have a mortgage, nobody forces you to buy property insurance and you may
0:33:03 just go without. We see, unfortunately, a lot of that among some of the older mobile home parks
0:33:08 because people don’t have a mortgage, they don’t have to have insurance, but then they have nothing
0:33:14 when a disaster strikes. We may also see some wealthy people who just choose to fully self-ensure.
0:33:19 If you have a lot of money saved up and you really want to live close to the ocean, you might be
0:33:22 willing to live there and just accept that you’re going to have to rebuild your house from time to
0:33:32 time and pay for it out of pocket. We’ll be right back. Support for Prop G comes from Quince.
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0:36:53 holiday shop ever, also available at skims.com. So back in 2022, you spoke with Ezra Klein about
0:36:58 how progressive states struggle more with homelessness. Why do you think that is? And why
0:37:04 haven’t things changed? I mean, you just hear so much about the home. I see it when I’m in Seattle,
0:37:11 when I’m on these west coasts, “progressive cities,” you just see such an extraordinary
0:37:17 homeless problem. Why is that? Many of the progressive cities and states are the ones that
0:37:22 have made it the most difficult to build housing. Fundamentally, the number of homeless people is
0:37:27 a function of the number of people who can’t afford the rent or the mortgage. So expensive places have
0:37:33 higher rates of homelessness. People are falling into homelessness much faster because they’re
0:37:38 housing unstable and they’re spending a lot of money on income. There’s this weird relationship
0:37:44 with why progressive places have made it the hardest to build. Some of this goes back to
0:37:50 some of the big social trends in the 1960s and ’70s. Giving communities a voice in what gets
0:37:56 built and in what gets torn down very much comes out of a reaction to urban renewal. The federal
0:38:01 government tore down a bunch of black and brown neighborhoods and cities to run highways into
0:38:05 the downtown areas and they didn’t talk to the communities that were displaced. The federal
0:38:10 government just came in and took your house and tore it down and ran in a highway. So the sort of
0:38:15 community empowerment comes out of a reaction to that. In California, California was the first
0:38:23 state to pass a statewide environmental protection law, CEQA, which initially was supposed to protect
0:38:29 environmentally vulnerable places, but now has really become weaponized so that people can sue
0:38:34 to stop a bike lane or infill development or affordable housing on the grounds that it’s
0:38:39 going to create more traffic or that it’s going to disturb their view. So a lot of the sort of
0:38:44 good impulses in the progressive movement have now been weaponized by some of the most affluent
0:38:49 and well-organized communities to stop poor people and to block projects often that have big
0:38:55 environmental benefits. There’s been a lot of controversy about institutional buyers coming
0:39:01 in buying up apartments or housing. And one, do you see it as a bad thing or is it just additional
0:39:08 source of capital that should inspire more supply? So I don’t think we should worry about the sort of
0:39:13 legal entities that are buying housing as much as we worry about the ways that housing is being
0:39:19 provided. There are sort of a couple of reasonable pushbacks against private equity in particular
0:39:23 buying up homes. One is that in some cases they’ve not been great landlords. They provide
0:39:27 poor quality housing. They don’t fix maintenance issues. They’re not responsive to their tenants.
0:39:33 And tenants have a right to good quality housing and good treatment. But that’s true whether your
0:39:38 landlord is a private equity firm or a mom and pops landlord or for that matter a public housing
0:39:42 agency or a nonprofit. And we should enforce these rules across all kinds of landlords.
0:39:47 There’s also been concern that private equity has a lot of cash. And when they go in and they’re
0:39:53 buying up properties for cash, they can outcompete first-time home buyers who need to get a mortgage.
0:39:57 Again, understand that that’s definitely a pain point. But then we should also worry about things
0:40:03 like boomers who are retiring and selling their primary home and using cash to buy a second home.
0:40:07 If it’s cash buyers, then again, this applies across all different kinds of entities.
0:40:12 So my sense is we’re scapegoating private equity because it’s a convenient villain.
0:40:17 But even if you banned all of private equity from buying up housing, that wouldn’t alleviate the
0:40:23 housing shortage and that wouldn’t reduce rents and prices by very much. And I think people forget,
0:40:28 didn’t a lot of the institutional buyers get basically their face ripped off and had to sell
0:40:33 these things at a loss creating more cheap supply? Doesn’t it swing both ways when you have institutional
0:40:38 buyers? It does. Some of them are good at buying at the bottom and selling at the top and others
0:40:43 mistime the market just like any other investor. In the wake of the Great Recession, there were a
0:40:48 number of markets that had really high vacancies and a lot of foreclosures. And remember that nobody
0:40:52 could get a mortgage. And so you had to have cash to be able to buy. A bunch of the big institutional
0:40:57 investors went into neighborhoods that had foreclosed and boarded up homes, bought them,
0:41:02 and at least rehabbed them enough to be habitable, got renters in. So they stabilized some of the
0:41:08 neighborhoods that were hardest hit. You may argue, we’d like them to sell to homeowners once the
0:41:12 mortgage market’s loosened up, but they did perform a really important service because they
0:41:16 have access to capital when other people don’t. What do you think of these sort of cities and
0:41:21 startups? And my understanding is there’s certain big swaths of land in California and other states
0:41:26 that have been incorporated by investors. And my understanding is one of the motivations or the
0:41:31 opportunities they see is a lack of zoning and the ability to just kind of build, baby, build.
0:41:37 What do you think of these sort of startup cities? So there’s a big one outside of the Bay Area that’s
0:41:44 gotten a lot of political pushback. My sense as part of the problem there is that there was
0:41:50 intentional secrecy on the front end. So they were buying up a lot of land and trying to
0:41:56 develop plans for this without revealing who was behind it. And that comes across as
0:42:02 secretive and undemocratic. And so people are kind of nervous about this. We do have older
0:42:08 examples of planned cities, so Celebration in Florida, Columbia, Maryland, Reston, Town Center
0:42:14 in Virginia, where there was a big master plan city. Many of those are lovely places to build,
0:42:20 and people want to be in a place that has housing and restaurants and public space and parks.
0:42:26 And there’s some efficiencies to doing these in kind of large scale. We see that also within
0:42:30 neighborhoods within cities. In Washington, D.C., where I live, a number of the big new
0:42:35 neighborhoods around Union Market and the Navy Yards Ballpark, those were done as big master
0:42:40 plan communities. So those can be really nice places, and you have some economies of scale in
0:42:46 the infrastructure provided. I think the sort of concern of our private companies doing this going
0:42:52 to be accountable to voters is worth a conversation. I’m also a little skeptical that you can build
0:42:57 a city and fill it with tenants who won’t at some point then want to take control over the
0:43:03 democratic process. So maybe you build Forever, California, 10 years down the line, the people
0:43:06 who’ve moved in there decide they actually don’t want to continue building housing and they turn
0:43:10 into nimbies. That strikes me as a very plausible outcome down the line.
0:43:16 When I look at the impacts in the economy coming out of COVID, it feels like the real
0:43:22 structural enduring change is remote work, more so in the U.S. than in Europe and other parts of
0:43:26 the world where you see vacancy rates are back to kind of the normal levels in commercial real
0:43:31 estate. But in the U.S., it seems that a lot of people have gotten very used to remote work.
0:43:38 Is there perhaps just an entire structural shift that will step change up the value of
0:43:42 housing because people are just spending a lot more of their waking hours in their home?
0:43:49 Yes, and we have probably seen some of that already. So there’s some good research that shows
0:43:57 that about 20% of the increase in prices nationally is due to remote work by high-income
0:44:01 workers. So it’s not just that people are working from home, but it’s the most affluent workers
0:44:06 who want more space to have a home office or just more space to spread out, and they’re really
0:44:13 driving that. So in metro areas with higher rates of work from home, we see bigger spikes in housing
0:44:19 prices. I will say that they’re sort of a flip side, which is the opportunity from reimagining a
0:44:25 lot of the office-heavy downtowns. It’s not quick and easy to convert an office building
0:44:29 into residential, but this does open up more buildings. And in some of the city centers that
0:44:34 have a lot of amenities, it’s probably going to take five to 10 years before we see substantial
0:44:38 numbers of homes, and they’re not going to be cheap. But that does mean that we’ve got some
0:44:45 places we can reimagine. And I realize this isn’t your domain, but I can’t resist asking
0:44:52 any thoughts. About a year ago, there was all of this speculation that some of the second tier
0:44:55 regional banks were going to go out of business because they had all this commercial real estate
0:44:59 on their balance sheet. And it doesn’t feel as if we’ve seen them melt down. We’ve seen
0:45:05 vacancy rates be stubbornly high in commercial real estate, but we haven’t seen this sort of meltdown
0:45:09 similar to the subprime crisis in 2008 that was being predicted in the commercial real estate
0:45:13 market. Any thoughts on the state of commercial real estate right now?
0:45:19 That’s going to look different across markets too. Even for things like office vacancy and retail
0:45:25 vacancy, some cities have held up better than others. So places like San Francisco and New York
0:45:30 still have some of the highest office vacancy rates, but that’s fundamentally very expensive land,
0:45:34 and somebody is going to figure out something to do with that land and those buildings to make
0:45:42 money off of it. Many of the smaller markets, the Sun Belt never had as much work from home,
0:45:49 and those office markets have held up much better. Regional banks tend to loan both for acquisition
0:45:56 and for development and the loans on commercial properties in their home region. So maybe the
0:46:00 regional banks that are lending on San Francisco real estate are going to take more of a hit,
0:46:07 but again, those are pretty diversified in big economies. And so without speculating too much,
0:46:11 it’s not clear that we’re going to see a giant wave of bank failures primarily because of
0:46:17 commercial real estate. So just a couple of theses, and I want you to respond to them. One,
0:46:24 it feels as if, so life happens, death, disease, divorce, that all of these homes are these kind
0:46:29 of unexploded devices called a mortgage at 2.5% where they can’t leave. At some point,
0:46:35 as those mortgages start to come due or they need to turn them or refinance them, at some point,
0:46:39 when you just got to move back to be closer to your aging parents or you need a bigger house,
0:46:46 there’s my understanding is the housing, we’ve never seen where kind of a historic trough in
0:46:52 terms of housing sales right now. Do you see pent up demand and what might be like a kind of a
0:46:57 housing liquidity or sales boom in the next one to three years? It just feels at some point,
0:47:02 the dam has to break or is this just a structural shift where people are going to stay in their
0:47:09 homes for much longer? People will move eventually. People do decide they’re just going to take the
0:47:13 hit and they will move to something that’s going to have a higher interest rate if they really
0:47:17 need to. I think that’s right. When people have life circumstances, they will change.
0:47:23 Interest rates will come down in the next couple of years. We don’t know how quickly and how far,
0:47:27 but that loosening up is probably going to open the spicket a little bit and people will get more
0:47:33 flexible. The other option is that people do what they did in the greater session. You have to move
0:47:38 for a job related change or a family change, but rather than sell your old house, you rent it out,
0:47:44 so part of the uptick in single family rentals is actually just normal people who are renting
0:47:49 out their other home that they used to live in. I’m curious to get your take on a specific type
0:47:55 of property. My thesis is that the fastest growing demographic isn’t seniors or Latinos,
0:48:00 it’s billionaires or very, very rich people. I think income inequality is only going to get worse
0:48:06 and you’re going to continue to see the quote unquote really aspirational high end places,
0:48:13 whether it’s certain parts of LA, certain parts of New York, although as someone who’s owned in
0:48:18 New York, the middle-state market has been kind of flat for the last decade, but the 1% communities
0:48:22 are going to outpace everywhere else just because of income inequality. Your thoughts?
0:48:29 We’re seeing that in markets that really cater to high-end homes. One of the other trends that
0:48:34 came out of the pandemic was a real spike in demand for housing in places like Aspen,
0:48:39 in upstate New York, in a lot of the rural resort communities. Those are some of the hardest places
0:48:44 to grapple with this because you have very wealthy people buying vacation homes and second homes with
0:48:50 essentially no price cap. You also need to have a bunch of not very well-paid workers who serve in
0:48:55 hospitality and retail and food service who can’t live anywhere close to there. I think those are
0:49:01 sort of one of the early examples that we’re going to see this inequality. You may get to some
0:49:08 broader realization that we have to have workforce housing for regional economies to work,
0:49:13 including in some of these resort areas and in major cities. The regional economy just doesn’t
0:49:19 function well. If you don’t have enough housing, middle income, and for lower-wage workers,
0:49:23 we may get to a breaking point in sort of political realization, but I don’t think we’re quite there yet.
0:49:28 Dr. Jenny Schütz is a nationally renowned economist, author, and policy expert on housing
0:49:33 in Lanias. She recently joined Arnold Ventures as vice president of infrastructure for housing.
0:49:38 She joins us from her office in Washington, D.C. I love how just sort of sober you are about this.
0:49:43 Really enjoyed the conversation. It’s such an important topic and we need more thoughtful
0:49:54 voices weighing in. Appreciate your time. Thank you.
0:50:01 I was a bit of happiness. This has been a rough week for me. I didn’t realize how much the election
0:50:07 was going to fuck with me. I was very invested. Was I invested in Vice President Harris? Not really,
0:50:13 but I have never supported a candidate initially that ended up getting the nomination. I supported
0:50:20 Michael Dukakis in 1992. Ask your parents. Most recently, in the 2020 election or 2020,
0:50:26 I supported Michael Bennett. So I don’t have a great track record of picking candidates and Vice
0:50:31 President Harris wouldn’t have been my pick. I’m not here to talk about why she lost or how he won.
0:50:36 I’m here to talk about what I do and I feel myself going into a bit of a tailspin. I’ve
0:50:42 talked about this before. My acronym is SCAFA. Now, how do I identify? I start getting quiet.
0:50:48 I start getting angry. I start being curt. I start getting very upset at myself and I feel
0:50:57 I recognize, okay, I’m going into a tailspin. I implement this acronym called SCAFA to try
0:51:03 and snap out of it. SCAFA. S for sweat. I find working out and sweating kind of resets your
0:51:09 system, if you will. C for clean. I try to eat at home. When you eat out, it’s buttery. It’s salty.
0:51:13 It’s sugary. It’s just not good for you. A, abstinence. Not the abstinence. Most people think
0:51:18 but abstinence from alcohol and THC. I like alcohol. I like THC. I’m good at both of those things.
0:51:23 They’ve enhanced my life, but when I’m not doing well, I try to just give my sensors a bit of a
0:51:30 break. F is for family. I try and be around my family, specifically my boys. Not because they’re
0:51:35 so wonderful, but mostly because they’re oftentimes very awful and being around my kids forces me to
0:51:41 be out of my head thinking about how bad I feel because they command or demand, I should say,
0:51:45 my total attention. And also on occasion, they are pretty wonderful. And then A is for affection.
0:51:49 I get a lot of affection. It sounds weird for my dogs. My dogs are always up for
0:51:55 laying on me and playing with me and letting me pet them. And I think my kids sense when I’m not
0:51:59 feeling well. And I’ll say, I’m not doing great. Can we watch TV or something? And they’ll sit out
0:52:05 and just sort of instinctively flop their legs over mine. And it just feels very nice. And most
0:52:11 recently, this time, something that gave me real moments of peace, real moments of peace, was music.
0:52:16 And I’m going to play some of that music now. We had these two, I found, I stumbled upon these two
0:52:24 wonderful songs. The first is the cover or a cover for the English Beat Save It For Later from their
0:52:29 Special Beat Service album. Was it called Special Beat Service? Anyways, great album. Reminds me
0:52:34 of my friend Lee. We used to go to Vegas and his red jet. I get $40 of the ATM and head to Vegas.
0:52:39 And we’d listen to that album the whole way out. And Eddie Vedder at Pearl Jam does a wonderful
0:53:02 job covering it. And then this other one I found on threads, and we’ll play it for a few seconds
0:53:09 as well, is a cover of America’s Ventura Highway by this band called Penelope Road.
0:53:12 And they look like three high school boys. And it’s just so lovely.
0:53:41 Anyway, so I hope that you are doing well this week. I am doing better. I’m getting out of the
0:53:46 house. I’m getting more sunshine. I’m socializing, which helps. And I can feel myself back on an
0:53:53 upward spiral. But if you are struggling with this or anything else, find a recognize it,
0:53:59 admit it, and find your own acronym and spin your way out. But in the meantime, enjoy these two
0:54:05 wonderful covers. This episode was produced by Jennifer Sanchez and Caroline Shagrin.
0:54:08 Drew Burroughs is our technical director. Thank you for listening to the Prop G Pod from the Vox
0:54:13 Media Podcast Network. We will catch you on Saturday for Nomersino-Mellis, as read by George
0:54:18 Hahn. And please follow our Prop G Markets pod wherever you get your pods for new episodes every
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