Project 2028: Housing
Audio Recording by George Hahn
Democrats need to be the party of ideas, not indignation. Our “Project 2028” series will address critical issues facing American society through a No Mercy / No Malice lens. We begin with housing.
The Rent Is Too Damn High
The U.S. doesn’t have a housing crisis, but an affordability crisis. Roughly one-third of Americans rent, and nearly half are “cost-burdened,” i.e., they spend 30% or more of their income on housing. Since 2019, rents have increased 1.5x faster than income in most U.S. metro areas. In purely economic terms, increased housing costs reduce labor mobility and productivity, as workers can’t afford to live in high-growth areas. When human capital can’t be invested in the regions offering the greatest returns, it dampens growth; one research project estimates that removing housing constraints (i.e., lowering costs) to increase the liquidity of human capital would increase GDP by $1.4 trillion. In sum, there may be an economic as well as a social justification for government investments in housing.
Elevated housing costs also take a toll on health, as families who struggle to afford housing often delay medical care, eat less healthy food, and have higher levels of anxiety and depression. But the most catastrophic consequence of unaffordable housing is that 770,000 Americans are homeless. According to one study, communities where the median rent is more than 32% of the median household income are likely to see sharply higher rates of homelessness. But no matter where they live, homeless people suffer intense physical and mental harm, put a disproportionate burden on public services where they live, and reduce the quality of life for all citizens.
The common denominator for struggling renters and the homeless isn’t identity, but money. Increasing support for Section 8 housing and rent control may provide short-term relief, but in the long term these programs become entrenched and suppress development. The quickest way to help poor people afford housing is simple: Pay them more. As I’ve written before, I believe the minimum wage should be $25 per hour. 
Thank You for Your Service
There are approximately 32,000 homeless veterans in the U.S. While vets account for only 5% of the total homeless population, housing them is a good place to start, as they’re politically popular and have access to benefits. A federal “No Homeless Vets” pilot program could be a platform for testing solutions. It could also provide what’s missing in American politics right now: Renewed confidence that the government can take on big challenges.
American Hallucination
Owning a home marks one’s progression into adulthood, starting a family, and building wealth. But for many Americans, the American dream has become a hallucination. This is especially true for young people; between 1984 and 2024, the age of the typical first-time homebuyer jumped from 29 to 35. Since 1963, home prices have increased 3x, after adjusting for inflation, while the median household income increased about 1.5x. Nationally, the average home price to income ratio is 4.7. It’s significantly higher in California (8.4), Washington (6.3), Massachusetts (6.3), New York (5.7), and Florida (5.7).
Shortfall
Housing experts say we need to build somewhere between 1.7 million and 7.3 million additional housing units. In the same way Ernest Hemingway described the process of going bankrupt, we got here gradually, then suddenly, as the pace of homebuilding has yet to fully rebound to the rate before the Great Recession.
Increased costs for labor, building materials, and regulatory compliance (see below) have all contributed to the problem. The cost of building multifamily housing in California, for example, spiked by 25% between 2010 and 2020. Nationwide, residential construction costs rose 19% over the same period. Construction costs have stabilized since the pandemic: Labor costs grew 3.8% over the past year, while the cost of materials was flat. Mass deportations and tariffs, however, will likely increase the cost of both labor and materials.
Democrats don’t have power over tariffs and immigration, but they can champion cost-effective building. Manufactured homes, which are built in factories and finished on site, are 35% to 73% cheaper than homes built entirely on site. In Los Angeles, many homeowners can’t afford to rebuild after the fires, as quotes for new construction can be 2x or more what insurance will cover. A partnership between a nonprofit and manufactured home startup aims to donate 100 prebuilt homes that cost around $260,000 each. To rebuild L.A. quickly, local leaders should hyperscale this kind of building.
It’s the Zoning, Stupid
When I interviewed housing economist Jenny Schuetz on my podcast, she told me housing policy is relatively simple, but the politics are hard. Case in point: Around 75% of residential land in the U.S. is zoned exclusively for single-family homes — the most costly and least dense type of housing. Rezoning for multifamily housing and taller buildings would make it easier to build.
At the federal level, the bipartisan Yimby (yes in my backyard) Act encourages block grant recipients to track and remove barriers to housing construction. HUD grants along the lines of Pathways to Removing Obstacles to Housing, which Congress authorized $85 million for in 2023, have helped localities purchase land for affordable housing, streamline the building application process, and add local staff to fast-track affordable-housing proposals. We should double down. Likewise, we should pass the bipartisan Housing Supply and Affordability Act, which would allocate $1.5 billion in technical assistance to overhaul local zoning rules.
Local governments and neighborhoods, however, hold most of the power here. Reform is costly and time-consuming, as new rules must contend with a confusing legislative labyrinth. The effects of an overlawyered process are most apparent in blue states. A significant number of Californians left for Texas in search of jobs and affordable housing — the chocolate and peanut butter of economic growth. To win national elections, Democrats need to demonstrate that they can govern. The winning move: Go hard at zoning reform, cut red tape, and encourage development. Such a pivot could make for strange bedfellows — zoning reform means taking on environmentalists and wealthy homeowners.
Kill the Building Tax
The standard property tax model imposes taxes on land and structures. This discourages building, since new construction will be taxed. We should reverse the incentives, and tax only undeveloped land, encouraging development, while cutting taxes on existing homes. The idea has been proposed in Detroit and New York City to reduce the number of vacant lots in those cities. In Pennsylvania, several cities have used a similar split-rate tax that taxes structures at a lower rate than land. One study found that split-rate tax models can increase high-density housing units between 2% and 10%. Embracing the strategy could rebrand Democrats from tax-and-spend liberals into tax-cutting builders.
CEQA
This week, the California legislature released a report examining the state’s failure to build enough affordable housing. The author’s conclusion: The planning process is slow, crippled by red tape, and vulnerable to frivolous lawsuits, making it “too damn hard to build” in the Golden State. Exhibit A: In 2024 the state’s Supreme Court resolved a three-year battle over a 1,200-unit Berkeley housing project. Neighborhood groups argued that the noise predicted to come from college student housing amounted to a “pollutant” under the law. The neighborhood groups lost, but the case illustrates the larger problem. BTW, UC Berkeley has been there longer than any resident, and the scarcity model weaponized by admissions departments and existing homeowners is morally bankrupt. But that’s another post.
Nimby homeowners have fashioned a state law, the California Environmental Quality Act, into an anti-growth cudgel. A California Legislative Analyst’s Office study found that CEQA litigation delayed construction by two-and-half years. Only 20% of CEQA lawsuits target “greenfields,” i.e. converting open space to housing, while 85% of CEQA lawsuits were filed by groups with no track record of environmental litigation. A California state senator has introduced legislation to fast-track CEQA cases. Lawmakers in states and localities with similar laws should follow suit.
Blueprints for Reform
Rents in Minneapolis increased by only 1% between 2017 and 2022, largely because developers increased the housing stock by 12% during the same period. Meanwhile, rents in the rest of Minnesota, which only boosted housing stock by 4%, increased by 14%. The unlock? Minneapolis reformed zoning laws to encourage taller multifamily housing projects and eliminated parking minimums that can cost $50,000 per space. It’s a similar story in Austin, where city officials waged a decade-long political fight to tackle housing affordability through rezoning. Austin’s new rules allow for single-family homes to be built on smaller lots, apartments to be built closer to single-family homes, and denser development along a planned light-rail line.
Nimby
Nimby homeowners tend to be loud and politically connected, giving the impression that their views represent the broader community. That is not the case. YouGov polling suggests that Americans may be more receptive to local development than previously thought. Support for building more single-family homes polls at 90% nationally, 81% locally. For senior housing, national support polls at 88%, local support is 84%. Nationally, 76% of Americans want more apartments built, while 65% support building more apartments locally. Low-income housing and homeless shelters are the least favored housing types, but even there local support polls at 2 to 1. If you’re a politician, you’ve been given a green light to ignore Nimbys.
Decouple Housing From Wealth
Despite the conventional wisdom, people lose money in real estate. Homes are illiquid capital-intensive assets that come with “phantom” costs: Insurance premiums, maintenance bills, and property taxes — all of which are expected to rise due to climate change. Owning also limits diversification, as homes are close to workplaces, meaning a local economic downturn or a natural disaster could wipe out your equity at the same time you lose a job. Historically, the S&P averages a 10% annual return, outpacing housing at 4% to 8%. Moreover, real estate brokers typically charge around a 6% commission — 60x the transaction cost you’d pay for a low-fee ETF that tracks the S&P. The advantage of homeownership is forced savings, as people don’t want to risk the hassle and shame of eviction. Another advantage: Owning can stabilize monthly housing costs relative to rents.
I like real estate, as no other asset class allows you to lever up 5-to-1 with a low downpayment and a deductible interest rate. But the idea that homeownership is the best, or only, way to build wealth is a lie fomented by the National Realtors Association that needs to die. This lie leads to dubious financial advice for the people who buy homes that don’t outperform the market, and it makes those who aren’t able to buy feel like failures. But the most toxic by-product of this lie is that it encourages incumbents to inflate the value of their assets by making housing scarce. Americans want to build wealth, and Democrats should speak in aspirational terms. But if housing is the primary / only vehicle for wealth accumulation, we shouldn’t be surprised that our political fault lines are rich against poor, rural against urban, and old against young.
If economic security is the nutrition of a capitalist society, then maybe we need to stop thinking of housing as an investment, but a consumable (e.g., food, energy, education). The construction of millions of low-cost units for young people, coupled with tax-advantaged incentives to invest in the market would result in a better path to wealth. In addition, we need to remove housing from the growing list of sources of anxiety for young people. It’s housing, not an investment strategy or the arbiter of whether you’re worthy enough to mate, start a family, or earn status. Economic security and deep and meaningful relationships are the American Dream, not a mortgage payment. The call sign for the next administration should morph from “Drill Baby Drill” to “Build Baby Build.”
Life is so rich,
P.S. This week on Prof G Markets, Ed and I discussed EU defence stocks, the latest tariffs, and crypto, plus we had a conversation with Jonathan Kanter, former assistant attorney general for the Antitrust Division of the U.S. Department of Justice. Listen here on Apple, Spotify, or YouTube
P.P.S. Join me for an AMA on Thriving in the Age of AI on March 20. RSVP for free here.
Prof. Galloway, Thanks for laying out your ideas in a coherent fashion. I’m a former city council member in a small Bay Area city. I live in a century-old 1,100 sq. ft. bungalow in a “streetcar” neighborhood. My little city, about half small-lot, single-family (SF) homes and half multifamily units, is dense enough to support a charming walkable commercial district and good public schools. I agree with most of your ideas, but I have strong disagreements about some others:
I think we’d agree that grotesque income inequality is a big problem. But that is coupled with an inefficient monopolized building industry that builds too little and charges too much. And don’t forget the Great Recession that decimated housing construction just as the large millennial cohort reached homebuying age. Plus Covid and work-from-home and other factors mentioned in the comments. It’s been a big ol’ clusterf**k.
OK, now for the hard part:
1) I have a problem with the term NIMBY. First, it’s a slur. Second, it creates a false dichotomy. Housing policy is not black-and-white. Third, the term is so overused that is has become meaningless. George Orwell famously stated that “the word Fascism has now no meaning except in so far as it signifies ‘something not desirable’.” Same problem with “NIMBYism.
2) You get CEQA wrong. It is a state law, and its abuse is driven by two factors. First, the building and trade unions, a powerful lobbying group in our state capitol in Sacramento. They use threats of CEQA lawsuits to enforce prevailing wage agreements. I mostly agree with the end, but not the means. Second, legislators like CEQA because it gives them the power to create carve-outs for their special-interest funders, leading to what has been called “Swiss cheese CEQA.”
3) Don’t trust Jenny Schuetz on zoning. I don’t understand the fetishism about upzoning. Upzoning is not a form of eminent domain. An initial zoning map lays out a pattern of plots. But once they are purchased, it is property rights that shape further development, not upzoning. There are many SF neighborhoods that are zoned for higher density but remain SF because SF homes are in high demand and because the SF housing turnover rate is only about two percent annually. Any developer who wants to build a small four-plex apartment building where a SF home exists must first outbid someone who wants the SF family house. In the Bay Area, that someone is often a techie who can pay $1 million or more–in cash. Tearing down a valuable SF house and building a four-plex just isn’t profitable.
4) I disagree that local government bureaucracy is a major problem. Here in California, since 2017 the state legislature has passed about 200 housing bills that streamline housing permits and reduce local govt authority. The result? Housing production has barely budged. Build baby build is a fine mantra, but it will require major federal and state funding. The current affordable non-profit housing sector is a boutique industry dependent upon insanely bureaucratic funding schemes. It just doesn’t scale. Urban renewal was a disaster, but we need to figure out how to do public housing right. The private sector isn’t going to build the millions of housing units we need in the USA. Private builders often accidentally overbuild, but they stop building once they see rents dropping. That is exactly what happened in Austin.
Thanks for the analysis. Do you not agree CEQA is a huge deal? I feel like the litigation is being abused by a bunch of anti-growth people not just the people you mention. Part of why rebuilding SF homes into MF homes is so expensive is that any construction can be held up in court for years. Subsidising homebuilders to get over the hurdle of legal costs seems very wasteful.
Wish Scott had included thoughts on owning and residing in a du/tri/quad plex unit for a childless couple or person….
Hi, Scott. I often agree with your perspectives. However, I note that your argument is not new and has been tried many times before, leading to at least 4 major real estate collapses since WWII. Every time government policy relaxes zoning or financing, or increases incentives for building more housing, we often build too many, therefore leading to builder and homeowner bankruptcies and bank failures. Your article joins the well-orchestrated symphony of voices decrying NIMBYs who want to keep their neighborhoods and communities low density. (Interesting how the left has linked arms with the Realtors and builders in this orchestra. YIMBY and other so-called affordable housing groups are financed by them). Zoning for single family homes is not new. The diversity of a metropolis, with low density, suburban, even rural communities, combined with high density, high excitement areas is the ideal combination. Dropping all zoning standards and building 5-8 story apartment buildings everywhere does not constitute diversity, but sameness, and unaffordability as new apartments are costly and drive out current lower income residents and the eventual overbuilding leading to the problems noted above. As new homes are built in new communities in what used to be the exurbs, jobs follow. This is how cities and the nation grow. This “new” press to increase densities everywhere will lead to the “old” problems of the past.
The “Build, Baby, Build” plan should have some responsible guard rails. It’s not just about building anything but building smartly. Before undeveloped land is taken, all vacant, abandoned houses/buildings should be rehabbed first. Take an old mill sitting vacant and transform it into housing for many. Find a way to provide incentives for this. Builders prefer open land first but that is wrong, it leaves abandoned, blighted properties to sit and then takes the open space we all need. Open space is essential for mental health and for physical health with walking paths, bike paths, etc. Open space improves the quality of life. Also remember, we are not the only inhabitants of this planet, respect the needs of wildlife. “Build, Baby, Build” should also include quality construction, don’t just build anything, build a high efficiency home to provide future savings with lower energy costs. It is a missed opportunity to not build high efficiency and harder to fix later. Another issue is that sadly, neighbors can be loud, rude, and choose not to or unable to (please help them) take care of their property. On the other hand, some neighbors are wonderful and lasting close friendships are developed. Unfortunately nowadays, this can be tricky and I don’t have an answer but to be courteous, kind and respectful to all and make our homes and neighborhoods a welcome retreat after a busy day.
Excellent points, especially reducing the monetary premium of real estate.
Let’s make houses a utility again!
The negative externalities of the status quo are shamefully bad.
Give the poor more money they will buy drugs
The first step in Project 2028 for the Democrats may be making sure Tim Walz knows he’s a done dullard.
When he came out swinging, trying to imply that J.D. Vance, a guy with a lovely wife and a few kids, was an incel, Walz proved himself as clueless as he is hate-filled.
He was obviously trying to play to the Democrats’ hate-filled memer demo.
Perhaps not having a hate-filled memer demo would be the next goal for Democrats’ Project 2028.
You need an executive summary. State what your belief and link to the rational in the essay.
Outstanding article! In the LA area there are other factors causing excessive housing costs. The biggest is the mission creep on building codes. Today fire sprinkler systems and solar are mandatory for new housing. Nice to have? Absolutely. But every time we add new requirements the cost goes up. You can no longer build a bare bones home in LA.
Second issue is fees. Every new home has to prepay for schools and parks and sewer and other “linkage fees”. If the is any public funding the project has to pay prevailing wages – adding 10-15% to overall cost.
Finally, building and safety inspectors are all allowed to interpret codes and these is no LA standard. So each time you get a new or temp inspector there can be rework which is usually costly.
“I would love to have denser housing next to me” said no one ever.”Especially if it’s affordable “
Seems to be missing the key point, which Scott has talked about before. Simply Income Inequality, and the huge growing gap. It’s not just housing, it’s nearly everything! Detroit used to have the highest per capita home ownership in the US! Why – simple. Good union wages working at the auto plants. Of course that was many decades ago.
We obviously need more (government) help for those with poor job and education prospects, but that help can only come from going back to tax rates common decades ago. There are obviously MANY more ways to address income inequality, primarily education. But we can’t force people to get an education.
Anyway, cutting taxes for millionaires, causing our deficit to significantly increase, then saying we need to cut Federal agencies and jobs to pay for the deficit?! And the GOP is most likely going to EXTEND those tax cuts for the millionaires.
No free lunch – damn politicians!
This
Amen
Reading the recent best seller Poverty By America I walked away with the same feeling, if we fix housing we can fix a lot of the social ills that come from the under supply of it.
Affluent areas act like the universities you criticize for failing g to expand access. And in my very progressive area of the country, staunch left wingers decry every opportunity to expand the housing stock (schools! Water! Wildlife!) out of their vanity and greed at their premium piece of inefficiently allocated land.
Spot on!
This argument aligns with your critique of how our increasingly digital lives foster greater isolation. Single-family R1 zoning increases isolation by decreasing walkability & requiring car dependence, resulting in a significant loss of freedom—especially for those who can’t drive. Kids needing rides or elderly parents imprisoned at home due to a lack of transit or anything interesting a short walk away—both personal experiences.
The way we’ve developed our cities post-war mirrors the social media experience, prioritizing convenience over real social interaction. R1 zoning confines people to isolated spaces, reducing social interaction thus weakening the social fabric.
Reform isn’t just about housing policy; it’s about development for economic resilience, social infrastructure, and holistic sustainability. Adding density increases the tax base while reducing infrastructure maintenance costs per capita. The added revenue should go to smart infrastructure investments.
The U.S. needs a shift in how we view cities and housing. Healthy urban living, with density, mobility, and well-designed spaces, should not be a luxury (downtown Manhattan) or compromise (inner city USA). It should be aspirational yet attainable for everyone, creating more opportunity, economic mobility, and human connection.
Scott, thank you for this thorough analysis. I know you love your life and you want to enjoy it as much as you can. But please. Enter California politics. There is no way old guard will fix these problems by themselves.
Look at the map in your post. Housing is expensive on the coasts (with their colossal vulnerability to climate change). It is cheap in the middle. Is there really a national housing supply/demand imbalance? Or is it really that everyone wants to live in a flood zone, fire zone, or tourist destination. Advocating for zoning reform to let anyone who wants to live in Seattle live in Seattle won’t necessarily make housing/income cheaper in Seattle. Name the cities where zoning reform led to the outcome you are advocating for. Look at all NYC public housing. It will never be sufficient to meet demand. Zoning reform is incredibly divisive; it is a wealth transfer from existing residents to people who don’t live in the community. Unless you can show how zoning reform benefits existing residents, it is inherently undemocratic to impose it on them. As in literally socialist. You hinted at a better solution–raising incomes. The best way to balance housing demand with supply is jobs. Put more jobs in the areas where there is undervalued housing. We know that works. One of the fastest-growing cities in America? Detroit.
Perry – I agree. Scott mixes his statistics between high cost, desirable coastal areas like Seattle and California with Minnesota and Texas. Not everyone can live on the coast, or wants to. There isn’t a housing shortage for the nation.
Dems should listen to Bernie Sanders. He’s never got it wrong. What he worries about should be what Democrats are addressing. The rest is window dressing.
Unfortunately I think you miss the biggest (or one of) causes is institutional investors such as blackrock and mega-investment groups that bought- or are buying MASSIVE amounts of properties. I lived in FL for the 08 financial crisis and they were buying houses cash as fast as they could acquire them. I lived/worked in the Pinellas/Hillsborough area and it was crazy.. that was 2009-2011. I live in Spain now (Costa del sol/Marbella since 2018, and the same here in Malaga area and most of Spain, for both speculative appreciation but also for air bnb. You’ve seen the protests.. the root cause isn’t so much a shortage of housing as it is speculative investors with unlimited capital.
Even at highest estimates it’s barely 2% of homes owned by institutionals … and the quality of services, amenities, and professionalism is nearly always better. You’re just a leftist nut with ideas that have ruined California, Washington, etc. because you hate young people.
If they make housing unaffordable, then, by definition, people can’t afford to live in their housing. Yet that doesn’t seem to be the case. Hmm.
I had four years to help solve the housing problem. Yet, I was not cognitively competent, and the legacy media hid my sad condition. I failed the nation in every way and the legacy media covered up my condition which is unforgivable. I’m sorry I ruined the country. JB
There were so many well before the year 2000 working hard at crippling the public wellbeing.
Suggested reading: Trilateral Commission’s report, A Crisis Of Democracy.
I am a developer and agree with the red tape in this article. Another easy change is in the fire code. Wood construction can only go to 5.5 levels. If the fire code was adjusted and modernized we can build higher with cheaper construction. Even if high-density was unlocked, the cost to build with steel and concrete is disproportionate to the rents. Wood is the key.
It’s hard to argue with a guy who makes his living as a builder that putting poor people into fire traps would be cheaper than having them live in a safe building.
We must have a Project 2028! This is brilliant and critical. Let’s. Do. This.
Sobra gente. En USA sobran 50 millones de personas.
Hmmmmm……thought I had something to say, then I read Melly’s comment….the good is the opportunity to learn here….i am not ready to be invited to the inner circle … like the blue grass players at station inn … I am the old kid watching – listening – learning – I was going to comment – then between the post and the comments I started to feel lost ….. but this is fucking important and I want to understand so I can participate – act – I comment to encourage others – to stay – listen – learn and Find a way to act….. it’s overwhelming but it is a source of hope and responsibility … to choose the right of passage . I hesitate to select submit
Love the comment about cutting taxes, but that will not happen.
This real issue is local red tape. In California there is no hope at present. If democrats truly wanted to get their act together, this would be the perfect laboratory. Unfortunately, politicians love to pass laws to protect us all from ourselves. Sadly, they will never get out of the way.
The NYT today had an article that points out that the northern 1/3 of CA and bottom 20% of OR is one of the least densely populated areas in the nation. A region the size of Great Britain with only 1.5mm people. Plenty of room there.
Once again we aren’t bringing up institutional investors and their greedy hands in the housing market. The large institutional investors accounted for 1 out 5 home sales a few years ago in CLT. But sure Scott, build an apartment complex in a suburb right next to our house with zero parking spots, causing already stressed roads more traffic. How about a homeless or section 8 housing right next to one of your many homes Scott? Life is rich, when none of these things effect you. How about addressing greed of investors first?
Love the comment about cutting taxes, but that will not happen.
This real issue is local red tape. In California there is no hope at present. If democrats truly wanted to get their act together, this would be the perfect laboratory. Unfortunately, politicians love to pass laws to protect us all from ourselves. Sadly, they will never get out of the way.
Love the Project 2028 theme! In addition to housing, I hope your next installments include big ideas for affordable healthcare and higher education. Perhaps create a new metric, e.g., percentage of middle class income spent on these three and make a campaign pledge to lower it. Make America Affordable Again for the Middle Class (but with real ideas and metrics).
“Mass deportations and tariffs, however, will likely increase the cost of both labor and materials” you’re full of democrack bullshit. And you turn off comments because you know you’re full of bullshit media lies. TRUMP WILL MAGA🇺🇲🇺🇲🇺🇲🇺🇲
There’s an Ignored Factor in Home Costs
1955
In 1955, the average size of a new single-family home in the United States was around 1,000 to 1,200 square feet.
In 1955, the average family size in the U.S. was about 3.5 to 4 people.
Simple math, square footage/family member, rounded 300 sq ft.
In 1955, the average cost of a new home in the U.S. was around $22,000. Adjusted for inflation, this price would be equivalent to roughly $230,000 to $250,000 in today’s dollars.
2025
In 2025 (most recent data given)
As of recent data, the average size of a new single-family home in the U.S. is about 2,500 to 2,600 square feet.
As of recent data, the average family size in the U.S. is approximately 3.1 people.
Simple math, square footage/family member, rounded 850 sq ft.
As of 2024, the average cost of a new home in the U.S. is around $430,000
Simple math, square footage/family member, rounded 850 sq ft.
The Question what makes housing so expensive? Could the driving force be comfort, status, or just contrived?
This is a point worth making, and this point should be part of the conversation about the problem of housing costs and solutions to that problem.
Bingo. Also, people used to go to where land is cheap. Now they want to live where land is expensive. In the past 100 years the US population has doubled. The proportion of the population living in a flood zone is up by over 60x. Living on the beach in FL is pretty nice. But it has a cost.
I like this logic, Ken!
Part of this increase to 850 sq ft is how much time we spend in our homes now. I work from home, as does my wife. My kids need space to do mountains of homework, we have a stationary bike and some space for exercise, a room to watch tv, small kitchen. What we do in our homes now, requires this increased space. How does this get accounted for in taxes (benefits and charges), considered in the crafting of home loans, etc.?
What if rather than increase minimum wage and demote everybody making a higher wage we cut taxes back to near where our founding fathers insisted they be? It’s not a wage problem. It’s a tax problem. If everything wasn’t taxed so damn much the free marked would adjust the cost of building and living way down.
Great ideas. A injection of money and deregulation of new public transit systems would help also or a restructuring of who owns the railways. Start to make it viable to live outside a city and commute 45mins by train again.
Pay them more? As a second-order effect of raising the minimum wage, I’d expect higher unemployment and higher lodging costs at the same time. The logic is same as student loans. “More money there” leads to higher prices, which is where inflation comes from.
Maybe changing tax laws to encourage house-building rather than real-estate investment would help? Dunno.
Here’s an off-the-wall thought: Maybe Trump’s tariffs will help get more jobs to Americans.
This is a good start, Prof G. Dems need to propose big, audacious ideas again. Fix these problems. Stay on message. That’s the way to help defeat the fire hose of negativity coming from the right.
“The quickest way to help poor people afford housing is simple: Pay them more. As I’ve written before, I believe the minimum wage should be $25 per hour.”
Yeah, but you also called for everyone who didn’t get the vax to be fired and make $0 per hour for the rest of their lives.
Every time I see you cosplaying as some great hero of the working class I’m going to remind everyone that Scott Galloway wanted to ruin the lives of everyone who exercised their informed consent to not be a part of your stupid medical experiment and not get the jab.
Galloway wanted everyone who didn’t get the jab to be fired and to ruin their lives.
And Galloway got what he wanted.
Lives were ruined over the vax mandate.
Some people lost their jobs over the mandate.
Some people lost their business over the mandate.
Some people lost all hope and took their own lives over the mandate.
And Galloway wished that misery upon people.
Guy with a net worth of over $100M ruining the lives of people taking public transportation and living paycheck to paycheck.
Real brave of you, Galloway.
Uh, just take the shot?
What would happen to housing prices in the US if we removed the 15 and 30 year mortgage? Would prices drop because there would be no way to support current prices? I want to know what people think?
Oh, they would DROP DROP
In San Francisco we get slammed a lot as Nimbys. But it’s not that we don’t want more housing, it’s that our building departments are rife with the most corrupt staff in the country, with the FBI making frequent arrests, including the head of our housing department, who just happened to be the former boyfriend of our last mayor. You can’t make it up. Moreover, San Francisco has plenty of examples of poor implementation of affordable and other housing in the past. Who has not been shocked by the Tenderloin when they visit San Francisco? The ugliness of Japan Town, or the Western Addition? Finally, drive through downtown at night, where in recent years dozens of residential towers have gone up that get no mention in the press. Yet, looking up these towers you will see most units are dark. Built purely for investment and unoccupied. The endless hustle by developers who appear like vultures and have hordes of useful idiots pushing for more “housing”.
I live in an area of the country where so many people from CA have migrated that someone put up a sign: “Welcome to Eastern California.” I think allowing public defection and making it a non-crime to steal and then the police not getting involved in anything but violent crime might be why so many lights are out in SF.
Liberty destroying: The problem is big government whose rules and over-regulations increase inefficiency raising costs, lowering aggregate standards of living and reducing liberty.
Rent controls distort the market by causing shortages and lowering property values. Rent controls reduce the supply of new housing by reducing the return on investment hurting the very people the policy was intended to help. Same with restrictive zoning laws- raising costs and making it difficult to impossible to profitably produce low income housing.
Minimum wage raises the income of those at the bottom at the cost of decreasing the number of jobs available- again a trade off that hurts some of those it intends to help. Higher costs are passed on in the form of higher prices hitting those at the bottom disproportionately. Negative externalities.
The answer to these issues is almost never more government. Just say no!
I’m always curious how people with your viewpoint reached the middle class. Or, was your family rich when they got to these shores? What work did your father and grandfather engage in? Did they get the GI Bill to go to school? Was their industry helped by state and federal subsidies or policies that stifled competition? Were they government workers? Postal employees? Usually I find that the boomers who are most angry about government seem to have benefited the most from government. My forebears picked cotton in Mississippi, were denied the GI Bill despite serving, and never got the benefit of the housing, land, and govt job initiatives that my white neighbors did. But now that you’re all sitting in a relatively stable condition, usually with significant help from tax payers/govt, now it’s time to shut the door. Hypocrites.
I left the middle class 40 years ago in my 20’s. Worked my way up from shoveling snow and delivering newspapers. Worked apprenticeship for lunch (below the minimum wage) to learn a skill that otherwise couldn’t be offered (the small business could not afford to pay me).
There’s no free lunch. Well intentioned policy failures only make things worse- like student loans- which enable colleges to charge more- deeply indebting those the policy intended to help.
Our government schooling produces relatively poor results while spending larger sums of money in part because of tenure and a lack of competition. Teachers serve their administrators instead of their customers- the parents and children.
Similarly, government mandates increase the cost of transportation by maintaining monopoly powers for taxi services while clamping down on cheaper options like ridesharing.
Government zoning laws and subsidization of highways reduce urban density which is necessary to make transportation options like bus lines and street cars economically viable.
Not all government is bad or unnecessary- and most of it is a bloated mess that would be better served by the private sector.
Corruption, inefficiency and waste are hallmarks of Government- the largest & worst monopoly with no competition and no market mechanism to measure success or failure. Government employees serve their administrators, not their customers- which is why government service is so often sub par.
Who are you to judge me?
Oh- and my dad worked for the city and my mom worked at the PTA. Growing up lower middle class taught me good values and how to be resourceful- it was a blessing.
Sigh. Another article on housing the fails to mention the elephant in the room – short term rentals. If you look at the rise in housing prices it tracks the rise of Airbnb. Take a couple million units off the market and turn them into short term rentals and your location too will find a housing shortage.
STRs are not the only problem, but no one can pretend they aren’t a problem. There’s a reason why major cities are limiting them and some banning them outright. They take units off the market for purchase or full time rent and turn them into unregulated hotels.
Fantastic point. In Idaho, Cities are prohibited by state law from regulating short term rentals. Guess who got that law passed? The result is that my town has become one big hotel. No more families. No more doctors. No more “locals.” All the long-term rentals that working people lived in have gone Airbnb. You want to remove national zoning restrictions? Before you do that, let localities regulate short-term rentals.
Generally correct, but the property tax comments don’t reflect reality. There is not a mass of properties sitting undeveloped that with higher property tax would quickly get developed. Zoning and infrastructure challenges are far more impactful. And low property taxes on residential developments often discourage jurisdictions from approving housing, believing the services required (police, fire, etc.) are not adequately supported by their tax base. I’ve run into this repeatedly in CA and CO (in private – officials often won’t admit it in public). Texas has high property taxes and ample building. It’s not as simple as it sounds.
My cleaning person makes $40.00/hr. She has a hard time getting other gals to work with her. Landscape people are making $75.00/cut for 1/2 acre. A seasonal yard cleanup is over $1000.00. It seems the biggest thing that we lack is a desire to work. Stop the gov’t intervention, let the market sort out the wage puzzle. People will figure out where they are most valued.
Yelp another 6 minutes waisted reading your agenda ridden comments Scott. Please go back to writing about business topics. According to the SAMHSA 68% of homelessness have substance abuse problems. So paying this group of people $25.00 an hour for what…. Drinking? Doing Drugs? Sleeping? In 2023 the Feds spent $67 billion on housing assistance. You really think $25 bucks an hour fixes the problem? Instead of demanding a $25 hourly wage which will ultimately mean fewer $25 jobs for unskilled people which will probably mean more addiction and homelessness as businesses close or automates, let’s figure out a way to end the $67 billion dollar homeless industry. We can start by encouraging 2 parent families (Yes, I am aware of your background. Your mother did a great job with what she had.) We can then stop glamorizing drugs, including alcohol. How many times do you talk about drugs including ketamine on your podcast. Is that helping the struggling males you seem to care so much about? We can then move on to incentivizing students (i.e. Guaranteed acceptance to Med school / Allied Health school) to enter the mental health world to become doctors, therapists and counselors. Finally we can spend some (most) of that $67 billion on the root of cause of homelessness which is addition. (BTW that $67 billion on mental health care is also an outrageous number.) The $25.00 per hour wage is a simpleton solution.
Few acknowledge a significant amount of the homeless in San Francisco are addicted to fentanyl. They need a significant amount of services than simply housing. Who’s going to pay for it all?
Wouldn’t raising the minimum wage also increase the price to build?
I would like to hear Scott’s response to criticism that he owns several homes in cool areas “so that his kids want to visit him”. I’m no housing expert, but doesn’t this phenomenon eat into the supply side of the equation. Not trying to shame Scott or “the rich” but as much as I’ve heard Scott rant against NIMBYs over the years, I genuinely don’t think this thought has crossed his mind
You need to do a much deeper dive, in a non-partisan way, on the CEQA laws in California. Not only do they add years to any project, but they cost millions of dollars in legal fees, which then get tacked onto any sale price or rental cost to the homeowner/tenant. Please explain to the people that CEQA is actually the developer paying for the City’s legal fees after the City has issued zoning and/or building permits to a developer. A developer spends millions of dollars acquiring land, drawing plans, submitting them to the City Planning Department, then Building and Safety then for approval to the City Council, all of which after being vetted issues a permit to the developer. Then, “interested or impacted parties” sue the City under CEQA. The Developer then has to defend the City, paying all legal fees. Who came up with this protocol? Who is benefiting from this arrangement? Follow the money. Trial lawyers own the Democrats in California. Do an article on PAGA in California as well. Ask around, there are developers in CA that have been building stuff for 30+ years that will not do any more projects due to this racket.
Someone go talk to developers and ask them what they want to develop more lots. NOTHING ELSE MATTERS, all of the above suggestions will get you 10% more houses. The other 90% will come from working with developers. Huge and I mean huge financial backstops on loans ($50M – $500M) are what it would take. Signed, a retired civil engineer.
In Fort Worth Texas the population keeps increasing but the local public schools keep getting shut down. When building the multi-family dwellings must also be aware of the effect on the local schools. Of course if you or others send your children to private schools you have already avoided that issue.
I’ve lived in CA for 50 years. The last 10+ years have been 1 party supermajority in both state houses as well as the governor. The red to blue transition to CA happened in 1992. The state used to function better and everybody knows it. The party in power has had the chance to do whatever they wanted for more than a decade and this is where we are. They had the ability to do almost anything the prior 10 years. The policies and politicians own this failure entirely.
I’m still here. State is still great.
Happy to say the Lexington, MA has joined the ranks of YIMBY towns
This is a great deep dive. Recently I heard that awhile back Canada started a project to rebuild the middle class. Since then I have been thinking about the main planks of that. Your article is one of those planks and I truly believe the democrats need to make their focus on “Rebuild the Middle Class” they should stop spending too much time on the fringes and get the middle class strong again
Housing
Trade education
Living wage rural vs metropolitan
Cost of housing
Modern housing developments
Thanks for anyone who took the time to read this
Brian
With regard to California specifically, any discussion of a sizable increasing in the housing stock must consider WATER. California’s current population is rapidly depleting the state’s groundwater supply, and the ongoing draught means that resource will not be replenished – possibly ever. At a certain point, certain regions will, or have already outstripped the available resources. We live on a planet of finite capacity to support human life. We cannot build our way past that reality.
That’s f***ing interesting, man.
+100. Southern California in particular should never have been allowed to grow to this size and only did so by stealing water from everywhere and everyone. Unless we’re going to eliminate agriculture in the state (not recommended) then we have to reduce water demand. Ultimately, it’s either lawns or more people. Choose one.
Yeah, meanwhile Phoenix is one of the fastest growing cities atm… We can fix water problem in SoCal with desalination+nuclear, maximizing reuse, storing water smarter, etc.
The only complaint/comment I have is all this housing policy discussion needed to be fine a generation ago. When systems don’t adjust people have to. There’s a 30% decline in population measured by age cohort at the end of the millennial generation. In the next 5 to 10 years boomers will die in greater numbers (poorer ones earlier than richer) and they’ve already been replaced in the labour market for the most part. If you view the marketplace to see the waves of people moving into jobs then the housing market, you can see the current scarcity is caused by younger workers replacing boomers and seeking their own housing while the boomers still live in the homes those jobs paid for. By the end of yhis decade their should be excess rental inventory and by 2035 excess owner/occupied inventory to cause prices to go down. Nothing stopped prices from exceeding income fundamentals, what stop prices from sinking below it? Once that correction happens a significant asset base for credit extension shrinks as well as the economic activity that credit fuels. Growth slows even more. And no reason to think a more balanced market occurs for twenty years. To me a better solution was to create as housing product that would get boomers to move from their housing after retirement to free up existing supply for the next generation. Without waiting for natural demographic change.
Prof,
I used to really like your commentary… turns out I still do. Keep up the good work.
A few items you did not comment on. The SF of new homes has probably gone up some 100% in the last 50 years. What was once a bedroom can now be the size of a master closet. The quality of finishes has gone way up driving up costs. The number of homebuilders that built/closed on over 10 homes a year has gone down by some 80% (?) since the GFC. The top ten builders now build over 50% of all new homes, with the top 2 building some 25% of all new homes. Local S&L’s who financed local building were wiped out in the 1980’s and local banks that loaned locally in the 2000’s were wiped out in the GFC. The GFC wiped out a lot of builders and therefore a generation of young workers found employment in other industries – hard to instantly recoup the loss of talent. A lot of the “dirty work” in home construction is/was done by immigrants. That talent pool is headed back south of the border. The number of homes “required” to bring the housing stock back up to par does not include the homes/apartments etc that are 50-80+ years old that need to be redone/torn down/replaced.
Great post Scott. There are a few items that could be added to your solutions. Out sourcing of plan checks adds years to the approval process. The private plan checkers have no incentive to get the job done. There is every incentive to cause the plans to be rejected so that the private plan checkers can collect more fees when the plans are resubmitted. Second the Government affordable housing process is slow and costly. When we built a multifamily project recently a similar project next door that was affordable and restricted to farmworkers cost twice as much. This is the result of the mandating of Union workers on the Affordable project and the complex financing, and the fact that the developer was mainly getting paid as percentage of the cost. Consequently the cost was higher so the developers fees were higher. The way that affordable projects are chosen by the states is slow and risky. It requires multiple layers of bonds and financing. Lastly, cities view housing as a loss in terms of city revenue. They get very little of the increase in property taxes. Cities much prefer retail or hotels because they get constant revenue from ongoing taxes. There is no incentive for cities to zone land for residential.
Several thoughts:
1. Housing should not be built without a holistic urban a total urban plan. There’s no point in having a cheap rental house in an area that requires car ownership and the 60-minute commute to and from work. Concentration of housing has both economic and environmental benefits.
2. Capital gains taxes should be graduated and indexed to CPI to encourage movement, especially senior citizens who cannot afford to sell and therefore “block” younger families from accessing affordable homes currently occupied by those seniors.
3. The SALT caps were a politically motivated f-you to blue states like CA and NY as well as a politically motivated gift to people like the Kushner’s whose fortune is built around renters. Repeal that.
4. Have we become too “greedy” in our housing desires? The “average” two-bedroom apartment of today is a far cry from what it was a generation ago or two generations ago. Some of that is necessity — work from home requires office space. But do we “need” a living room large enough to hold a 72 inch TV screen to watch Netflix? Do we “need” stone counter-tops? Things that are considered standard today were luxuries a generation ago.
5. Have we become to greedy/lazy with other expenses? Until fairly recently, Americans always spent more on food and beverage for in-home consumption that they did for out-of-home consumption (see NPD/National Eating Trends data).
As someone who lives in a NIMBY hotbed, your comment screams don’t change my community and lower my taxes back while you’re at it. We need a full court press to build dramatically more housing, the locals have had decades to approach this thoughtfully and instead they’ve frozen their towns in amber so that nothing changes except the price of the house they haven’t maintained since 1980 is now selling for $1M.
I’m in total agreement that there needs to be more investment in city planning and infrastructure to get people around the more dense neighborhoods. That change has to coupled with a radical shift in how it gets implemented. Namely the locals get a say in a vote at the state level but no say in the implementation. We’re either for more housing in New York State full stop or we’re not.
Scott,
Seems your weekly letters are increasingly political. I’ve always known you’re a bleeding Lib but the slant to your newsletters is approaching 90deg.
Reading these things are becoming really difficult for us Conservatives.
If you feel uncomfortable reading an idea, that means your mind is expanding. Good for you.
Everyone touts high density housing, no one talks about the stress on infrastructure. Schools, hospitals, sewers, etc. do not miraculously appear because you plant an apartment building on a lot zoned a single house.
Nope, but it scales up with population, as tax base increases.
I own 25 mobile home parks catering to families. The truth is at least 10mm migrants entered over the last 4 years. At 5 to a house, that is 2mm affordable rental housing units removed from the housing stock. Simple supply and demand economics=rents soared. The only good news for renters is with the border closed demand has fallen dramatically. And if they deport a few million people you will see affordable rental rates stabilize and maybe even fall a bit. And yes you are right about zoning. The only State in America with new mobile home parks is Texas. Everywhere else has no zoning for them or rules and density that are written to make them economically impossible.
If we only had such leadership and problem solving on the national and local level…Thanks Prof. for all you do…
Scott, at the rate we’re going, there won’t be a country in 2028
Oh please! (eye roll)
Prof you have no idea how much of a smile you put on my face when you talked about Yimbys. We need and want more mixed use, multi family, walkable development!
Slight correction: “ Such a pivot could make for strange bedfellows — zoning reform means taking on environmentalists and wealthy homeowners.” — us environmentalists are actually estatic about zoning reform. Single family housing is actually very energy inefficient (think how much energy it takes to keep 100 single family homes vs. an apartment complex of 100 units cool over the summer). Plus, walkable development means less cars and therefore less pollution. Not to mention the myriad of benefits living in a mixed use community has on one’s physical and emotional health.
Fantastic newsletter as always. I look forward to reading these every Friday.