I want to clarify one thing, because it seems to keep getting reframed.
My argument is not that supply doesn’t matter. It’s not that state reform is illegitimate. It’s not that local institutions are perfect.
The question I’m raising is structural.
Even if we successfully reform zoning everywhere.
Even if we build at historically unprecedented rates.
What happens when prices start to fall in a system built on price appreciation?
Housing is not just shelter. It is collateral. It underwrites pensions, banks, municipal finance, and household balance sheets. When prices flatten, capital pulls back. When prices decline meaningfully, political and financial pressure mounts to stabilize them.
If the system intervenes to prevent sustained price correction — as it repeatedly has — then supply alone cannot deliver durable affordability at scale.
That’s the tension.
If we want to make housing broadly affordable, we have to grapple with that political economy, not just the regulatory layer.
If we build at "historically unprecedented rates", then prices relative to income will fall. This is already happening in numerous cities (Austin, Atlanta, etc.) and the national financial system isn't breaking down. Let's not overlearn lessons from the Great Financial Crisis. Housing price declines can happen (and used to happen semi-frequently) and it doesn't mean the financial system will fail. Yes, Trump is blustering that he isn't going to let home prices fall but why should we believe that statement any more than the hundred other things he promises that are in reality outside of his control?
The GFC resulted more from a mortgage-backed security bubble than a "housing" bubble. By 2007, we hadn't overbuilt physical housing units per se, but the MBS backed by mortgages on those physical housing units did reach over inflated values due to crazy amounts of opaque leverage. In 2026, we have nowhere near the levels of leverage or price appreciation of MBS. So I see zero signs that there is a housing bubble or housing-backed asset bubble.
What is problematic is that it is too expensive to build - we can't bend the supply curve down so prices can decline even if demand is flat or at worst slowly growing. Partially this is zoning - we know increasing density brings down price per housing unit. But increasing density is vociferously resisted by neighborhood defenders at the local level.
Let's not be generals fighting the last battle - worrying about what happens to the financial system if housing prices decline. They've already been broadly flat or declining for a few years now and no signs of stress in that part of the financial system.
AI and data center-related lending on the other hand... that could be a problem...
Prices are currently falling in cities that have built a lot and in cities that haven't. The citations of Austin, Atlanta, etc... by hyper-supply advocates really undermines credibility. It sounds like propaganda (because it is). You even say this yourself --> "...if housing prices decline. They've already been broadly flat or declining for a few years now..."
I'm not worried about this. Wall Street is worried about this. I'm relating this information to people who seem oblivious to the basics of how finance works.
Why does that undermine credibility? Rents and home prices are falling faster in cities that built more than those that didn't. I don't see how that is propaganda.
Yes, when rents fall, investment will also tend to fall. That's basic supply and demand in action. The key is to shift the supply curve (i.e., lower construction prices per unit) so that developers can still make a profit even if prices are coming down (as long as prices are above the marginal cost to build, they will keep building). This is why Abundance and YIMBY types are focusing as much on reducing the cost of building housing via a reduction in unnecessary regulatory burdens.
"Rents and home prices are falling faster in cities that built more than those that didn't."
That's a new talking point I hadn't heard yet. I'm guessing there are a dozen academic studies that show this clearly and I'm an idiot if I question them.
Let me just say, with a great degree of confidence: That is not a true statement. It might be true-ish if the data is cherry-picked, but it's not true in any universal sense. And it certainly does go to the next step and demonstrate causation out of any correlation.
Look, I hate fighting over this stuff -- if you want to believe this, go ahead. It doesn't hurt me. I just recommend sticking with that last line -- you want to reduce the cost of regulation -- instead of trying to justify it with all kinds of theory that doesn't reflect what most people experience. We can even agree that regulation of housing is bad, even if we don't agree on where the right lever to pull to address that is.
There definitely is a pretty extensive literature showing that places that are building more, relative to their existing stock, see lower prices to rent or buy, and lower inflation of housing cost (whether you measure it as the asset price, or the rental price). This is often described as "the empty quadrant". You can see a brand new version of it in a recent paper from Evan Soltas and Jon Gruber.
* There are places where there is little demand pressure, like Detroit, where you don't _have_ to build much for prices to be affordable and flat.
* There are places that have demand pressure, from a growing industry or because they're just perceived as desirable (like certain tourist-y areas that some wealthy people moved to full-time when remote work became possible), but where it is possible for builders to keep up with the demand, so prices don't spiral.
* And there are places that have demand pressure, but that make it impossible to build at a pace that would keep up, and hence see rising cost of housing relative to local wages.
* But there is _no such thing_ as a place that builds a lot relative to the existing housing stock, while rapidly getting more expensive. People _believe_ there is a such thing, because of the phenomenon of "the trickle or the firehose" that Strong Towns has described so well. They see that in some limited neighborhoods, stuff seems to be going up rapidly, and mistake that for robust housing growth. Steady incremental growth _everywhere_ would, in fact, produce _many more units_ than a handful of towers downtown.
Bills like California's SB9, which allows for building up to four units on most lots that were formerly zoned for SFH only (with some exceptions -- for instance, as I recall, it doesn't apply in high fire risk zones) tell cities that they cannot _block_ this kind of incremental growth. And IMHO this is good. It's not like the state legislature is "undemocratic", it's just a different level of democracy.
I think exclusionary zoning rules suffer from the same kind of "tragedy of the commons" problem that we were seeing with environmental regulation, prior to the federal Clean Air and Clean Water Acts. A town upriver might decide that it makes economic sense for them to let the local factory dump pollution, without letting the town downriver have a say. We needed to move decisions up a level to where the community as a whole agreed that, broadly speaking, they all want clean water. (For that matter, the original "tragedy of the commons", with overgrazing, is like this -- it makes sense for each person individually to let their sheep overconsume relative to what the commons can support. If they can't find a way to coordinate, everyone suffers.)
For each town, change may seem scary, and having more people around feels like a threat. (Traffic, parking, etc.) NIMBYs often _really mean it_ when they say, "I'd like to see more housing... just not here." But if _everyone_ says "not here", then you don't get it anywhere, and you need some way to break the logjam, and insist that _some_ housing is gonna get built everywhere.
I'd also add here that many YIMBYs would say that restricting the ability of localities to impose super-restrictive zoning and permitting hurdles is a _necessary_ but not _sufficient_ measure. It's not the _only_ factor in our housing shortage. And many of us see this from a kind of libertarian perspective. After all, the most local possible control is for the property owner to be able to do what they want on their own land, as long as they're not hurting anyone. (The argument of course is over what counts as hurting anyone. Pollution that impacts people's health clearly should count. "Noise" from college students probably should not. https://www.law.georgetown.edu/environmental-law-review/blog/california-says-student-voices-arent-pollution/ )
OK, maybe we are talking past each other. I'm saying prices are falling - faster in some areas which, yes, saw more building - and the financial system is not breaking. So the system can sustain falling prices without noticeable stress.
Yeah, I'd recommend reading financial news for a couple of weeks. The financial system hasn't broken, but there are few making the case that it's not really fragile right now. Lots of fear and volatility.
I always say that the Original Sin of the modern economy is telling middle class families that buying a home is a way to "build wealth", that it's a "good investment", which can only be true if housing costs rise faster than inflation. Housing costs are the single biggest component of inflation, so that can't possibly work. You can goose the numbers for a while by depressing interest rates, but eventually those run up against the zero lower bound. At that point, housing just has to start eating an ever-larger portion of the household budget, eventually consuming more-than-all of it. As Stein's Law tells us, things that cannot go on forever... stop.
To unwind this, we will eventually need to figure out how we give people better ways to save for retirement / build wealth. I'd like to see us start by enacting Cory Booker's "Baby Bonds" proposal ( https://www.vox.com/policy-and-politics/2018/10/22/17999558/cory-booker-baby-bonds ) and then extend that by offering people the equivalent of Vanguard target date funds, in a universal retirement investment plan. Your baby bonds normally start out targeting the date you'll be 20 years old, and then as an adult, you're defaulted into having 6% of your wages go to a target-date for when you'll be 65 (with some kind of matching funds from the gov't for lower-income people, and options to opt out if you REALLY want to). Overall contributions to the system (like, how many dollars worth of which dates have been bought) determine the balance across the underlying asset classes that the system is buying, but everything is all pooled together into a Sovereign Wealth Fund, for efficiency, rather than letting Wall Street charge absurd fees. (Look up the average 401(k) plan fee, not to mention the fund fees on the actively-managed funds they steer people into. It's highway robbery.)
On the other side, you'd want to unwind a lot of the "cost disease socialism" subsidies. Most importantly the Mortgage Interest Tax Deduction. At this point only a small minority of wealthy homeowners claim it (most take the standard deduction), but it still costs tens of billions, and its existence inflates the headline price of a home (because most people are actually buying based on the monthly payment they can afford -- deductibility of interest means that buyers who _do_ deduct interest can afford a larger monthly payment). You could phase it out over thirty years, just reducing the principal that qualifies every year until it's gone.
The answer is “time”. Which is unsatisfying but really the only answer. But we have to build more supply to keep prices flat-ish while wages slowly rise, inflation grinds on. And eventually housing prices are more affordable. We will never “grapple with” housing as a mass store of wealth unfortunately. It’s too ingrained in American culture and economy.
Jeff, I invite you to look deeper into some of your words.
As you wrote, "I see the gatekeepers of that system as local institutions designed to exclude, extract, and ensure change is always an uphill battle."
Those gatekeepers are humans. They have incentives, and they have blind spots, just like us. Chuck has done plenty of work to identify them.
It is a disservice to the good work of YIMBY organizations to marginalize these people as acting irrationally. They are acting rationally according to the incentives presented to them by big system players in both the Federal government and global financial investors.
To give power to the states, who are outsiders to the housing system, so they can overrule the actions of smaller players not only does not address the incentives of the system, but also sets a very bad precedence.
Take it from someone who lives in Canada, whose cities are creatures of the province (in our vocab, province = state). You don't want your state to have such powers over localities.
My city has not had a new hospital built since 1988, despite our population doubling from 808,000 in 1988 to 1,589,000 today. Not because our city didn't want one. We had a site picked out that would serve neighbourhoods who otherwise would have to drive 20-30 minutes to the nearest hospital.
However, partly because the city did not vote for the provincial party currently in charge, and partly to save costs, the provincial government axed the hospital plans. The province operates on income taxes, so as long as it isn't tanking the economy or angering its political base outside the city, it has no incentive to build a new hospital.
What happens if your state later changes its mind and decides it will revert back to the status quo? You will give it the power to intervene in local affairs, after all, so it has the authority to do so. Think about the possible ways the state can reverse its decision. The federal government, financial investors, municipalities, banks, and constituents all want the status quo because the incentives have not been changed, and they can apply considerable pressure to the state government and reverse the progress you made. What then?
If the financial incentives of the housing system don't change, there will be a limit where state preemption can no longer hold back the political will of everyone in the housing system.
I actually worded this as "I see the gatekeepers of that system as local institutions designed to exclude, extract, and ensure change is always an uphill battle." to avoid using the term NIMBY b/c - to your point - I didn’t think it was productive to focus on individual people as the problem.
Further, I don’t see anyone acting irrationally, given the existing institutions context in which we find ourselves. I think we have a collective action problem. I think the proximal constraint exists at the local level. And I think state level legislation has to be part of the effort to unstick that local (pun intended) equilibrium.
With regards to Canada, I’m not read up on y’alls municipal/provincial dynamics, but what I think you’re describing is just something different fro how land use (and land reform) works in the states. Broad brush strokes, state level reform is not moving specific planning decisions to the state level. Instaed, it’s using the state’s authority to regulate how localities are allowed to regulate local land use decisions. So this is isn’t about asking a state capitol to make decisions approving or denying specific projects; it’s about things like not letting cities continue to ban ADUs, duplexes, lot splits, and the like.
As for the financial sector piece, I think there’s an important conversation to be had there (one that YIMBYs probably under discuss). But, it’s not clear to me what financial actor, using what mechanism will prevent housing construction. Building more affordable housing (ie on smaller lots, thereby facilitating a reduction in legally mandated per capita land consumption) does not require developers to build at a loss. (in the US, Houston’s ‘98 minimum lot size reform saw this bear out). Again, I think the way that way real estate finance works - at least in the US - could be improved in a number of ways, but I don’t think this is stands in the way of significant material progress.
Thanks for the lengthy reply, it means a lot to me!
Colour me surprised to read about how municipalities derive their power from states! While I wish your strategy well, I am still skeptical though -- after all, it was the state of California that introduced Prop 13 that created a massive disincentive to build more residential.
I agree with you that there is a collective action problem, but I would re-frame it as two problems: a municipal math problem and a culture problem.
The municipal math problem is the problem that municipalities cannot afford to maintain the built environment they own. Chuck showed how municipalities have ignored maintenance costs, and Joe Minicozzi at Urban3 showed how municipalities are not making the most out of their built environment.
The culture problem or the collective action problem, is the problem that Americans and Canadians and their institutions do not prioritize investing for the future. Over-reliance on debt, short-sighted policies that create scarcity, and an over-emphasis on efficiency and convenience has raised the entry fee to the American dream.
This re-framing is important because the more accurate the diagnosis, the more precise our solutions can be.
The state doesn't have to solve the municipal math problem. Municipalities going bankrupt don't need state authority in order to make better use of their land. Municipalities don't need state authority to overrule residents when the residents experience degrading services and roads to their biggest personal investment. It is a problem of their own making.
Likewise, accurately diagnosing the cultural or collective action problem demonstrates the problem is beyond the scale of state level politics, as they are not the lending agencies nor the main beneficiaries of bad land use. And this cultural problem, coupled with the financial structural problem, is what Chuck diagnosed, and is the basis of his disagreement with state policy solutions.
So where do we go from here?
I firmly believe in Chuck's Local Conversation strategy (full transparency: I am a Local Conversation Leader in my city), because the strategy follows the most successful strategies at changing culture: providing an easy options out of the current culture.
That's what forms the basis of Strong Towns' Housing Toolkits, which emphasize adding starter homes and starter brick and mortar businesses, and financing for such developments.
I view my personal role to play is finding a "what's in it for me" for those opposed to such changes, one which I have a few ideas to try in my own city.
There is a valid argument that this does not tackle the financial structures that create an oversized incentive for the status quo. Very true. But if the 2008 financial crisis wasn't enough to dismantle a dysfunctional financial structure, why waste precious community energy on that?
Anyways, thank you for the conversation. I hope this gives a little more insight behind the strategies.
Appreciate the response in kind! Couple add'l follow ups.
1) Prop 13 was actually a bottoms up phenomenon.
- California has something called the ballot initiative system where, at election time, qualifying issues get decided via state-wide plebiscite.
- when a prop passes, it amends the state constitution and can't be undone by the legislature. Only a ballot prop can kill another ballot prop.
- this is a holdover from an earlier period of populism where activists needed ways to pass laws outside the power of state legislatures captured by rail road lobbyists.
2) On the financial front, agree there's a problem there, too. But it sounds similar to the local land use issue. If I understand the ST story correctly, localities are rationally doing things that are long-term bad because of bad incentives set from higher up (eg funding with bad conditions attached).
Which seems to imply there's at least scope for thinking about how we change those incentives - even if there's a lot of policy education work to be done.
Maybe I'm over simplifying though? Very interested in your perspective as a LCL/Canadian.
I'd love to hear your thoughts on it, when you get the chance to read it.
Apart from that, I want to address your two discussion areas.
On Prop 13:
Sure, how it got there may be bottom up, but a state-wide policy is what Chuck and I would consider a top-down solution. Every home in California is subject to this, from San Francisco to Fresno, even when it may not make sense. My point is showing how Prop 13 is a state policy meddling in local affairs when it doesn't need to, just like how state policy to overrule city policy is not needed.
On financial front:
Please read Chuck's Housing Trap book. He outlines every single player in the ecosystem: the home buyer, the municipalities, the banks, Freddie Mac / Ginnie Mae, and the investors, and how each of them got there. Once you understand everyone who wants house prices to go up, and why, you'll see the daunting task of disconnecting each player from their incentives.
You'll also understand why, after my city improved zoning codes for better land use, we didn't "get to do the fun stuff", as Laura Foote predicted when she was on the Strong Towns podcast. We went straight into another political fight.
I want to clarify one thing, because it seems to keep getting reframed.
My argument is not that supply doesn’t matter. It’s not that state reform is illegitimate. It’s not that local institutions are perfect.
The question I’m raising is structural.
Even if we successfully reform zoning everywhere.
Even if we build at historically unprecedented rates.
What happens when prices start to fall in a system built on price appreciation?
Housing is not just shelter. It is collateral. It underwrites pensions, banks, municipal finance, and household balance sheets. When prices flatten, capital pulls back. When prices decline meaningfully, political and financial pressure mounts to stabilize them.
If the system intervenes to prevent sustained price correction — as it repeatedly has — then supply alone cannot deliver durable affordability at scale.
That’s the tension.
If we want to make housing broadly affordable, we have to grapple with that political economy, not just the regulatory layer.
If we build at "historically unprecedented rates", then prices relative to income will fall. This is already happening in numerous cities (Austin, Atlanta, etc.) and the national financial system isn't breaking down. Let's not overlearn lessons from the Great Financial Crisis. Housing price declines can happen (and used to happen semi-frequently) and it doesn't mean the financial system will fail. Yes, Trump is blustering that he isn't going to let home prices fall but why should we believe that statement any more than the hundred other things he promises that are in reality outside of his control?
The GFC resulted more from a mortgage-backed security bubble than a "housing" bubble. By 2007, we hadn't overbuilt physical housing units per se, but the MBS backed by mortgages on those physical housing units did reach over inflated values due to crazy amounts of opaque leverage. In 2026, we have nowhere near the levels of leverage or price appreciation of MBS. So I see zero signs that there is a housing bubble or housing-backed asset bubble.
What is problematic is that it is too expensive to build - we can't bend the supply curve down so prices can decline even if demand is flat or at worst slowly growing. Partially this is zoning - we know increasing density brings down price per housing unit. But increasing density is vociferously resisted by neighborhood defenders at the local level.
Let's not be generals fighting the last battle - worrying about what happens to the financial system if housing prices decline. They've already been broadly flat or declining for a few years now and no signs of stress in that part of the financial system.
AI and data center-related lending on the other hand... that could be a problem...
Prices are currently falling in cities that have built a lot and in cities that haven't. The citations of Austin, Atlanta, etc... by hyper-supply advocates really undermines credibility. It sounds like propaganda (because it is). You even say this yourself --> "...if housing prices decline. They've already been broadly flat or declining for a few years now..."
I'm not worried about this. Wall Street is worried about this. I'm relating this information to people who seem oblivious to the basics of how finance works.
Why does that undermine credibility? Rents and home prices are falling faster in cities that built more than those that didn't. I don't see how that is propaganda.
Yes, when rents fall, investment will also tend to fall. That's basic supply and demand in action. The key is to shift the supply curve (i.e., lower construction prices per unit) so that developers can still make a profit even if prices are coming down (as long as prices are above the marginal cost to build, they will keep building). This is why Abundance and YIMBY types are focusing as much on reducing the cost of building housing via a reduction in unnecessary regulatory burdens.
"Rents and home prices are falling faster in cities that built more than those that didn't."
That's a new talking point I hadn't heard yet. I'm guessing there are a dozen academic studies that show this clearly and I'm an idiot if I question them.
Let me just say, with a great degree of confidence: That is not a true statement. It might be true-ish if the data is cherry-picked, but it's not true in any universal sense. And it certainly does go to the next step and demonstrate causation out of any correlation.
Look, I hate fighting over this stuff -- if you want to believe this, go ahead. It doesn't hurt me. I just recommend sticking with that last line -- you want to reduce the cost of regulation -- instead of trying to justify it with all kinds of theory that doesn't reflect what most people experience. We can even agree that regulation of housing is bad, even if we don't agree on where the right lever to pull to address that is.
There definitely is a pretty extensive literature showing that places that are building more, relative to their existing stock, see lower prices to rent or buy, and lower inflation of housing cost (whether you measure it as the asset price, or the rental price). This is often described as "the empty quadrant". You can see a brand new version of it in a recent paper from Evan Soltas and Jon Gruber.
https://evansoltas.com/papers/Permitting_SoltasGruber2026.pdf
https://x.com/omzidar/status/2026017574438228021
A few years back Jeremiah Johnson collected a bunch of examples.
https://x.com/JeremiahDJohns/status/1811478998825992690
Basically:
* There are places where there is little demand pressure, like Detroit, where you don't _have_ to build much for prices to be affordable and flat.
* There are places that have demand pressure, from a growing industry or because they're just perceived as desirable (like certain tourist-y areas that some wealthy people moved to full-time when remote work became possible), but where it is possible for builders to keep up with the demand, so prices don't spiral.
* And there are places that have demand pressure, but that make it impossible to build at a pace that would keep up, and hence see rising cost of housing relative to local wages.
* But there is _no such thing_ as a place that builds a lot relative to the existing housing stock, while rapidly getting more expensive. People _believe_ there is a such thing, because of the phenomenon of "the trickle or the firehose" that Strong Towns has described so well. They see that in some limited neighborhoods, stuff seems to be going up rapidly, and mistake that for robust housing growth. Steady incremental growth _everywhere_ would, in fact, produce _many more units_ than a handful of towers downtown.
Bills like California's SB9, which allows for building up to four units on most lots that were formerly zoned for SFH only (with some exceptions -- for instance, as I recall, it doesn't apply in high fire risk zones) tell cities that they cannot _block_ this kind of incremental growth. And IMHO this is good. It's not like the state legislature is "undemocratic", it's just a different level of democracy.
I think exclusionary zoning rules suffer from the same kind of "tragedy of the commons" problem that we were seeing with environmental regulation, prior to the federal Clean Air and Clean Water Acts. A town upriver might decide that it makes economic sense for them to let the local factory dump pollution, without letting the town downriver have a say. We needed to move decisions up a level to where the community as a whole agreed that, broadly speaking, they all want clean water. (For that matter, the original "tragedy of the commons", with overgrazing, is like this -- it makes sense for each person individually to let their sheep overconsume relative to what the commons can support. If they can't find a way to coordinate, everyone suffers.)
For each town, change may seem scary, and having more people around feels like a threat. (Traffic, parking, etc.) NIMBYs often _really mean it_ when they say, "I'd like to see more housing... just not here." But if _everyone_ says "not here", then you don't get it anywhere, and you need some way to break the logjam, and insist that _some_ housing is gonna get built everywhere.
I'd also add here that many YIMBYs would say that restricting the ability of localities to impose super-restrictive zoning and permitting hurdles is a _necessary_ but not _sufficient_ measure. It's not the _only_ factor in our housing shortage. And many of us see this from a kind of libertarian perspective. After all, the most local possible control is for the property owner to be able to do what they want on their own land, as long as they're not hurting anyone. (The argument of course is over what counts as hurting anyone. Pollution that impacts people's health clearly should count. "Noise" from college students probably should not. https://www.law.georgetown.edu/environmental-law-review/blog/california-says-student-voices-arent-pollution/ )
OK, maybe we are talking past each other. I'm saying prices are falling - faster in some areas which, yes, saw more building - and the financial system is not breaking. So the system can sustain falling prices without noticeable stress.
Yeah, I'd recommend reading financial news for a couple of weeks. The financial system hasn't broken, but there are few making the case that it's not really fragile right now. Lots of fear and volatility.
I always say that the Original Sin of the modern economy is telling middle class families that buying a home is a way to "build wealth", that it's a "good investment", which can only be true if housing costs rise faster than inflation. Housing costs are the single biggest component of inflation, so that can't possibly work. You can goose the numbers for a while by depressing interest rates, but eventually those run up against the zero lower bound. At that point, housing just has to start eating an ever-larger portion of the household budget, eventually consuming more-than-all of it. As Stein's Law tells us, things that cannot go on forever... stop.
To unwind this, we will eventually need to figure out how we give people better ways to save for retirement / build wealth. I'd like to see us start by enacting Cory Booker's "Baby Bonds" proposal ( https://www.vox.com/policy-and-politics/2018/10/22/17999558/cory-booker-baby-bonds ) and then extend that by offering people the equivalent of Vanguard target date funds, in a universal retirement investment plan. Your baby bonds normally start out targeting the date you'll be 20 years old, and then as an adult, you're defaulted into having 6% of your wages go to a target-date for when you'll be 65 (with some kind of matching funds from the gov't for lower-income people, and options to opt out if you REALLY want to). Overall contributions to the system (like, how many dollars worth of which dates have been bought) determine the balance across the underlying asset classes that the system is buying, but everything is all pooled together into a Sovereign Wealth Fund, for efficiency, rather than letting Wall Street charge absurd fees. (Look up the average 401(k) plan fee, not to mention the fund fees on the actively-managed funds they steer people into. It's highway robbery.)
On the other side, you'd want to unwind a lot of the "cost disease socialism" subsidies. Most importantly the Mortgage Interest Tax Deduction. At this point only a small minority of wealthy homeowners claim it (most take the standard deduction), but it still costs tens of billions, and its existence inflates the headline price of a home (because most people are actually buying based on the monthly payment they can afford -- deductibility of interest means that buyers who _do_ deduct interest can afford a larger monthly payment). You could phase it out over thirty years, just reducing the principal that qualifies every year until it's gone.
The answer is “time”. Which is unsatisfying but really the only answer. But we have to build more supply to keep prices flat-ish while wages slowly rise, inflation grinds on. And eventually housing prices are more affordable. We will never “grapple with” housing as a mass store of wealth unfortunately. It’s too ingrained in American culture and economy.
Idk Chuck maybe when that happens people in their 20s and 30s will be able to buy a house. Sounds terrible doesn't it?
Jeff, I invite you to look deeper into some of your words.
As you wrote, "I see the gatekeepers of that system as local institutions designed to exclude, extract, and ensure change is always an uphill battle."
Those gatekeepers are humans. They have incentives, and they have blind spots, just like us. Chuck has done plenty of work to identify them.
It is a disservice to the good work of YIMBY organizations to marginalize these people as acting irrationally. They are acting rationally according to the incentives presented to them by big system players in both the Federal government and global financial investors.
To give power to the states, who are outsiders to the housing system, so they can overrule the actions of smaller players not only does not address the incentives of the system, but also sets a very bad precedence.
Take it from someone who lives in Canada, whose cities are creatures of the province (in our vocab, province = state). You don't want your state to have such powers over localities.
My city has not had a new hospital built since 1988, despite our population doubling from 808,000 in 1988 to 1,589,000 today. Not because our city didn't want one. We had a site picked out that would serve neighbourhoods who otherwise would have to drive 20-30 minutes to the nearest hospital.
However, partly because the city did not vote for the provincial party currently in charge, and partly to save costs, the provincial government axed the hospital plans. The province operates on income taxes, so as long as it isn't tanking the economy or angering its political base outside the city, it has no incentive to build a new hospital.
What happens if your state later changes its mind and decides it will revert back to the status quo? You will give it the power to intervene in local affairs, after all, so it has the authority to do so. Think about the possible ways the state can reverse its decision. The federal government, financial investors, municipalities, banks, and constituents all want the status quo because the incentives have not been changed, and they can apply considerable pressure to the state government and reverse the progress you made. What then?
If the financial incentives of the housing system don't change, there will be a limit where state preemption can no longer hold back the political will of everyone in the housing system.
Hey Clinton, thanks for the note.
I actually worded this as "I see the gatekeepers of that system as local institutions designed to exclude, extract, and ensure change is always an uphill battle." to avoid using the term NIMBY b/c - to your point - I didn’t think it was productive to focus on individual people as the problem.
Further, I don’t see anyone acting irrationally, given the existing institutions context in which we find ourselves. I think we have a collective action problem. I think the proximal constraint exists at the local level. And I think state level legislation has to be part of the effort to unstick that local (pun intended) equilibrium.
With regards to Canada, I’m not read up on y’alls municipal/provincial dynamics, but what I think you’re describing is just something different fro how land use (and land reform) works in the states. Broad brush strokes, state level reform is not moving specific planning decisions to the state level. Instaed, it’s using the state’s authority to regulate how localities are allowed to regulate local land use decisions. So this is isn’t about asking a state capitol to make decisions approving or denying specific projects; it’s about things like not letting cities continue to ban ADUs, duplexes, lot splits, and the like.
As for the financial sector piece, I think there’s an important conversation to be had there (one that YIMBYs probably under discuss). But, it’s not clear to me what financial actor, using what mechanism will prevent housing construction. Building more affordable housing (ie on smaller lots, thereby facilitating a reduction in legally mandated per capita land consumption) does not require developers to build at a loss. (in the US, Houston’s ‘98 minimum lot size reform saw this bear out). Again, I think the way that way real estate finance works - at least in the US - could be improved in a number of ways, but I don’t think this is stands in the way of significant material progress.
Thanks for the lengthy reply, it means a lot to me!
Colour me surprised to read about how municipalities derive their power from states! While I wish your strategy well, I am still skeptical though -- after all, it was the state of California that introduced Prop 13 that created a massive disincentive to build more residential.
I agree with you that there is a collective action problem, but I would re-frame it as two problems: a municipal math problem and a culture problem.
The municipal math problem is the problem that municipalities cannot afford to maintain the built environment they own. Chuck showed how municipalities have ignored maintenance costs, and Joe Minicozzi at Urban3 showed how municipalities are not making the most out of their built environment.
The culture problem or the collective action problem, is the problem that Americans and Canadians and their institutions do not prioritize investing for the future. Over-reliance on debt, short-sighted policies that create scarcity, and an over-emphasis on efficiency and convenience has raised the entry fee to the American dream.
This re-framing is important because the more accurate the diagnosis, the more precise our solutions can be.
The state doesn't have to solve the municipal math problem. Municipalities going bankrupt don't need state authority in order to make better use of their land. Municipalities don't need state authority to overrule residents when the residents experience degrading services and roads to their biggest personal investment. It is a problem of their own making.
Likewise, accurately diagnosing the cultural or collective action problem demonstrates the problem is beyond the scale of state level politics, as they are not the lending agencies nor the main beneficiaries of bad land use. And this cultural problem, coupled with the financial structural problem, is what Chuck diagnosed, and is the basis of his disagreement with state policy solutions.
So where do we go from here?
I firmly believe in Chuck's Local Conversation strategy (full transparency: I am a Local Conversation Leader in my city), because the strategy follows the most successful strategies at changing culture: providing an easy options out of the current culture.
That's what forms the basis of Strong Towns' Housing Toolkits, which emphasize adding starter homes and starter brick and mortar businesses, and financing for such developments.
I view my personal role to play is finding a "what's in it for me" for those opposed to such changes, one which I have a few ideas to try in my own city.
There is a valid argument that this does not tackle the financial structures that create an oversized incentive for the status quo. Very true. But if the 2008 financial crisis wasn't enough to dismantle a dysfunctional financial structure, why waste precious community energy on that?
Anyways, thank you for the conversation. I hope this gives a little more insight behind the strategies.
Hey Clinton,
Appreciate the response in kind! Couple add'l follow ups.
1) Prop 13 was actually a bottoms up phenomenon.
- California has something called the ballot initiative system where, at election time, qualifying issues get decided via state-wide plebiscite.
- when a prop passes, it amends the state constitution and can't be undone by the legislature. Only a ballot prop can kill another ballot prop.
- this is a holdover from an earlier period of populism where activists needed ways to pass laws outside the power of state legislatures captured by rail road lobbyists.
2) On the financial front, agree there's a problem there, too. But it sounds similar to the local land use issue. If I understand the ST story correctly, localities are rationally doing things that are long-term bad because of bad incentives set from higher up (eg funding with bad conditions attached).
Which seems to imply there's at least scope for thinking about how we change those incentives - even if there's a lot of policy education work to be done.
Maybe I'm over simplifying though? Very interested in your perspective as a LCL/Canadian.
Hey Jeff, always happy to continue the conversation with you.
I had so much to say about policy changes getting eaten up by the "housing as a financial investment" ecosystem that I published my first article on it here: https://clintonwong.substack.com/p/why-im-using-the-strong-towns-approach
I'd love to hear your thoughts on it, when you get the chance to read it.
Apart from that, I want to address your two discussion areas.
On Prop 13:
Sure, how it got there may be bottom up, but a state-wide policy is what Chuck and I would consider a top-down solution. Every home in California is subject to this, from San Francisco to Fresno, even when it may not make sense. My point is showing how Prop 13 is a state policy meddling in local affairs when it doesn't need to, just like how state policy to overrule city policy is not needed.
On financial front:
Please read Chuck's Housing Trap book. He outlines every single player in the ecosystem: the home buyer, the municipalities, the banks, Freddie Mac / Ginnie Mae, and the investors, and how each of them got there. Once you understand everyone who wants house prices to go up, and why, you'll see the daunting task of disconnecting each player from their incentives.
You'll also understand why, after my city improved zoning codes for better land use, we didn't "get to do the fun stuff", as Laura Foote predicted when she was on the Strong Towns podcast. We went straight into another political fight.
Hope to hear from you soon.