5 ms·

This is good news but to sustain (or even increase) this growth, the US needs to address the housing crisis. The housing shortage is best viewed not so much as

This is good news but to sustain (or even increase) this growth, the US needs to address the housing crisis. The housing shortage is best viewed not so much as too few homes overall nationally, but too few homes in job-rich regions where people want to work and live. Hsieh and Morrietti estimated the resulting spatial misallocation of labor lowered aggregate GDP growth by 50% between 1964 and 2009: https://www.nber.org/system/files/working_papers/w21154/w21154.pdf https://www.nber.org/system/files/working_papers/w21154/w211... That is, businesses can’t find the needed local workers to expand, and workers lack access to good paying jobs. Remote work is helping, but still, the problem is estimated to have gotten much worse recently with the surge in home prices over the last 15 years. TLDR: fix the housing problem, and the economy will be able to sustain higher growth.

jeffbee 3y ago
There's been some robust discussion about the Hsieh-Moretti result recently. These tweets link to some of it: https://twitter.com/otis_reid/status/1725610847072879030 https://twitter.com/otis_reid/status/1725610847072879030
- BenFranklin100 3y ago
  Thanks, I recall there being some debate about the magnitude of the effect, but if recall correctly, some authors argued the problem was even worse than Hsieh-Moretti thought originally? Whatever the actual percentage, it makes intuitive sense a spatial misallocation of labor and capital will hurt economic growth.
  - jeffbee 3y ago
    You might be thinking of this earlier correction, which made their effect larger. https://www.econlib.org/a-correction-on-housing-regulation/ https://www.econlib.org/a-correction-on-housing-regulation/
ethbr1 3y ago
Additionally, there's the problem of home ownership trending in the direction of exacerbating income disparities, by shifting rental income and property value gains to investors instead of new homeowners.
- waveBidder 3y ago
  land value tax would solve this…
  - thinkerswell 3y ago
    Also outlawing mortgages more than 7 years, and building cheaper, smaller houses.
    - brutusborn 3y ago
      Outlawing mortgages > 7 years would be counterproductive. This would just shift home ownership to richer people and reduce demand for new housing. The market will produce houses as cheap and small as people desire, the real limitation is regulation preventing this. The libertarians and georgists are correct in this: reduce regulation and institute a land value tax and the problem will solve itself.
      - somenameforme 3y ago
        The problem with housing is that people view it as an investment. And it is, but that same mindset tends to drive people to pay as much as they can possibly afford, loans included. This drives housing prices up. Reducing the max mortgage will not reduce demand in the least, but it would reduce the maximum price people could pay. This would drive housing costs sharply downward. For this very reason, this stands exactly 0 chance of ever being passed, but it almost certainly a viable solution. It's not like people would just endlessly sit on vacant houses on a large scale.
        brutusborn 3y ago
rr808 3y ago
No its better to enable WFH so people will live where the houses are not where the offices are.
- larsiusprime 3y ago
  This will have (and already has had) the predictable effect of increasing the price of houses where everyone moves to in order to WFH.
  - cwalv 3y ago
    But even in the popular WFH spots it's less expensive than the cities
  - chii 3y ago
    which is fine, because then those who find that area too expensive will then spread out to a cheaper area. And with increased population in these "WFH" areas, other services would spring up to feed the demand of the now locals working from home there. The only real issue is the inability for small businesses to start near there for cheap, or for regulatory reasons. For example, you cannot run a corner store in residential areas.
stjohnswarts 3y ago
we are not going to sustain 5% growth. 2-3% is about as much as we'll get over the long haul
AnimalMuppet 3y ago
> That is, businesses can’t find the needed local workers to expand, and workers lack access to good paying jobs. Those are compatible problems. You need more workers to expand? Pay them. You'll get them. The jobs that can't (or won't) pay workers more will be the jobs that don't get filled. Those are the jobs that don't produce enough value to be worth paying decent money, and they are exactly the jobs we want to go unfilled.

jeffbee 3y ago

There's been some robust discussion about the Hsieh-Moretti result recently. These tweets link to some of it: https://twitter.com/otis_reid/status/1725610847072879030 https://twitter.com/otis_reid/status/1725610847072879030

BenFranklin100 3y ago
Thanks, I recall there being some debate about the magnitude of the effect, but if recall correctly, some authors argued the problem was even worse than Hsieh-Moretti thought originally? Whatever the actual percentage, it makes intuitive sense a spatial misallocation of labor and capital will hurt economic growth.
- jeffbee 3y ago
  You might be thinking of this earlier correction, which made their effect larger. https://www.econlib.org/a-correction-on-housing-regulation/ https://www.econlib.org/a-correction-on-housing-regulation/

ethbr1 3y ago

Additionally, there's the problem of home ownership trending in the direction of exacerbating income disparities, by shifting rental income and property value gains to investors instead of new homeowners.

waveBidder 3y ago
land value tax would solve this…
- thinkerswell 3y ago
  Also outlawing mortgages more than 7 years, and building cheaper, smaller houses.
  - brutusborn 3y ago
    Outlawing mortgages > 7 years would be counterproductive. This would just shift home ownership to richer people and reduce demand for new housing. The market will produce houses as cheap and small as people desire, the real limitation is regulation preventing this. The libertarians and georgists are correct in this: reduce regulation and institute a land value tax and the problem will solve itself.
    - somenameforme 3y ago
      The problem with housing is that people view it as an investment. And it is, but that same mindset tends to drive people to pay as much as they can possibly afford, loans included. This drives housing prices up. Reducing the max mortgage will not reduce demand in the least, but it would reduce the maximum price people could pay. This would drive housing costs sharply downward. For this very reason, this stands exactly 0 chance of ever being passed, but it almost certainly a viable solution. It's not like people would just endlessly sit on vacant houses on a large scale.
      - brutusborn 3y ago

rr808 3y ago

No its better to enable WFH so people will live where the houses are not where the offices are.

larsiusprime 3y ago
This will have (and already has had) the predictable effect of increasing the price of houses where everyone moves to in order to WFH.
- cwalv 3y ago
  But even in the popular WFH spots it's less expensive than the cities
- chii 3y ago
  which is fine, because then those who find that area too expensive will then spread out to a cheaper area. And with increased population in these "WFH" areas, other services would spring up to feed the demand of the now locals working from home there. The only real issue is the inability for small businesses to start near there for cheap, or for regulatory reasons. For example, you cannot run a corner store in residential areas.

stjohnswarts 3y ago

we are not going to sustain 5% growth. 2-3% is about as much as we'll get over the long haul

AnimalMuppet 3y ago

> That is, businesses can’t find the needed local workers to expand, and workers lack access to good paying jobs. Those are compatible problems. You need more workers to expand? Pay them. You'll get them. The jobs that can't (or won't) pay workers more will be the jobs that don't get filled. Those are the jobs that don't produce enough value to be worth paying decent money, and they are exactly the jobs we want to go unfilled.