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unidentified
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| Joining us this morning is Salim Firth. | ||
| He's a senior research fellow at George Mason University here to talk about efforts to increase housing supply across the country. | ||
| Mr. Firth, let's just begin with the status of housing. | ||
| What does the supply and the demand look like? | ||
|
unidentified
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If you know anybody who's looking to buy a home in 2025, you know it's really tough around the country and it's not that much better if you're renting either. | |
| So what are the numbers? | ||
| Depending on where you live, it changes obviously. | ||
| But overall, how much of a shortage is there? | ||
|
unidentified
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So people will try to estimate this and they'll talk about millions of units, 4 million, 20 million, 7 million. | |
| I don't know that that's the most helpful approach to thinking about it. | ||
| A healthy housing market is one that is elastic, responsive, that as trends and demand and prices change, the market changes. | ||
| It delivers different kinds of homes in different places, depending on what's going on in the economy, depending on demographics and what people need. | ||
| And so, you know, I think the risk of trying to put a number on it is that then you think, well, if we just do that, then we can be done. | ||
| And the reality is you're never done. | ||
| Just like we need farms to keep producing food year after year, we need a housing market that will keep producing homes and evolving and changing year after year and decade after decade. | ||
| And we just have not had that really since the Great Recession in 2007. | ||
| What impact are interest rates having on supply and demand? | ||
|
unidentified
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Yeah, so interest rates have done two things. | |
| So one, they kind of directly raise the monthly cost of getting a mortgage, right? | ||
| And so that's sort of easy to understand. | ||
| The second is they lock people in, right? | ||
| So folks like me who were lucky enough to refinance when interest rates were really, really low, we're kind of in the golden handcuffs right now. | ||
| If I wanted to move to take a different job or find a different community, I would have to walk away from my really low interest rate and get a new one that's three or four times as high. | ||
| And so that would be kind of a big price jump. | ||
| Everything else, you know, being equal, I'd be paying a lot more to move. | ||
| And so that means fewer of us are putting our homes on the market. | ||
| So if you're looking to buy now, you're both faced with paying higher interest rates and just fewer homes to choose from. | ||
| There's just fewer people changing houses and kind of shuffling things around than there would be in a kind of a normal market where interest rates had kind of been flat for a long time. | ||
| How long has this lack of supply been the situation in the United States? | ||
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unidentified
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So it's been the situation in some key coastal cities for a long time. | |
| You know, Bernard Friedan wrote a book in around 1980 talking about how the San Francisco Bay Area was systematically blocking new housing and it was creating high prices and boxing people out. | ||
| And, you know, 50 years later, 45 years later, nothing has changed there. | ||
| Instead, what we've seen is the cost crisis has spread. | ||
| And it's not exactly the same in Kansas City or Buffalo as it is in California. | ||
| I don't want to say that they have exactly the same problem. | ||
| But there's some spillovers. | ||
| And particularly any place in the Western U.S. is seeing large numbers of Californians who are essentially cost refugees, either cashing out from their expensive homes or moving because they can't afford to buy that first home. | ||
| And so they're moving from California to Boise or Phoenix or Las Vegas and driving up prices there. | ||
| And so there's a number of factors also related to the pandemic, supply disruptions that sort of cost builders some time and increased homebuyers' power. | ||
| So prices have gone up in places that traditionally we don't think of as having any kind of supply constraint, but they just haven't been able to maintain the affordability that people in a place like Buffalo or Des Moines are accustomed to. | ||
| Well, what is happening in Florida then with the oversupply of housing? | ||
|
unidentified
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Yeah, so Florida, I think, was on like a one-year delay from the rest of the country. | |
| I haven't studied that in depth, but you need oversupplies, right? | ||
| So if you only have the boom and you don't have the bust, then you're on a one-way ratchet. | ||
| And that's kind of what we've seen, you know, in a place like Boston or Los Angeles, where, well, when things are booming, prices rise, and then the economy cools off, but prices don't really fall. | ||
| They just flatten out. | ||
| And that feels nice if you're a homeowner, right? | ||
| Because then you're like, well, sometimes I gain value and sometimes my home value stays the same. | ||
| But if there's no bust, if you never come back down, then prices are just going to get higher and higher. | ||
| And, you know, Florida, yeah, they've got a little bit of price decline now, but it's not like they're back down to 2019 levels. | ||
| They need even more home price decline to get anywhere close to the affordability they had just six years ago. | ||
| I want to invite our viewers to join in in the conversation. | ||
| Here is how we'll divide the lines this morning. | ||
| If you're a homeowner, call us at 202-748-8000. | ||
| If you rent, your line this morning is 202-748-8001. | ||
| All others can call at 202-748-8002. | ||
| And remember, you can text if you don't want to call at 202-748-8003. | ||
| Celine Firth, you put out a policy paper recently with the title, Pro-Housing Legislation Goes Vertical in 2025. | ||
| What did you find? | ||
|
unidentified
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Yeah, that's right. | |
| So this was work with my colleague Eli Khan. | ||
| And what we found is that state legislatures all over the country, both coasts, but also in the middle, are taking housing costs really seriously and doing far more work on housing supply than they've done in previous sessions. | ||
| So last year, 2024, was the busiest legislative session on housing that anyone can remember. | ||
| And this year doubled that. | ||
| This year tripled 2023. | ||
| And most state legislatures do most of their work in the first half of the year. | ||
| And we're seeing, I think we counted 123, 125 bills in the last 12 months that have passed state legislatures. | ||
| And those range from tweaking the process to make it quicker to approve housing to legalizing housing in commercial zones to expanding homeowners' rights to build an accessory dwelling unit, like a backyard cottage or a basement apartment in land they already own. | ||
| And so legislators, both parties, North and South, are trying everything and they're working with people like me and Eli and people at research centers around the country to say, hey, what really works? | ||
| We don't want to make things worse and we want to understand how this problem works, how the market works. | ||
| And I'm incredibly impressed, actually, with our state senators and representatives around the country in an era of pretty sharp polarization. | ||
| And you see some really nasty fights in a number of these state legislatures. | ||
| And these folks are able to set those aside. | ||
| Sometimes in the same legislatures where there's name-calling and viciousness, when it comes to housing, they have been able to, in most cases, set aside those differences and say, all right, well, we don't agree on a lot, but we do agree that people in our state need a place to live and we're going to take the research seriously and try to find solutions. | ||
| Before we get to calls, what's happening at the federal level? | ||
| Last week here on the Washington Journal, we read about a proposal by Tim Scott and Elizabeth Warren, you know, Republican and Democrat, not exactly two people that see eye to eye, working on housing legislation to address the supply issue. | ||
|
unidentified
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Yes, I think that was really impressive. | |
| There's been a number of calls to do something huge and muscular at the federal level. | ||
| I think that's wrong. | ||
| I don't think the federal government has the knowledge or the capacity to do something that's big, powerful, and large. | ||
| So the Warren-Scott bill, I think, does what's right, which is it pulls together like 25 different small board proposals because there's many little federal touch points in the housing market and trying to address each of those and creating a few new touch points in ways that try to tilt things towards encouraging localities to do more to expand the right to build housing, trying to make it easier to access housing. | ||
| And that's, so I think that's the right approach from the federal level to say, this is a big problem, but we can't trust ourselves, the federal government yet, to come wading into this as an outsider and fix everything. | ||
| Instead, we need to listen to the locals, listen to the states, and give them the tools they need and the encouragement to do the real work. | ||
| Because I think the real work is happening in places like Olympia, Washington, and Augusta, Maine. | ||
| All right. | ||
| Salim Firth is our guest here this morning. | ||
| He's with George Mason University, here to talk about the increase in housing supply. | ||
| Richard, in Minneapolis, your homeowner, up first. | ||
| Good morning. | ||
|
unidentified
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Yes, good morning. | |
| I don't know if that means homeowner or apartment owner. | ||
| I own a couple of duplexes. | ||
|
unidentified
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And, you know, the biggest problem I see here in Minneapolis is the far, far left city council. | |
| They want to provide money for everything. | ||
| Money seems they, you ask them how much is this going to cost? | ||
| And they look at you like they lost their way in the woods or something. | ||
| But they're piling on property taxes at 8% a year, 9% a year, 6% a year, 7% a year. | ||
| It's a great big cost to rent increase. | ||
| And I belong to the Minnesota Multi-Housing Association. | ||
| And the experts there say the biggest and biggest way to lower the price of rental is to build more houses. | ||
| And with this far left city councils around here and the whole state of Minnesota, they're putting on so many regulations. | ||
| It's possible to build houses and do it in a way that's economic. | ||
| Thank you. | ||
| All right. | ||
| All right, Richard. | ||
| Mr. Firth. | ||
|
unidentified
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Yeah, one of the great things about the Twin Cities area is that you have the ability to learn from each other. | |
| And St. Paul, actually, across the way, made a huge mistake of enacting rent control two or three years ago. | ||
| And that completely shut down their multifamily market. | ||
| Basically, no investor would go anywhere near St. Paul. | ||
| And Minneapolis's council had, the voters had given it permission to enact rent control, but they said, hey, let's just wait a few months and see how this thing plays out in St. Paul. | ||
| And when they saw how badly things went in St. Paul, the Minneapolis Council, as far left as they are, decided, you know, we do want to keep building apartment buildings and we don't want to completely shut out the market like St. Paul did. | ||
| So, you know, there's been housing policy has been tricky in Minnesota. | ||
| I've actually been very close to it, written papers about the housing market there. | ||
| But at least Minneapolis kind of saw what was going on. | ||
| And St. Paul, to its credit, has tried to kind of worm its way backwards and create more and more exceptions to create some daylight where people can make money building and renting out housing. | ||
| Because ultimately, rents will fall in a relative to incomes. | ||
| Rents will fall over time in an unrestricted market. | ||
| On average, the rent in any given building tends to go down or to rise less than inflation while people's wages and taxes on average rise with the rate of inflation. | ||
| Once you put in place rent control, you say, well, it's going to rise at the rate of inflation. | ||
| Well, that's higher than it was rising before. | ||
| And, you know, we're seeing this now actually in my home county in Montgomery County, Maryland, enacted rent control, and it has now for 18 months shut down multifamily construction, which had been going along at a brisk clip and continues to move along at a brisk clip in neighboring jurisdictions. | ||
| And this is another place where same unit rents tend to fall or to at least rise less than inflation. | ||
| And now with the new rent control, they can rise at the rate of inflation. | ||
| And so rent control is actually probably going to raise people's rents in Montgomery County relative to what it was doing before. | ||
| And that's a tragedy. | ||
| You can go much too far in the, well, we're going to try to micromanage this market instead of removing the strict regulations. | ||
| Our collar city owns two duplexes. | ||
| One of the great things that Minneapolis did was to allow duplexes again in most of the city, which is something they had built in the past and then basically criminalized. | ||
| And they said, you know, actually, duplexes aren't so bad. | ||
| And they're really great for small investors like our caller. | ||
| And they're really great for having a place that you can rent or sometimes buy that's not as expensive as a single family home, but has a lot more of that kind of connection to the neighborhood and freedom to move around than simply having an apartment in a large building. | ||
| If rents rise with rent control policies, then why would investors leave if they're going to make more, you said? | ||
| You argued that they will make more without the rent control. | ||
|
unidentified
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The people who own existing buildings will make more. | |
| People who build new buildings say, well, we don't even want to move in there. | ||
| And so they don't make anything. | ||
| They just walk away. | ||
| And so then it's the existing folks who already own a building. | ||
| So the key, right, on housing supply, the key is to say, we need competition, right? | ||
| If you have only one grocery store in your town, they can raise the prices really high. | ||
| Once you've got three grocery stores, they have to compete with each other because if one is too expensive, you'll just go to the other one. | ||
| And it works the same with housing in a place like you mentioned, Florida, but it's also true in Denver. | ||
| They built a lot of apartment buildings when rents were high, and now rents are coming down because tenants can shop around. | ||
| I was walking around the Orange Line corridor two days ago in Arlington, Virginia, and every big building has a sign out sign up with a QR code you can scan saying, please rent here. | ||
| It's great for renters when there's new housing supply, high-quality apartments that compete with each other and compete with the existing stock. | ||
| If you're stuck with a static stock of buildings, then time takes its toll. | ||
| Housing gets worse as it gets older. | ||
| And if there's no competition, there isn't that downward pressure on prices as a new unit comes on. | ||
| It says, hey, we'll charge you the same for a better unit. | ||
| All right. | ||
| Let's go to Wisconsin. | ||
| Mike, who rents there? | ||
| Good morning to you. | ||
|
unidentified
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Well, I'm 68. | |
| I live 38 miles north of Madison. | ||
| They just built a 16-unit apartment right next to me, 50 yards away. | ||
| They're in the process of renting it right now, and they're asking $1,500 to $1,800 a month for a two-bedroom. | ||
|
unidentified
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I'm trying to relocate to a more quieter area. | |
| I live north of Madison, 40 miles north, and I can't find a place to rent, to move to, because everything is taken up. | ||
| I'm on a list everywhere I go. | ||
| And pretty much in Columbia County, north of Madison, about 40 miles, everything is going for anywhere from $1,300 to $1,800 a month plus utilities for a two-bedroom. | ||
| When I was in 2000, I rented a beautiful apartment. | ||
| Back in the 70s, you could get a two-bedroom for $250 a month. | ||
| Back in the 90s, it was $275, $300. | ||
| Back in the 2000s, it was $500 a month. | ||
| Now it's just tripled. | ||
| Let's take your point, Mike. | ||
| Mr. Firth. | ||
|
unidentified
|
Yeah, inflation is real, right? | |
| Everything is more expensive. | ||
| The good thing is that our wages rise with inflation too. | ||
| So there's some balance there. | ||
| Rural places, and I've actually talked with professionals who work in rural Wisconsin. | ||
| One of the biggest problems that they have is the lack of people entering the trades. | ||
| So if you're in a smaller town or a rural county, you know, there might be just one or two plumbers or electricians who consider that their territory. | ||
| And if you want to get somebody to come out from Madison or Milwaukee, you might have to pay them extra for the drive time. | ||
| And a lot of those folks are actually the same age as our caller, and they're retiring. | ||
| And there's no one coming up behind them. | ||
| There's a dry pipeline of apprenticeships. | ||
| And that's going to be a challenge in rural areas to say, we want to continue to have high quality, different types of housing. | ||
| It's great that there's 15 or 16 new apartments right where the caller lives. | ||
| And that will create options. | ||
| And at least he's got that option. | ||
| Maybe it's not exactly what he wants. | ||
| But it's a lot better than having no options and just having housing get older. | ||
| But we need to really affirm, I hear this actually from educators, young people who could go into the trades and earn good money, six-figure salaries, doing skilled, interesting work, problem-solving and creative work, building things. | ||
| They're kind of told that that's lower class work, that they should, you know, wear a white collar like mine and sit at a desk. | ||
| And that's, you know, it's fine. | ||
| I like my job, but like that's not for everyone. | ||
| And you can make a good living and help your neighbors. | ||
| And we should really affirm when a young person says, Hey, I'm joining the electricians union as an apprentice and I'm going to be able to make six figures in five years and have my own business in 10 years. | ||
| And that's that's a fantastic path that young Americans could take. | ||
| And we who are older, we should affirm that and not kind of look down on them if they don't have a college degree. | ||
| All right, we'll go to Cliff, Tulsa, Oklahoma. | ||
| I'm a 50-year builder, construction plumber. | ||
| We used to build apartments for $25,000 a unit back in the 70s, and I think they're probably $200,000 a unit. | ||
| The thing I've seen in the market is the short-term rental market really exploded during the pandemic. | ||
| Investors went all over the United States and bought up everything they could to get into the Airbnb Verbo. | ||
| You know, in Tulsa, we're having a problem with investors buying all the houses around all the hospitals for furnished finders, nurse traveling nurses. | ||
| The problem is, we do some, you know, we do a lot of weekly rentals, but we can do short-term rentals and make the same amount of money in the house they used maybe a third or 50% of the time. | ||
| And this is being repeated all over the country right now as well. |