Dave's Daily Dose 10/5/2021

Housing Edition

On goes the backlog…

• RE Noah Smith on China’s real estate crisis: Anyone ever notice how the second-most common cause of bubbles and financial crises¹ is “real estate”?

  Just off the top of my head… there’s Savings & Loan (80’s), the Great Recession (‘08), China (‘21) of course, the various (real-estate-driven) railroad crises of the 1800s, and probably plenty I’m ignoring.

  It kinda seems to me like we should consider re-imagining the real estate market as one of those major macroeconomic threats that needs to be impartially regulated, like we do the money supply, rather than as merely an asset class or an affordability issue.

  Of course, that’s putting the cart way before the horse. It’s one thing to make a theoretical argument for macro regulation of real estate (which probably involves supplanting local regulation as well), but the political economy here is so far behind the 8-ball that it’s barely worth discussing as anything but a novelty theory.

• RE That whole movement having its once-every-few-years resurgence right now due to the housing debate: “Just build bike paths/lanes!”. No. Just no.

  Look, it’s meaningful in some senses. Yes, build them where they belong, where there’s momentum for them, etc. But as a macro strategy that the entire nation should embark on… just. Fucking. No. It’s the last thing anyone could accuse of being “comprehensive” or “complete”, which is what we actually do need.

  If anything, this is another great example of Advocate Brain or Activist Tunnel Vision than any viable system of thought. You can’t just take problems like “make our country more sustainable by increasing bike usage”, boil them down to some silly “chicken and egg” scenario (“people aren’t using bikes because there aren’t enough paths!”), and then convince yourself that you have to start making eggs or chickens somewhere, so you might as well start here. It just doesn’t work like that.

  The reason why, is because chickens and eggs grow within systems. You can never just start from either one and get to the other; you have to start with the system. But that’s hard, and not satisfying for most people! They want you to tell them which one to just start building: chickens, or eggs.

  For those who I’ve lost here, the problem with just building bikes or paths, is that our entire way of life is basically hostile to biking in the first place in most of the country. Most of the country, after all, lives in suburbs built on a “pod” model: houses in one pod, retail in another, and commercial in another, all separated by many miles. And within each pod, they’re lain out in winding courts and cul-de-sacs that can add several miles to each trip all on their own!

  If we replaced most roads in America with bike paths over the next year, we wouldn’t have some happy, healthy, sustainable bike-riding nation, we’d have an insurrection on our hands that made January 6 look like child’s play.

  This is why you should always be skeptical of advocates and activists. They mean well, and they tend to be very well informed, but the solutions they typically offer are critically constrained by (1) the tunnel vision of understanding a problem extremely well but at its most superficial level, and (2) the ossification of our political system at pretty much every level. Most fall into category #1, and can’t be helped. Of those who realize that #2 is quite the doozy and pretty much obstructs all but the most incremental of action, it’s only the most blindly dedicated to their cause who are willing to stay on as advocates; the rest give up, and a rare few (like myself) refocus on the hopeless quest of fixing politics.

  So, advocates are pretty much inherently self-selected for not being able to actually solve the problems they want to solve. And I’m pretty sure a cursory examination of history would show them to at most only ever amount to being useful foot soldiers whenever leaders at some higher level decide to mobilize in favor of any particular cause. There’s a reason why the absolute best ones tend to be great leaders in their own right, even when they don’t hold office - Gandhi, MLK, etc. [Ed: And why they’re so rare!]

• I’m growing more and more convinced that although housing is indeed the worst economic crisis currently facing America, density for density’s sake is not the right path. As our friend Chuck Marohn points out, good density comes from respecting the difference between streets and roads. That said, I disagree with him on one critical issue: broad upzoning is probably the best way, since it prevents the disruptive concentration of densification and allows densification to happen more organically.

  Chuck spends a lot of his time talking about subsidiarity — the idea that you have the closest level of government manage a certain aspect of life. The problem here is simply that municipalities have the single worst-broken democratic feedback loop in America. And the housing crisis is happening *now*, not a century from now when we’ve all Listened To Dave And Fixed American Government. Pre-emption protects municipal governments from themselves.

  I think the best form this plan comes in is the quota system California is considering right now: You build to the quota, however you deem fit, or you start losing control of your zoning. The major caveat is that this is still a crap-in-crap-out situation. You need state governments to make the right decisions on allocations, and you need the municipals to play along and not juice the numbers. Top-down quotas and bottom-up implementation may work… or it may result in the same problems communism and Wells Fargo have had.

• Final thought: Maybe Strong Towns is slightly wrong about the suburbs being unsustainable! Even if Chuck is right about the fundamental problem of the Suburban Growth Ponzi Scheme, it’s possible that America has simply permanently elected to stay in this new high-cost regime due to cultural reasons — we like the suburban way of life, no matter how much it costs us or how many trillions in debt we conjure out of thin air.

  This probably would have been a stronger theory before Millennials and young Xers revitalized our urban cores, but it’s also not like Millennials completely abandoned the suburbs, either.

  Let me put it this way: Even if the bill eventually comes due, what do you think is more likely? (A) That we do more or less everything Chuck says, or (B) that we panic, wave our hands around a lot, and find some new unsustainable paradigm that papers over the problem for another hundred years or so?

  My money’s on (B). That’s what humanity always does.

1. Next to monetary and speculative bubbles.