This time around, Matt talks to Luca Gattoni-Celli about why it’s so expensive to buy a house.
In the 80s, people from all sorts of socioeconomic backgrounds were able to afford apartments and houses in places like New York City, San Francisco, or London. Now, on the other hand, even many wealthy people are getting priced out of the city. And indeed, the issue is no longer specific to urban areas: the problem of seemingly infinitely increasing real estate prices would appear to be creeping into the rest of the US, and into many other areas that were typically regarded as affordable in the recent past.
Why is this the case? In this episode, Luca Gattoni-Celli discusses three factors that have artifically inflated housing prices far beyond the equilibrium point between supply and demand. One is zoning regulations, which impose limits on how maximum building size in a given area, how many people can live on a single property, and so forth. Another is permitting, which has the effect of introducing delays into the building process that make it financially infeasible and thus effectively block it from happening. The third is building codes, many of which were introduced for the purposes of making buildings safer to inhabit, but which have the perverse effect of preventing the construction of new buildings that would be safer than the old buildings that are currently in use.
Our guest also makes the argument that zoning regulations have a sordid racist and classist past, which you can see, to an extent, in some of the original proposals that led to some of the original policies. More broadly, the claim is that population density is the way that low-income people band together to be able to afford real estate for which there is high demand, and that a push to block density effectively amounts to a push to keep lower-income people out.
I found the discussion quite stimulating; I hope you enjoy it.
Matt Teichman
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