#1283 Kevin Erdmann | National Emergency for Affordable Housing Is Here
Dec 13, 2023
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Kevin Erdmann, analyst focusing on the US housing market, discusses solutions and the federal reserve's impact on housing affordability. They also cover topics like lack of housing supply, institutional ownership of single family homes, challenges of municipal planning, and where to find the guest's books.
Underbuilding in close access cities has led to cyclical migration patterns and a housing affordability crisis.
The focus should be on making the housing market more flexible and removing barriers to construction to meet the demand for affordable housing.
Deep dives
Understanding the US Housing Market
Kevin Erdemann, an analyst specializing in the US housing market, breaks down a new framework for understanding the housing bubble, financial crisis, and costly housing markets. He emphasizes that the primary reason housing is unaffordable in America is due to a lack of supply caused by not building enough houses for 30 years straight. This supply-demand imbalance has led to high rents, which in turn drive up housing prices. Erdemann's research focuses on the concept of closed access cities, where fewer homes are permitted to be built compared to other major metropolitan areas. This limited supply leads to cyclical migration patterns as residents move to areas with more housing options. He also highlights how zoning rules and regulations have hindered the development of cities and made it difficult to address the housing shortage.
The Impact of Underbuilding and Regulatory Obstacles
Underbuilding, particularly in close access cities like New York City, San Francisco, and Los Angeles, has created a refugee phenomenon where residents are forced to move to other cities due to a lack of available housing. This underbuilding, amplified by regulatory obstacles and zoning rules, has contributed to the housing affordability crisis. Erdemann argues that the focus should be on making the housing market more flexible and removing barriers to construction in order to meet the demand for affordable housing. He acknowledges the challenges associated with municipal planning and highlights the need for a market-driven approach that allows for a variety of housing options to meet different needs.
The Role of Institutional Ownership and Substitutions in the Housing Market
Erdemann addresses concerns about institutional ownership of single-family homes, stating that while it has its pros and cons compared to small-scale landlords, it is not the root cause of the affordability problem. Instead, he emphasizes that the inability of low-income families to access mortgages is the main issue. He criticizes policy decisions that have locked out potential homeowners and created a shift towards institutional buyers. While institutional ownership can provide stability and quality management, it is important to recognize that the problem lies in the exclusion of owner-occupiers from the market, rather than institutional ownership itself.
The Way Forward: Making the Market Work
To address housing affordability, Erdemann stresses the importance of making the market work by removing regulatory obstacles and allowing for more housing construction. While careful planning is ideal, he highlights the challenges of implementing effective planning across fragmented municipalities. He believes that some form of market-driven approach, even if it is not perfect, is better than the current situation. Erdemann asserts that cities need to embrace change and overcome the discomfort associated with fluctuations in development. By enabling the construction of a variety of housing types, from single-family homes to duplexes and high-rises, cities can provide options and meet the housing needs for different socioeconomic groups.
Kevin Erdmann is one of the most interesting analysts when it comes to the US housing market. He writes on Substack at kevinerdmann.substack.com. He also has 2 books, called “Shut Out” and “Building from the Ground Up: Reclaiming the American Housing Boom.” In this conversation, we go through ideas on how to make housing more affordable, how we get here, Federal Reserve, who is responsible, and solutions.
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