The housing theory of everything - Works in Progress

🌈 Abstract

The article discusses the various problems facing the Western world, including slow growth, climate change, poor health, financial instability, economic inequality, and falling fertility rates. It argues that the root cause of these issues is a shortage of housing, particularly in high-demand urban areas, and that addressing this housing shortage could help solve many of the other problems.

🙋 Q&A

[01] The Obvious Effects of Expensive Housing

1. What are the obvious effects of expensive housing?

• People often spend a lot of their money on renting or buying their home, leaving them with less money to spend on other things, especially if they live in and around the Western world's most wealthy cities.
• The problem of expensive housing is getting worse over time.

2. How has the cost of housing compared to other household products over time?

• Almost every other household product has become better and less expensive since the 1970s, while housing has become more expensive.
• Even though incomes have risen, both parents in a family now typically have to work to afford a decent family house in a major city, and people have had to move farther and farther outside city centres to find somewhere they can afford to live, spending more time and money on commuting.

[02] Productivity

1. How does expensive housing affect productivity?

• When housing is scarce in high-productivity areas, some people are priced out of the area altogether, so they can't move within range of better jobs. This means that many people are working in less productive jobs than they could if it was easier for them to move to more productive places.
• Businesses end up leaving highly skilled staff without assistance, spending their time on work that could be done by others, lowering the time they can spend on the tasks they're best at.

2. What is the relationship between city size and productivity?

• On average, workers in larger cities tend to be more productive than workers with similar skills and education in smaller cities.
• Productivity per worker tends to rise by 2% or more with each doubling of city size, especially when the city includes skilled, educated workers.
• Regulations that limit building density in high-demand cities may be preventing these cities from growing larger and becoming more productive.

[03] Innovation

1. How does housing scarcity affect innovation?

• Nearly all innovation happens, and has always happened, in cities, as they allow innovators to collaborate and come up with new ideas.
• By limiting the number of people who can go to live in places like the Bay Area, we may not just be hurting productivity directly by restricting who people can work with, but also missing out on the new ideas that drive society forward.

[04] Inequality

1. How does housing scarcity contribute to inequality?

• A fixed supply of housing means improvements in people's aggregate incomes often partially go to landowners, as people bid up the price of housing with some of their increased income.
• This has led to an increase in the share of national income that flows to landowners rather than to labor, contributing to rising inequality.
• Housing inequality, not income inequality, primarily determines how much wealth inequality there is in most Western countries.

2. How can increasing housing supply help address inequality?

• Increasing the supply of housing and commercial space, while ensuring that it benefits existing residents, could turn the zero-sum situation of gentrification into one where everyone can be better off.
• This might be done by allowing residents to vote on increased density and benefit from it directly, so that new demand can be accommodated without displacing them.

[05] Left-Behind Areas and Regional Inequality

1. How does housing scarcity contribute to regional inequality?

• People who cannot earn top salaries are unable to move to high-income cities, leaving behind many lower-skilled workers competing for a limited supply of lower-wage jobs in their home regions.
• This has directly led to a slowdown in the rate at which poorer US states have been catching up with richer ones, as only the most skilled can afford to move to the most productive places.

2. What are the consequences of this regional inequality?

• Many Western countries have regions where the most economically productive people have moved away, leaving behind their lower-skilled peers competing for a limited supply of lower-wage jobs and driving wages down further.
• Without the mobility of people of all income and skill levels, many communities have an unhealthy mix of people all competing for the same low-paid jobs, shut out entirely from the places that could be offering them a better life.

[06] Families

1. How does expensive housing affect family formation and fertility?

• The more expensive an extra bedroom is, the more expensive it is to have more (or any) children. Expensive housing can force people to wait before having kids and move out of city cores and into cheaper suburbs when they do.
• Across the developed world, the number of children that women actually have is well below the number they say they would like to have, and rising housing costs may be causing dramatically fewer children to be born than people would like to have.

[07] Obesity

1. How does urban design and housing density affect obesity rates?

• Japanese cities, which have much denser and more walkable urban environments compared to sprawling American cities, have significantly lower obesity rates.
• The average Japanese walks thousands more steps than the average American every day, as dense, walkable cities enable more physical activity as part of daily life.

[08] Climate Change

1. How does housing density and urban design affect carbon emissions?

• Walkable, transit-rich cities with denser housing have significantly lower carbon emissions per capita compared to sprawling, car-dependent cities.
• As people flee expensive, temperate cities for more affordable but car-dependent sunbelt cities, it contributes to increased carbon emissions.
• New, well-insulated homes and apartment buildings can also help reduce energy use and emissions compared to older, less efficient housing stock.

[09] Broader Implications

1. What other potential impacts of housing scarcity are discussed?

• Housing shortages may have played a role in the 2008 financial crisis and the COVID-19 pandemic, as well as contributing to political and cultural divisions in Western countries.
• Addressing housing shortages could have widespread benefits across many aspects of society, potentially making everyone's lives much better than most realize.

2. What potential solutions are suggested?

• A "radically localized democracy" approach that allows individual streets to vote on increased density, with the benefits accruing to those who vote for it.
• The need to find a creative, "below-the-radar" solution that turns the zero-sum housing problem into a positive-sum game, rather than a politically divisive issue.