Lead Story…. As regular readers know, we’ve been focusing a lot on the negative effects of heavy land use restrictions in closed access cities and featuring the excellent work that both Kevin Erdmann and Matthew Rognlie. The idea is starting to get some traction in the mainstream from a source that I would never have expected: Nobel Prize winner Paul Krugman. Anyone familiar with Krugman’s writing knows that he almost always sides in favor of regulation, not against it. Knowing that, I was quite pleasantly surprised to find this passage in his recent post on land use restrictions:
But what about all the people, surely a large majority, who are being priced out of America’s urban revival? Does it have to be that way?The answer, surely, is no, at least not to the extent we’re seeing now. Rising demand for urban living by the elite could be met largely by increasing supply. There’s still room to build, even in New York, especially upward. Yet while there is something of a building boom in the city, it’s far smaller than the soaring prices warrant, mainly because land use restrictions are in the way.
And this is part of a broader national story. As Jason Furman, the chairman of the White House Council of Economic Advisers, recently pointed out, national housing prices have risen much faster than construction costs since the 1990s, and land-use restrictions are the most likely culprit. Yes, this is an issue on which you don’t have to be a conservative to believe that we have too much regulation.
The good news is that this is an issue over which local governments have a lot of influence. New York City can’t do much if anything about soaring inequality of incomes, but it could do a lot to increase the supply of housing, and thereby ensure that the inward migration of the elite doesn’t drive out everyone else. And its current mayor understands that.
But will that understanding lead to any action? That’s a subject I’ll have to return to another day. For now, let’s just say that in this age of gentrification, housing policy has become much more important than most people realize.
This is arguably the leading liberal economist in the US calling for increased development in closed access cities as a means of reducing income inequality in a main stream publication. Stay tuned. This could get interesting.
Economy
Storm Clouds? The credit markets are softening and funding is getting tighter.
Penny Pinching: Companies are still reluctant to spend. Here’s why.
Glut: Oil inventories are spiking. Here’s how you know when it’s really time to worry about oil – when it gets low enough to start using “floating storage” or freighters to store it. See Also: If oil falls below $30 per barrel, Russia is basically screwed.
Going Up: Discretionary spending is getting squeezed as American consumers spend more on housing and health care.
Commercial
What Could Go Wrong? The new “tallest building in the world” is being built in Iraq’s oil-rich Basra Province.
Office Space: The office construction pipeline is increasing, especially in core urban markets.
Barbarians at the Gate: John Burns has a great piece on how Airbnb is preparing to take on the apartment space.
Heating Up: Competition is ramping up in the mezzanine space, leading to pricing pressure as lenders benefit from the high volume of CMBS loan maturities.
Residential
Luxury Languishing: Luxury home prices fell in the 3rd quarter for the first time since 2012 while lower tiers of the market continued to rise.
The Rent is Too Damn High: When families that make six-figure incomes qualify for subsidized housing you have a problem, and that problem is not enough units are getting built.
Eternity: Low interest rates might help keep affordability in check but they don’t do anything to help with down payments. It now takes the average American family nearly 8 years to save for a down payment of 10%. In California, that number is just under 22 years.
Profiles
Buyer Beware: Despite What you’ve probably read via email spam and internet banner ads, penny stocks are pretty much always a terrible, terrible investment.
League of their Own: The level of dominance that Amazon has achieved in the retail space is incredible.
I Totally Relate to This: How search engines make us feel smarter than we really are.
A Fungus Among Us: A banana-killing fungus that was first found in Asia in the 60’s has gone global and threatens to wipe out the world’s favorite fruit.
RV Revival: The RV business was pretty much left for dead during the Great Recession but has rebounded strongly thanks to cheap gas and low interest rates. As usual, Warren Buffet was right.
Chart of the Day
WTF
Elf on the Shelf: Here’s 20 horribly inappropriate things that you can do with that overpriced Elf on the Shelf that you bought for your kids.
Cheapskates: Athletes are going to have to pay for their own air conditioning at the Rio Olympics due to cost cutting by host country Brazil. (h/t Steve Sims)
What’s in a Name: Hipsters are now naming their kids after Instagram filters, because hipsters are lame. (h/t Casey Feldser)
Video of the Day: Watch a deer do a triple axle over a police car’s hood after getting hit and run off into the woods.
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