Isn't a 'quick fix', but legalizing the production of various shapes and sizes of housing would help a lot of people, especially long term.
Gasoline is like 5% per month. This is almost entirely an energy problem
Gasoline up over 50% over the year, increasing delivery costs and the price of damn near everything else.
The short term temporary solution is pressure on OPEC+ and jump-starting Shale (no small task).
The long term permanent solution is EVs and massive investment in renewable base load power generation.
Better to lean hard into electric mobility; in the short term, mandate employers allow remote work if the role supports such a config. This prioritizes oil for uses where it must be used (moving atoms versus bits), and is the only practical short term action that would be effective for managing the oil demand run rate.
We had the 70s oil embargo, we've had numerous oil price spikes since then that cause outsized diversion of productivity to acquiring energy for consumption [2], it's time to get off of oil. No more bandaids.
[1] https://en.wikipedia.org/wiki/Phase-out_of_fossil_fuel_vehic...
[2] https://www.macrotrends.net/1369/crude-oil-price-history-cha...
EVs do have a higher upfront cost, but lower total cost of ownership. Issue green bonds to subsidize the capital cost for borrowers, and increase the tax on internal combustion vehicles sales. EV supply is currently manufacturing constrained; provide incentives to rapidly scale EV and battery manufacturing.
[1] https://www.energy.gov/eere/vehicles/articles/fotw-1190-june...
For now. Because they are new. But there's every reason to believe this is temporary. Electric cars are way simpler to manufacture. Far fewer moving parts. Literally.
By 2024 every major car manufacturer will have a solid lineup of EVs and mega manufacturing capacity. EV Corollas will be the normal lowest-end car purchase by 2030, and with a tiny fraction of the operating costs.
With the price of cars going nuts, that could be good for EVs.
The price of used cars is going nuts far more than new cars, so I don't think the increase in car prices is good news for sellers of a class of new cars that is already at a premium.
Dealerships and car sales people have always been scum - but an economy like this turbocharges their virility.
I'll call BS on this. Sounds completely made up.
These popular all around great cars are getting inflated to hell
Covid was a part, but Biden put OPEC back in the driver's seat.
An article from December 2020 [1] illustrates the massive dropoff in specifically shale oil production from peak 2019.
And I'd direct you to an interactive chart that shows that in Jan 2021 (the end of Trump's term), we consumed more than we produced. But that is frankly misleading, since as you can see for yourself [2], we have been at or near energy parity for some years, and we remain so, under Biden. It is true, and to Trump's credit, that during his term, we for the first time in the 21st century became net exporters of energy products. However, that remains true today under Biden (as of Aug 2021, the latest data series).
I remain skeptical of the idea that Biden has caused overall price spikes, as opposed to world demand recovering faster than world production and delivery channels.
[0] https://wolfstreet.com/2021/08/03/us-shale-oil-drillers-batt...
[1] https://www.investing.com/analysis/the-collapse-of-us-shale-...
[2] https://www.spglobal.com/marketintelligence/en/news-insights...
19.2% according to Zillow. Sure there will be differences between metrics, but housing is clearly more than 0.5%.
We desperately need to dramatically curtail municipal planning authority and crank up construction.
> Shelter, the service the housing units provide, is the relevant consumption item for the CPI. The cost of shelter for renter- occupied housing is rent. For an owner-occupied unit, the cost of shelter is the implicit rent that owner occupants would have to pay if they were renting their homes.
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an...
That said, the difference in rents and home values is disconcerting.
Shelter isn't even 3rd place.
New vehicles are closer to 11%.
The consumer price index has all sorts of stuff built into it, like the price of televisions, which holds the number down. Sure, television prices have dropped substantially, but I’ve spent under $300 on televisions in the last decade so it doesn’t even begin to factor into what my money is worth.
Houses are the opposite, it’s such a huge expense that practically everything else is inconsequential in comparison.
That's 23% of $480,000, which is a hell of a lot more than 50% of $4 for gas or 30% of a $40,000 car. Percentages mean nothing, really.
Ah right, you made money and/or equity actually. That didn't really affect your price of housing. Your 30Y mortgage was locked in years ago, so you only benefit when prices go up.
Unless you stay in the house until you die, in which case property taxes mean you lose bigtime by appreciating values.
For a house staying in the family I'd want it to be worth as little as possible.
Also it would greatly reduce air pollution that is directly harmful to humans, since the majority of that comes from tire and brake dust. And for areas near water, greatly reduce microplastics, as tires are the greatest source of that. And on the pacific, it would allow salmon populations to increase, as a tire softener has been found to degrade into a potent neurotoxin in water that is severely limiting salmon populations.
In short: we need to remove car dependency from our land use planning ASAP. And that's not even considering the climate implications...
greatly? how much of energy usage is from work commute?
And for gasoline, trips like this are nearly all of the demand.
If only it were possible to stack dwellings on top of one another. Perhaps someone like Elon Musk will figure out a way!
The boring machine will be putting personal sleeping tubes all along the tunnels, allowing people to hop straight onto their commute. Disruption!
The specific intervention under discussion is to change the housing situation. Allow more housing to be built close to jobs. This is not set in stone, it's just the arbitrary laws that were made in the mid - to late-20th century as a way to enforce racial and economic segregation in communities.
And we don't need to ban all cars to greatly reduce their harms. Cutting VMT in half would provide great benefits, and could be done without forcing anybody to give up their car.
The number of e-bikes I see on the roads today is absolutely immense compared to pre-pandemic days, and this will hopefully continue as we make biking safer by providing more protected lanes. And as fewer people drive, biking also becomes safer. And as we have fewer long stroads because there's less demand for driving, biking also becomes safer and more attractive.
But it all starts with city planning, and allowing the people who want to live close to groceries and child care and work to live in mixed use neighborhoods. And the major blockage to that is a small law that can be flipped quickly.
The OP was specifically recommending adding such housing:
> Isn't a 'quick fix', but legalizing the production of various shapes and sizes of housing would help a lot of people, especially long term.
The reason the housing isn't there is because massive parts of our cities are zones to prohibit building dense housing, or housing+commercial together.
Those who are hardest hit by housing shortages are those with the least. And those who benefit the most are those with the most skin in the financial land-ownership game. And when those new luxury apartments are stopped, that isn't turn hurts those with the lowest incomes the most, because rather than the high incomes financing new building, those high incomes chase whatever else housing they can find, which raises prices all over, in addition to kicking out those with lower incomes in a game of musical chairs. And since in a market economy, if we only trickle out a tiny supply of new housing, that newest supply will only go to those high incomes, since newer housing is generally far more desirable than old housing that is worn down. So complaining about the high cost of new construction, without complaining about the ever rising cost of the existing housing stock, is tremendously damaging to housing affordability.
I also favor a controversial option, but I think that there should be state- or federal-level agencies that build housing countercyclicallt, to ensure that when there's a construction downturn, that labor can continue to be employed, and the workforce remains steady, competent, and capable. The boom bust cycle for construction drives up construction prices significantly by labor shortages followed by labor shrinkage, which is hell on labor's personal lives too.
Inflation doesn't work that way. Nor does "printing money"
This inflation is caused by actual short supply of goods seemingly from putting multiple chips on everything.
The inflation fear is what is driving up the bitcoin prices which in turn is driving up the chip demand. This inflation is partly a supply chain latency issue and partly hysteria driven
The supply of goods hasn't really changed much. Labour supply is lower by a couple of percent. Raw materials prices up a bit. Demand is up by something like 20-30%.
Also, it is worth noting that what you are seeing in the US is worse because there has been the highest level of growth in govt spending (over the past few years, to be clear), and the most amount of fiscal leakage. Even Canada, which really went balls to the wall, isn't seeing the same level of inflation.
A good explainer is - https://www.bridgewater.com/its-mostly-a-demand-shock-not-a-...
No, it wasn’t: https://tradingeconomics.com/united-states/government-spendi...
Trump's tax cut - 12% of GDP CARES - 12% of GDP Further stimmy (iirc, this was a bill passed in December after the election) - 5% of GDP Biden Stimmy - 10% of GDP Infrastructure Bill - 15% of GDP
This is why the CBO's projections have suddenly become very controversial. As I made clear, this is not all current spending. It is difficult to talk concisely about all the packages above because the cadence is totally different but the quantum of the effect in the medium-term is 40-50% of GDP (it is probably a bit higher tbh). This only becomes apparent over the medium-term and future % of GDP, obviously, depends quite heavily on GDP growth elsewhere in the economy. The size of the fiscal stimulus being applied however is massive (the chart you linked me shows 10ppts of growth...you realise this supports my argument? 25% growth is a lot in one year...it hasn't happened outside of wartime afaik).
The neoclassical economists have been very very very wrong about inflation.
For basics, not distinguishing between cost-push and demand-pull is a pretty basic error.
You're looking at aggregate. There are specific types of goods, the lack thereof, that's driving up the CPI. Right now I hear the car prices in US are pretty high and the production is lower because of the chip shortage.
The supply for a lot of other things is pretty elastic.
[1] https://www.semiconductors.org/chipmakers-are-ramping-up-pro...
> Why isn't this excess demand (caused by too much free money) as opposed to a "shortage"?
It might very well be excess demand. The idea is that supply should always be elastic and grow to meet the demand. In this case it didn't.
But this "excess demand" can't be attributable to lower interest rates because people, I imagine, aren't borrowing to buy these goods.
This irritates me so much. I don’t need or want computer chips in most of my appliances. Outside of what is needed for the efficient operating of an engine, I don’t want a bunch of electronics in a vehicle. If the shortage is just chips, could we go back to manufacturing goods without them? It’s what I wanted anyway.
Purely mechanical designs are more expensive and harder to make.
17% of the US spends more than 50% of their income on rent.
There is a major, major housing issue in the US and it's only getting worse.
If energy prices are up significantly, I'd expect that to have a much larger than 1% impact on prices as a whole. Much more than the impact of gasoline prices in isolation on the basket of goods.
> Prices of synthetic fertilizer, which rely on natural gas and coal as raw materials, have soared amid an energy shortage and export restrictions by Russia and China. That’s adding to challenges for agricultural supply chains at a time when global food costs are near a record high and farmers scramble for fertilizers to prevent losses to global crop yields for staples.
> The Green Markets North American Fertilizer Price Index is hovering around an all-time high at $1,072.87 per short ton, while in China, spot urea has soared more than 200% this year to a record.
> In the U.K., not only are farmers scrambling for animal compost, but many are even trying to get their hands on treated sewage sludge containing human excrement, or biosolids.
https://www.bloomberg.com/news/articles/2021-12-09/global-sh...
This is one of the reasons why we need to electrify the economy ASAP, especially long haul commercial logistics vehicles.
Unlike gasoline electricity can come from at least a dozen or more (thus, diversified) sources. This means that electricity should remain cheap, as any cost increase in terms of c/kwh only makes other sources more profitable. For example, if electricity doubled then the payoff period for solar just halved etc etc.
Liberalizing zoning and implementing LVT would help, but it would means massive structural change in our society. It's a true fix, but that true fix requires that we have important and difficult conversations about said structural changes.
This is a huge drain on the economic productivity of the younger generations, and anybody who was not able to afford to buy in to the scheme before the recent climbs.
It's time to make housing behave at most like a savings account, rather than an investment account.
> This is a huge drain on the economic productivity of the younger generations
Economists have attempted to quantify the effects of this, and the numbers are huge: https://www.aeaweb.org/articles?id=10.1257/mac.20170388
Depends on jurisdiction. Canada's housing market has most of the same problems as the US's, but you can't really lock in low interest rates for longer than five years - so if you raise interest rates, you leave people five years from now underwater and having to renew for the next two decades at high rates.
How so? The only downside (for people who already own a house) I can see of building more housing is that prices wouldn't rise as much as they historically have. AFAICT rising house prices only benefit real estate speculators, not actual homeowners who live in the house - my taxes are a percentage of the appraised value of the house, and they go up every year to the point where I'm starting to wonder if I'll be able to afford them in 10 years. I can't really "cash out" the value I have in the house either - or I could, but then I'd have to buy another house to live in at the same inflated prices.
It sounds like you're just wanting to punish people who saved their money and put it in a wise investment, when actually, that's what everyone should be doing.
My buddy's dad owns 20 properties, preventing younger generations from owning a place for themselves.
Just imagine how much value and how many jobs he could've created by investing that money into manufacturing instead of increasing rents and making younger people's lives more miserable.
Also, investors won't start exiting the market if they expect expansion in housing stock. Financial markets trend, they absorb information imperfectly, they overreact, and there is massive volatility as all this occurs. Indeed, there are some investors who base their investment strategy on the inability of markets to react to capital cycles (Marathon Asset Management have written books about this). Investors have different time scales, if the housing stock was going to expand then you would see capital pile into the sectors because people will chase that growth expecting to flip at a higher price at the top.
When you own a home, whether you've paid it off or have a mortgage, you can sell that home and convert it back into currency that you can use for other things. Even better if you can improve upon the home in ways that increase the resale value. Depending on the state of the housing market, it gives the potential to hedge inflation. Homes can be inherited and passed on to descendants. Perhaps one could hold their wealth in precious metals as an alternative, but those metals don't provide value until they are cashed out. A home, on the other hand, provides constant value because you get to live in it and do with it as you please (HOAs and other regulatory bodies notwithstanding).
When you rent a home, you are paying to pretend like you own the place. You cannot sell the home, any improvements you make to it benefits the landlord, and you cannot put your home in a will. In other words, when you hand in your rent check every month, that wealth might as well have disappeared into the ether.
It's hard to speak for other parts of the world, but my experience in California is that the concept of a "starter home" is a thing of the past. Yes, there are swaths of small homes that may become available, but one that isn't horribly dated can be hard or in disrepair to come by, and these days the price of an existing starter home is pretty outrageous. Whenever you see new construction, typically it's one of 4 things: mansions, McMansions, condos, and large-scale apartment complexes. My assumption is the reason you don't see new starter homes being built is because the only way for developers to make a meaningful profit after years of fighting for municipal approvals is to build one of those 4 types of homes I mentioned because they have the highest return upon sale.
Seriously, just take a tour of the Southern California area. You are unlikely to find new single family homes being built that aren't McMansions. Nearly all of the starter homes that would be appropriate for a young couple and a couple of small kids are occupied by retirees, are in need of renovation, and are in less favorable areas.
Maybe it's different around the rest of the country and the world, but with the way the housing market and the economy are going, as well as the direction that UN governments want to take things, I predict that will be a spreading and continuing trend.
If it wasn't so costly, time consuming, and an overall hassle to build homes of various sizes, more people might be able to maintain and build wealth even in the face of inflation. Otherwise, their currency mostly sits and rots, or gets lost in bad stock market gambles.
Hell, just try building a "tiny house" and see how that goes. Many of the people that build those have to build them on wheels for a reason, and not necessarily because they want a quirky portable home.
EDIT: Oh, and about the labor force thing... if people have the hope of being to able to own a home and build their own little fiefdom like their parents and grandparents did, they might choose to participate as opposed to being part of the mass workforce exodus we've seen recently. After all, if you have no hope of owning a home and you probably won't retire, why spend your life working hard rather than just working minimally to get by? Even I would work way harder if I didn't think that home ownership would be futile or at most a Pyrrhic victory.
I suppose if I had a larger family I would want more bedrooms. But we are done growing our family at this point - and mine is roughly the size of the median, so I don't see why we need to flood the market with homes that are too big.
If you zoned more places to be walkable and lowered rent for the kinds of places people wanted to walk to you wouldn’t have to cram people into a few desirable places.
https://www.vox.com/22524829/wall-street-housing-market-blac...
> If you zoned more places to be walkable and lowered rent for the kinds of places people wanted to walk to you wouldn’t have to cram people into a few desirable places.
Yes, we should absolutely relax zoning! But rents are set by the market, by and large. You drop them by allowing housing to be built to meet market demand.
i.e. make them an offer to buy their property which they, of their own choice, accept.
> If you zoned more places to be walkable and lowered rent for the kinds of places people wanted to walk to you wouldn’t have to cram people into a few desirable places.
I'm unclear on what your point is now. Lowering the rent means allowing supply to respond to demand (since we don't set market rent by fiat), i.e. allowing developers to make offers to buy parcels and upgrade them to higher density. Are you for this or not?
1500 sqft is 140 m^2, my first apartment was 30m^2. I can't imagine what you would put in a 3500 sqft (325 m^2) house, never mind something like answering the door if you were at the other side of your house.
But I believe that the GP's point is that "more housing" usually means "more, primarily smaller, units". And that may in fact be true. Though, if you can get a small apartment rather than live in your car, you're still moving up, even if the average square feet per unit moves down.
Very few do.
> and in any event, it should be a choice.
It is a choice, if you can afford not to. That's why the people in those environments are disproportionately both the very poor who can't afford to choose and the very rich who can afford the expense of mitigating the harms; the people who aren't super rich but can afford to choose just tend to choose not to live in dense environments.
> Very few do.
So the people living in NYC, LA, Chicago, etc are not living well? That's news. Tell me how else I'm not living.
Outside of the very core of these cities, you can live, and live well while benefitting off of all the things large urban centers provide (culturally, financially, etc).
Not the ones that aren't making significantly above national median income, no. High income work (and even more so large acal5 capital ownership) makes it possible for people to afford to mitigate the downsides of dense living, which is why the presence of high wage work and capital returns leads to more people voluntarily accepting sense living conditions.
Eliminating the choice of low-density living by reducing availability will force more people who can’t afford to mitigate the downsides of dense living into it.
(We need more dense housing in places where it will relieve the problem of people being unhoused; those people already typically experience dense conditions with added downsides; but forcing people who would otherwise choose to be housed in lense-dense conditions into dense conditions is reducing the quality of life.)
OP is asking for it to become a good choice by fixing the problems that lead it to be a poor choice right now.
The main way of mitigating it is spending lots of money to make your own living conditions not dense, despite living in an area that is otherwise dense.
That is, it is convenient to live in an area where services and amenities and the people needed to staff them are dense, so long as you personally can afford not to be packed in a tin like the rest of the sardines.
The issue at hand is that many economic centers like San Francisco are adding several times more residents than housing units. There's onerous zoning and processes by which existing residents can block new housing. There's also price controls that disincentivize housing. These factors cause a chronic undersupply of housing, making housing very expensive even though San Francisco isn't all that dense. That's why almost all the YIMBY attention is on urban areas like these experiencing housing shortages.
Why would they push for more housing in suburban and rural areas that aren't experiencing chronic housing shortages? Most rural areas have shrinking populations.
Why is proximity to amenities and jobs so important? Many people spend hours of their lives driving themselves from home to work, the grocery store, really anywhere of interest and back. Driving is such a strong requirement we rarely revoke drivers licenses, even when drivers kill others through their negligence. Driving is expensive (costs thousands per year), dangerous (drivers kill 30,000 people a year), and leads to a sedentary lifestyle that is bad for your health. The quality of life impacts are massive.
From personal experience: living and working in San Francisco I would easily hit 10,000 steps per day just going about my daily life. When visiting the car-dependent suburb I grew up in for the holidays, that dropped to almost zero. It's no wonder obesity rates, life expectancy, and therefore quality of life is lower in these areas.
Only the wealthy with the money and time to spend on exercise (in addition to the extra transportation costs) are able to mitigate these deleterious harms. Car breakdown? You are literally unable to do anything, and incur massive costs in emergency repairs in addition to possibly losing your job. The poor are more likely to defer maintenance and buy older vehicles, so they are likely to fall into a vicious cycle of payday loans due to a something like this.
Are you sure that's causation and not correlation?