The Unassuming Economist

From the IMF’s latest report on Thailand:

“Credit and housing markets are also cooling down. Total credit growth—including credit from nonresidents—moderated from 5.8 percent in 2018 to 4.8 percent year-on-year in 2019:Q1, led by declines in corporate borrowing. While loans to households picked up in 2018 and remained buoyant through 2019:Q1—driven by auto loans and new mortgages housing loan demand softened following the tightening of loan-to-value (LTVs) in April 2019, and condo prices declined by 1¾ percent (y/y) also reflecting weaker foreign demand. The housing market is already going through a period of adjustment consistent with the broad-based cooling of the Thai economy.”

From LSE:

“The real estate industry is now worth $217 trillion, which is 36 times the value of all the gold in the world. What is more, it forms 60 per cent of global assets, and it is how one of the most powerful people on earth – US President Donald Trump – made his name. How, then, is the rise of the real estate industry transforming our cities and urban life? In Capital City, Samuel Stein argues that the emergence of the ‘real estate state’ has brought with it vicious gentrification, concomitant displacement of working-class people and remade our cities as temples of luxury development, rendering global cities increasingly inaccessible to all but an elite few. For Stein, ‘gentrification has become a household word and displacement an everyday fact of life’ (5).

Gentrification is, of course, a well-trodden path of academic inquiry. There is an extensive collection of books, articles and journal special editions spanning decades dedicated to the topic. Without treading on familiar ground, however, Stein approaches the issue at hand through the lens of urban planning. A central contention throughout is that, to understand gentrification, we must understand the rising political influence of real estate interests within local and national governments. Similarly, we are reminded of how these interests are actualised in a paradigm driven both by the growth imperative of capitalist development and the neoliberal state – that is, through urban planning and urban planners themselves. Early on in the book Stein, a trained planner himself, tells us that:

“This book is about planners in cities run by real estate. It describes how real estate came to rule, and what planners do under these circumstances. Planners provide a window into the practical dynamics of urban change” (6)

We can see, then, that Capital City is about understanding the dynamic that emerges between planners and real estate interests within the capitalist mode of production. It follows, therefore, that we must unpack the nature of urban planning itself. Stein’s genealogy of urban planning reveals that whilst the practice of planning is as old as human settlement, the profession of planning is a more recent phenomenon – and one with a rather oppressive history. ‘Proto-planners’, as Stein notes, advanced the ‘murderous westward expansion’ of the US (15),  and planned and facilitated slavery through plantations and the systemic racial inequalities eminent from decades of ‘redlining’.”

Continue reading here.

From a VOX post by Stefania Albanesi:

“The US economy has been hampered over the last four decades by three trends: the productivity slowdown, the Great Moderation, and jobless recoveries. Economists seeking to explain these phenomena have generally looked to the impact that technological change has on labour demand. This column proposes an alternative explanation: the rise and stabilisation of women’s participation in the workforce, one of the most notable developments in the post-war US. Excluding gender differences in aggregate models of the US economy obscures our understanding of business cycle behaviour and economic performance.

The rise in women’s market work is one of the most notable economic developments in the post-war United States. Female participation rose from 37% in 1960 to a peak of 61% in 1997, and then flattened out, as shown in Figure 1. This phenomenon contributed substantially to the rise in aggregate hours per person in the US in the 1970s and 1980s. While a large literature has studied the determinants of the rise in women’s employment, the implications of this phenomenon for the aggregate performance of the US economy have been left largely unexplored. At the same time, several key properties of US business cycles changed over this period, and economists have yet to provide a comprehensive explanation of those changes. Three particularly puzzling phenomena stand out:

• the productivity slowdown in the 1970s (Jorgenson 1988) and the decline in the cyclical correlation between aggregate per capita hours and productivity (Gali and Gambetti 2009);
• the decline in the cyclicality of output and aggregate hours starting in the early 1980s, known as the Great Moderation (Stock and Watson 2002); and
• the sluggish growth in employment in the aftermath of recessions starting in the early 1990s, often referred to as jobless recoveries (Graetz and Michaels 2017).”

Continue reading here.

From a Vox post by Andrés Rodríguez-Pose, and Michael Storper:

“A dominant view in urban economics suggests that the solution to the housing crisis of major cities is to relax zoning and other planning regulations. This column challenges this position, arguing that there is no clear and uncontroversial evidence that housing regulation is a principal source of differences in home availability or prices across cities and that these issues are more linked to rising inequalities in the geography of employment, wages and skills. Blanket changes in zoning are unlikely to increase affordability for lower-income households in prosperous regions, but would increase gentrification without appreciably decreasing income inequality.

Housing in the largest metro areas the world over has become unaffordable for much of the population. Hard working individuals living in large cities have been priced out of better-quality housing. Those wanting to move from lagging regions into dynamic urban areas in search of better opportunities are also deterred by astronomical real estate costs. Segregation of housing and income inequality are increasing, as are commuting times.

According to the dominant view in urban economics, the main culprit for this situation is restrictive zoning in large metro areas (Katz and Rosen 1987, Quigley and Raphael 2005, Ihlanfeldt 2007, Glaeser and Gottlieb 2008, Saiz 2010, Kline and Moretti 2014, Hsieh and Moretti 2015, 2017, Ganong and Shoag 2017, Gaubert 2018). The solution is simple – the massive ‘upzoning’ of urban land by reducing the decision-making power of local communities over land use, so that they can no longer prevent high-density building. By getting rid of restrictions and letting the real estate developers in, more and more affordable housing will be built in those places where people have the greatest opportunities. Prosperous metropolitan area like New York, the Bay Area, or London will become bigger, more productive, and more socially inclusive. Inter-regional mobility will pick up and, as a consequence, income inequality will decline, both within cities and across the country (Hsieh and Moretti 2015, 2017).

Supply restrictions are therefore considered to be the main obstacle to solving the problem. Zoning prevents building enough housing to keep up with demand, increasing housing prices, rewarding landowners, as a consequence enhancing inter-personal and inter-territorial income inequality, and dissuading talent from flowing into more affluent regions (Hsieh and Moretti 2017, Ganong and Shoag 2017). It is also regarded as a major source of economic inefficiency, as lack of affordable housing may prevent these cities to reach their full potential (Glaeser 2017), limiting overall national growth and hurting the most vulnerable (Hsieh and Moretti 2017).

Finding a possible solution

According to this view, the solution is simple – cut regulation in order to build more and denser housing in metro areas. The greater affordability triggered by housing deregulation in the prime areas of prosperous metro regions would trickle down to the rest of the metro area. Following this view, a fast-growing coalition of high-income millennials (‘yes in my back yard’, or YIMBYs), urban planners who want density, developers, and elected officials has thrust this view into the public debate.”

Continue reading here.

On cross-country:

• Central banks push for action on Europe’s rising house prices – Financial Times
• Hypostat 2019 – European Mortgage Federation
• Negative interest rates are inflating real estate prices. These cities are at risk of a bubble – CNN
• The global real estate rethink – Axios

On the US:

• Stranded: Inequality, House Prices leaving People Trapped – IMF
• Opinion: Rent control is better than nothing, but it can’t fix California’s housing crisis – Los Angeles Times
• How to Kill a Housing Market – Wall Street Journal
• Bernie’s National Rent Control – Wall Street Journal
• Would AOC’s National Rent Control Solve the Housing Crisis, or Make It Even Worse? – Citylab
• How Rent Control Threatens the American Dream – Foundation for Economic Education
• Poll: 59% of Americans Favor Building More Housing in Their Neighborhood – Cato
• California’s Poorest Big City Faces a Different Kind of Housing Crisis – Citylab
• Affordable Housing – Bloomberg
• Help for California’s Housing Crisis Is in the Backyard – Bloomberg
• Mortgage Finance in the Face of Rising Climate Risk – NBER, New York Times
• Think San Francisco Housing Is Expensive? It Ranks 10th Globally. – Barron’s

On other countries:

• [Canada] To Tackle Housing Affordability in Canada, Build More Houses – IMF
• [Colombia] Building Inclusive Social Housing: Lessons from Bogota – Harvard Joint Center for Housing Studies
• [Panama] Panama’s property prices are rising strongly – Global Property Guide
• [United Kingdom] Employment and the collateral channel of monetary policy – Bank of England
• [United Kingdom] Divorce: dividing up the family home – Financial Times
• [Vietnam] Positive outlook for Vietnam’s property market – Global Property Guide