The Unassuming Economist

On cross-country:

• Hostility towards private equity’s push into property is misguided. Big investors are filling a gap in the market – The Economist

On the US:   

• How Jerome Powell as Fed Chair Will Affect Crypto, Hot Housing and Inflation. Wall Street loves Powell for helping lift the stock market up from its pandemic lows. But will he continue to keep rates low and credit cheap? – Bloomberg
• Mortgage Bills Are Coming Again. $10 Billion in Aid May Arrive First. The federal Homeowner Assistance Fund aims to help those still struggling as forbearance periods come to an end. But the assistance isn’t limited to mortgage payments. – New York Times
• A record number of US homes are being built just for renters – Quartz
• Some Eviction Economics – Conversable Economist
• Home Prices Are Surging. The Manufactured-Housing Industry Sees an Opening. Some lenders and advocates think factory-built homes are a solution to the U.S. housing crunch – Wall Street Journal
• The Housing Proposal That’s Quietly Tearing Apart Atlanta. Secession efforts by Buckhead residents are gaining momentum as the city proposes zoning changes to create more apartments and affordable housing. – Bloomberg
• New York Targets Affluent Neighborhoods in Push for Affordable Housing. Supporters say the plans help address New York’s housing crisis and help integrate the city’s neighborhoods. Opponents see more gentrification and giveaways for developers. – New York Times
• Housing Is Cruising For A Bust, But Not Just Yet – Forbes  
• The destabilizing cost of a pandemic: What COVID-19 meant for renters already getting assistance – Brookings
• Mortgage Burnout Looms for Lenders. Mortgage originators are likely to feel a hangover from the pandemic boom, so they need some new tricks – Wall Street Journal
• Five things to know about rising house prices. Benjamin Keys, a professor of real estate and finance at the Wharton School, gives his five main takeaways from the recent increase in house prices. – Penn Today

On China

• China eases pressure on property sector but reform remains priority. Beijing’s policy loosening to prevent collapse of industry does not represent a retreat, analysts say – FT
• China’s Economy Czar Liu He Calls For Stable Housing Market – Bloomberg
• Will China’s property tax rob from the rich and give to the poor, aiding common prosperity drive? China’s property tax plan is part of Xi Jinping’s so-called common prosperity campaign to redistribute wealth and to address widening social inequality. The plan will not be implemented straight away, with a five year pilot programme set to test the proposal before it is eventually rolled out across the country – South China Morning Post

On other countries:  

• [Albania] A Denser City, But at What Cost? Albania’s capital is getting a makeover intended to stop urban sprawl. But critics say the plan could leave Tirana changed beyond recognition, and erase its history. – Bloomberg
• [Australia] ‘Twilight’ for Australia’s housing boom as prices to fall 10% in 2023, CBA says. Commonwealth Bank expects a peak in 2022 and then a drop the following year as borrowing costs rise – The Guardian
• [Australia] Who is responsible for housing affordability? – ABC
• [Austria] Austrian central bank sees growing risks from mortgages amid property boom – Reuters
• [Canada] Financial stability through the pandemic and beyond – Bank of Canada
• [Colombia] Striking a Balance. Toward a Comprehensive Housing Policy for a Post-COVID Colombia – World Bank
• [Hong Kong] Hong Kong conundrum: sky-high prices and flats the size of parking spaces. Ranked the world’s least affordable housing market, the cramped city suffers from a lack of supply – FT
• [New Zealand] New Zealand raises rates to 0.75% as house prices surge. Rates will have to rise above their neutral level to cool the economy, says central bank – FT
• [New Zealand] RBNZ outlines new home loan restrictions – Financial Review
• [Nigeria] Empty houses litter Nigeria’s cities despite housing crisis – Reuters
• [United Kingdom] Nationwide’s profits almost triple as mortgage borrowing stays high. UK building society reports strong demand despite expected BoE interest rate rises – FT
• [United Kingdom] Revealed: first-time homes have grown less affordable under the Tories. Guardian analysis shows situation has worsened in most of England and Wales since 2015 – The Guardian

“The COVID-19 is the fourth crisis to have hit the Middle East and North Africa (MENA) region in the decade following the Arab uprisings, the 2014-16 oil price declines, and the 2019 resurgence of protests.  It differs from the other crises because of its broad impacts and its distributional consequences. But even before COVID-19 arrived in March 2020, MENA had been facing a number of serious economic challenges — high rates of unemployment, high levels of informality, low annual economic growth, low female labor force participation, an unconducive business environment, a lack of quality jobs, food insecurity, and fragility and conflict (with large numbers of refugees).”

A recent report by the World Bank Group titled, Distributional Impacts of COVID-19 in the Middle East and North Africa Region (2021), attempts to find answers to pertinent questions regarding this, such as what are the welfare of individuals and households in MENA, and what are the key issues that policymakers should focus on to enable a quick and sustained economic convalescence? 

“The report’s findings suggest a substantial rise in poverty, greater inequality, the emergence of a group of “new poor” (those who were not poor in the first quarter of 2020 but have become poor since), and changes in the labor market (notably how hard people work and how many people work). Top policy options center on stepping up vaccination programs, resuscitating economic activity, rethinking the approach to the informal sector, boosting resilience to future shocks, and improving data quality and transparency.” 

Click here to read the full report.

Excerpts from Professor Dani Rodrik’s working paper, A Primer on Trade and Inequality (2021), for the National Bureau of Economic Research:

“In the public imagination globalization’s adverse effects have loomed large, contributing significantly to the backlash against the political mainstream and the rise of far-right populism. The literature on trade and inequality is in fact exceptionally rich, with important theoretical insights as well as extensive empirical findings that sheds light on this recent experience. Some of the key results of this literature, discussed here, are as follows: Redistribution is the flip side of the gains from trade, and it becomes larger relative to net gains from trade in the advanced stages of globalization. Compensation is difficult for both economic and political reasons. International trade often differs from other market exchanges, raising fairness concerns in ways that domestic markets do not. The economic benefits of deep integration are generally ambiguous. Dynamic or growth gains from trade are uncertain.”

Moreover, on the role of financial globalization and capital mobility the paper takes the following stand. “Researchers at the IMF have found that greater capital mobility produces strong inequality effects (Jaumotte et al., 2013; Furceri and Loungani, 2015; Furceri et al., 2017). In particular, they find that capital-account liberalization leads to statistically significant and long-lasting declines in the labor share of income and corresponding increases in the Gini coefficient of income inequality and in the shares of top 1, 5, and 10 percent of income.”

Click here to read the full paper.

From a post by Conversable Economist:

“Part of the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) signed into law by President Trump on March 27, 2020, was a national moratorium on evictions. However, the moratorium was scheduled to end on July 24, 2020–although it effectively required an additional 30 days beyond that date before landlords could file notices to vacate. Congress did not vote to extend the moratorium. However, the Centers for Disease Control then announced a national eviction moratorium to start on September 4, 2020. The US Supreme Court held in August 2021 that the CDC lacked the power to make this policy decision without the passage of a law through Congress and signed by the president. Of course, the Supreme Court decision was not about whether the eviction moratoriums were good policy or had beneficial effects. Here, I set aside the legal questions and focus on what we know about the outcomes.

It’s worth saying at the start that data on rental evictions is not nationally centralized, and is not up-to-the-minute. Every study has its own sample. However, certain patterns do seem to emerge across studies. Jasmine Rangel, Jacob Haas, Emily Lemmerman, Joe Fish, and Peter Hepburn at The Eviction Lab at Princeton University provide evidence on overall eviction patterns in “Preliminary Analysis: 11 months of the CDC Moratorium” (August 21, 2021). Their project collects data from 31 cities and six full states, representing about one-fourth of all the renters in the country. Here’s their estimate based on the sites they trask of how the total number of evictions would have evolved starting in January 2020, compared to what actually happened. Evictions fall by about half starting in March 2020 , and the gap between expected and actual evictions continues to expand after the CDC moratorium is enacted in September 2020.”

Continue reading here.

State capacity refers to the government’s ability to do its job effectively: to raise taxes, maintain order,
and provide public goods. A series of calamities during the 21st century—the Iraq War, Hurricane Katrina,
the financial crisis, and most recently the COVID-19 pandemic- all indicate the erosion of state capacity. A recent report by the Niskanen Centre (2021) discusses the same.

“The decline in state capacity since the 1960s can be traced to two distinctive but mutually reinforcing intellectual movements. One occurred on the political right while the other is associated mainly with the left. Both represent dysfunctional responses to America’s longstanding (and well-founded) fears of centralized power. On the right, healthy suspicion of rapid government expansion has given way to a toxic contempt for government and public service per se. On the left, efforts to expand “citizen voice” in government as a check on abusive power have produced a sclerotic “vetocracy” that makes effective governance all but impossible.”

Bold policy changes on many fronts are needed to bring back dynamism and inclusive prosperity.

Click here to read the full report.