Friday, October 8, 2021

Housing costs

This is Joseph. 

It is without doubt that something is wrong with the housing market. The fundamentals do not change so rapidly over a short period. I think there are two dominant narratives.

One, is that something is wrong with supply. The sources of housing supply are complicated with issues ranging from zoning to cost of building materials. This source of housing shortage is ever popular to discuss, as everyone knows some municipal building or zoning rule that they consider daft. But supply can't be the only driver -- San Francisco has a 9.6% gross vacancy rate and 8,000 homeless persons (>5,000 unsheltered).

Two, is that there is demand caused by low interest rates/asset inflation. Like all forms of investment, it is vulnerable to bubbles, irrational exuberance, and the general problem of searching for yield that tend to become severe in times of high income inequality. Issues of affordability of land certainly go back to the Roman Republic and were a big factor in the rise of Caesar. 

But the truth is all sorts of places (like London, Ontario or Fresno) are showing rapid cost increases in housing, both rent and purchase prices. These sustained increases seem to be require a fairly strong driver that explains why now and not before. These housing prices have led to an increases in unsheltered persons and a resulting crackdown on things like camps. 

Sometimes the answer is the less complicated one. Real estate, via mechanisms like REITs mean that we are mixing a human necessity (shelter) with an investment class. The recent crisis accelerated income inequality, even overseas, which means that one obvious problem is that you have aligned incentives to make investors want yield. Some of this comes from the exceptionally low interest rates from the central banks but I wonder to what extent you have influential people making nudges in a thousand little ways to preserve asset values.

The bad news for this explanation is that there is no happy ending. An increase in interest rates would be a huge blow to leverage home owners whereas a drop in rates is a huge recession event (right after the stagnation in productivity caused by pandemic inefficiency). 

Rome shattered and become an empire. France beheaded the rich. At best you have the consequences of a huge asset bubble popping, in an asset class that nearly everyone is highly exposed to.

We need somebody to prove me wrong. 

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Thursday, October 7, 2021

Does building where the prices are highest always reduce average commute times?

It's late and I don't have time to do this justice, but I do want to take a minute and get it in the housing thread, because it concerns a claim that shows up a lot, implicitly and explicitly. 

Before the housing crisis reached a boil, the main argument offered by the NYT/Vox YIMBYs was based on the carbon footprint of people driving long distances to their jobs. We might push back on their estimates of the impact of the commuting (particularly in an age of remote work) compared to other green policy changes, but there's no question that having fewer cars on the road driving less would be an environmental win. Nor is there any question that far too many people are forced to make horrifying commutes because they can't find affordable housing closer to major employment centers. 

But can we go further and treat housing choice as a simple, straightforward trade-off between commuting distance and affordability? Probably not. There's quite a bit of research around this question that I hopefully will have time to get into later, but for now I've got some interesting counter-examples that are especially relevant to our ongoing discussion. 

From the American Community Survey, here are commute times for those who do not work from home. [quick caveat, I'm not familiar with ACS data so it's possible I'm missing something]:


Keep in mind that SF isn't very big and SM is tiny (with a reverse commute). Driving over twenty minutes from anywhere in the latter and more than thirty minutes from anywhere in the former will take you to or through neighborhoods with lower housing costs. If we're looking at a trade-offs between distance and price, this should almost never happen, certainly not the majority of the time.

This isn't hard to understand. SF and SM are tremendously desirable places to live (not my cup of tea, but even I see the appeal). It's not surprising that people are willing to pay more and tolerate slightly longer commutes to live there, but if you accept that this is what's happening, some interesting consequences follow.

Of the people in the Bay Area and LA who would like to live in SF and SM respectively, the vast majority do not work in those cities. If you increase housing capacity in these popular places and hold the desirability constant, we would expect to see acceptable commute times going up. That suggests that some people who had previously considered a forty-five or sixty minute commute a bit too much will change their minds.

And environmentally speaking, that's a really bad outcome. 

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Wednesday, October 6, 2021

Sure the money was small time by today's standards, but did Theranos have lions and tigers and iceless ice?

Surprised no one's made a movie of this fellow.

Keith Johnston writing for the LA Times. 

Success came quickly for Bourgeois, who had a talent for donning new hats when opportunities arose. He had begun his career in Europe as a cinematographer for Pathé Frères, jumped in front of the camera when a production needed an actor willing to do a dangerous stunt and learned to train animals with the help of the nature documentarian who directed his first films. Bourgeois’ first picture for Universal was a riotous two-reel comedy, “Joe Martin Turns ’Em Loose.” A series of collaborations with Marstini followed, with Bourgeois credited as actor, writer or director and his wife as the star.

...

Yet no private correspondence survives that explains why Bourgeois turned away from filmmaking. Geoffrey Donaldson, a seminal Dutch film scholar, once asked Bourgeois’ second wife about it, but she was unable (or unwilling) to disclose more, other than to say he had “lost interest” in film, preferring to work in the steel business — go figure. All that’s known is that by spring 1916, a restless man with a gift for reinvention found himself working as one of many filmmakers at a large Hollywood studio, with a reputation for animal abuse, a history of injuries and, perhaps, a broken marriage.

...

On March 2, 1916, the fashionable Café Bristol, on the ground floor of the Hellman Building at 4th and Spring streets downtown, debuted a new attraction for Los Angeles: a skating rink. Skating was already enormously popular, and cafe rinks were a fad in New York and Chicago. But they were expensive. The Bristol’s 24-by-50-foot surface required a $10,000 ammonia refrigeration system.


Bourgeois, finger to the wind, sensed an opportunity. Among his many skill sets was some knowledge of chemistry. Though his education record is unclear, a 1907 document from a train crossing the U.S.-Canadian border indicated he worked as an electrician in Manitoba. He told acquaintances that he’d received a deferment from service in the Belgian army during World War I because the U.S. Navy was interested in an alloy of his invention, although no record of this exists. In April 1916, he claimed to have invented “iceless ice.”

“Mr. Bourgeois claims that this composition cannot break, unless deliberately chopped up, it cannot wear out and it cannot melt, unless put on a fire,” The Times reported. “The composition is laid down in liquid form and ‘freezes’ over, or hardens, in twenty-four hours.”

Bourgeois secured investment to convert a roller rink and car dealership at 1041 S. Broadway into the Palace Ice Rink. The grand opening was to be attended in July 1916 by the mayor and feature L.A.’s first game of ice hockey. The entrance was constructed to resemble a huge iceberg. Inside were shops that would sell candy, ice cream, cigars and soft drinks.

Vendors paid Bourgeois hefty deposits to secure places in the venture. Cashiers could get a job if they paid $100. Dozens of skating instructors lined up to offer lessons to wobbly Angelenos. Bourgeois needed $17 from each of them to purchase a uniform.

Contractors, still busy through the summer, were paid almost entirely with checks that bounced. The builders sought out Bourgeois to find out how his ice was supposed to work, but he couldn’t be reached. A vendor named Jacques Levi reported him to the authorities, and a warrant was issued for Bourgeois’ arrest on Aug. 4, by which time he, his stenographer and his investors’ money were on their way to Yuma.

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Tuesday, October 5, 2021

Housing Metaphors

Crabs Trade Shells in the Strangest Way | BBC Earth

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Monday, October 4, 2021

Monday Tweets










Marshall is, as usual, right. The coverage of of this story has been extraordinarily bad.













OAN keeps talking ABOUT the recall. "Officials are finishing up the ballot count," different anchors reading the same script said at both 5 and 7am ET. But they're not admitting what AP, CNN, and everyone else reported last night: The recall failed. Newsom prevailed. (4/7)

— Brian Stelter (@brianstelter) September 15, 2021

























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Friday, October 1, 2021

A couple of curious things about Fresno

Like the late Rodney Dangerfield, Fresno gets no respect. The name itself has been treated as a joke.



But Fresno is not a small place. It's larger than Sacramento and around 60% the size of San Francisco, and it has also become a major hotspot in California's housing crisis.

From the LA Times:

The sky-high rents in the Bay Area and Los Angeles garner most of the attention in debates about California’s housing affordability woes. But few places in the country have seen such dramatic growth in what it costs to rent an apartment as Fresno, the state’s fifth-largest city.

The monthly rent for an average apartment in Fresno has gone up nearly 60% since 2017 to $1,469. Fresno’s median home value has risen almost as much over the same time and is now $331,000.

This is not a recent development.


Remember Paul Krugman's theory (discussed here) about high income, high tech enclaves? You don't get much further from that than Fresno. The area is poor. The economic driver is agriculture. 

It's not picking up spillover from a major metropolitan area. It's the biggest city for more than two hours in any direction.

Nor can you blame a population surge. The city's growth rate over the past decade is the lowest it has ever been since it was incorporated in 1885. 

But here's the part that puzzles me most about Fresno and to a lesser degree, about most cities west of the Mississippi suffering through the housing crisis. Take a look at the city from a distance.






Now let's zoom in to the area just west of the city (though we could pretty much pick any direction except northeast).




Why doesn't Fresno sprawl? I'm not saying it should. That's a debate for another time. I'm asking why it doesn't.

Go a mile or two past the city and there's almost nothing but farm land. Yes, it's amazingly fertile and wonderfully suited for agriculture, but still worth a fraction of what the owners should be able to get from developers.

Fresno County covers just under 6,000 square miles. More than half the population lives on less than 2% of that land. Even when you take away the part covered by nation parks and forests, this still leaves a tremendous amount of space and a tremendous potential for profit. Just for fun, take one square mile, less than a tenth of a percent of the county and play around with the value of that many houses in the current market.

And it's not just the current market. Housing prices have been hot and getting hotter for almost a decade. Why have developers been leaving huge and growing piles of money on the table?

The evils of sprawl are frequently invoked in the housing debate. The mystery of the lack of sprawl, particularly in an age of remote work, goes virtually unmentioned, but it really is the dog that did not bark. In places like Austin, Texas, or London, Ontario, or Fresno, California, the conditions are right and the incentives are there, but it just isn't happening, and until you can explain that, you don't have a handle on what's going on. 
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Thursday, September 30, 2021

At least Soylent was in on the joke

Absolutely no red flags here.
It is, of course, a stock trading app.
One such startup, Gatsby, announced Monday that it has raised $10 million in Aa Series A round of funding.

Backers include Techstars Ventures, Beta Bridge Capital, a network of “super angels” placed by ClearList and an oversubscribed SeedInvest campaign. Previous investors include Barclays Bank, SWS Venture Capital and Rosecliff Ventures. 

Jeff Myers and Ryan Belanger-Saleh co-founded Gatsby, a commission-free options and stock-trading app aimed at younger traders, in 2018. The pair had already one successful exit in Dealtable.com, a social data room platform. 

I suppose we should consider ourselves lucky it wasn't a competitor to DraftKings.

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Wednesday, September 29, 2021

What do disgraced turn-of-the-millennium financial gurus do for a second act?

 Should have seen this one coming.

Rich Dad Poor Dad Author Issues Stark Warning, Tells Investors To Grab Bitcoin and Ethereum Before ‘Giant Stock Market Crash’ 


MONDAY, OCTOBER 15, 2012

She left out the part about encouraging you to get your family to risk their finances by co-signing your loans

But other than that, Helaine Olen pretty much nails it.
Robert Kiyosaki, author of the bestselling Rich, Dad, Poor Dad series of financial advice books, is offering his fans yet another lesson in how the rich are different than you and me: they file for bankruptcy not because of ill health or unemployment related issues, but instead as a strategic business move.

Rich Global LLC, one of the corporate arms Kiyosaki has done business under, filed for bankruptcy protection in August, after it was ordered to pay just under $24 million to the Learning Annex and its chairman Bill Zanker.

Kiyosaki was one of the small-time wealth guru mountebanks who made it to the big-time in the aughts by telling his forever falling behind audience that they could get ahead, they just had not learned how. The shtick behind the Rich Dad books was that Kiyosaki was sharing secret money-making strategies of the wealthy with his wage slave readers. The tips ran the gamut from ridiculous to illegal and downright hurtful and included advocating for insider trading, arguing for the purchase of multiple real estate properties with little or no money down and telling followers they could purchase stocks on margin via unfunded brokerage accounts.
Kiyosaki is among the worst but he's not all that unrepresentative. If you feel up to it, the next time you're in a big bookstore take some time to browse the business section. Here and there, you'll find something interesting and intelligent or at least, helpful, but for the most part you'll encounter three profoundly embarrassing genres:

 1. The you-too-can-be-rich books like Rich Dad, which tend to target the financially vulnerable and deliver, more often than not, ruinous advice;

2. The guru books. These are predominantly buzzword-rich seminar fodder in the Tom Peters mode with the occasional pseudo-profound business fable thrown in (and no, I didn't make up the term 'business fable'). These are less sleazy than the first category (they primarily target people who are already in business rather than the desperate and dunemployed), but the advice is not that much better and their cost to society may be greater. Directly and indirectly, American business wastes a tremendous amount of money and what might otherwise be productive man-hours on these bozos.

3. The be-like-me books, where someone with a completely inapplicable success story tries to convince you that you can somehow get similar results by following his or her lead. These are probably the least harmful of the bunch. They can also provide some of the most amusing examples.
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Tuesday, September 28, 2021

A primer for New Yorkers who want to explain California housing to Californians

I shouldn't have to write this but...

1. The three biggest cities in the state are Los Angeles (by a large margin), San Diego, and San Jose. Any discussion of the housing (particularly involving densification), needs to focus on those three. The central valley should also be mentioned as well.

2. (or maybe 1b) For most purposes, the appropriate unit for discussing LA is not city but county. With a population of over ten million, more than one in four Californians are residents of the county. 

3. (or maybe 2... I'll stop now) San Francisco is not adjacent to or even particularly near Silicon Valley. Instead it's around fifty miles away. There are people who live in SF and commute to SV but it's a wasteful and completely unnecessary practice. San Jose is nearer and cheaper.

4. SF is not only more poorly situated and substantially smaller than SJ; it also covers a fraction of the area. Take away landmarks and public spaces and there's not much open space to develop. 

5. For this and other reasons, SF is such a problematic outlier with respect to housing that any state-wide argument based primarily on the city by the Bay will almost certainly be wrong to a significant degree. 

6. The housing crisis is very real but that doesn't mean everything you've read about it is true.

7. While building up is often preferable, building out is almost always an option. We have lots of land.

8. And lots of high ground. If you're going to write about sea levels, remember to look up elevations. For comparison, look up your own city's as well and don't forget to factor in hurricanes and storm surges. If you live in an American coastal city facing the Atlantic or the Gulf, you very probably will not be reassured with what you find.

9. The West is country of extremes. It's not unusual for two people both in the city limits of LA to call each other up and ask "how's the weather where you are?" Mountains and canyons complicate housing and infrastructure construction. The sheer scale of places like LA County make sensible seeming arguments absurd in practice.

10. At the very least, spend some time on Wikipedia and Google Maps when writing about places you're not familiar with (and maybe even places you are familiar with). If you don't, you're likely to make an ass of yourself and we'd hate to see that. 

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Monday, September 27, 2021

Did the NIMBYs of San Francisco and Santa Monica improve the California housing crisis?

Maybe so, if you're willing to go along with a few assumptions. 

First, you have to more or less go along with the arguments I've been making in this thread so far (see here, here, and here). Then there's one more fairly substantial but not unprecedented assumption: If a project falls through, some of the capital that would have gone into it is likely to be diverted to other projects in the area. Though probably not 1 to 1, blocking development in one spot will tend to free up some money for development somewhere else in the same metro area. 

If you buy this and you believe that the NIMBYs of SF and SM were at all effective in their efforts, then these local YIMBY losses have improved California’s housing and transportation crises and have very probably helped reduce the state’s carbon footprint by diverting development to more central, more populous and generally better situated neighborhoods. 

In the case of LA County and the Bay Area, where did that development money go (as of 2017. If I get more recent data I'll update.)? 



Top U.S. Neighborhoods that Got the Most Apartments After the Recession

 

Top 10 U.S. Neighborhoods with Most New Apartments



Downtown San Jose also breaks the top twenty.


As I've discussed in numbing detail (with, I'm embarrassed to say, more to come), the enclaves of the rich seen by the Vox/NYT YIMBYs as the keys to fixing the crisis,  are so badly situated that spending development money in any of them might possibly do net damage. One of the few pieces of good news in the California housing story so far is that we appear to be building mostly on the right places and very little in the wrong ones.

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Friday, September 24, 2021

The trick is that the trick is...

Interesting thoughts on just what constitutes an illusion.






With a bit background.




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Thursday, September 23, 2021

Yes, YIMBYs can be worse than NIMBYs Part III -- When an overly appealing narrative hooks up with fatally misaligned market forces, the results are always ugly.

[This finishes up my first round of of NIMBY/YIMBY posts (see here, here and here). I'll be addressing Joseph's asset inflation argument (more sparks will fly). I'll also be tossing in some data points which may not support my thesis since I haven't gotten around to forming one, but will raise some interesting questions about everyone else's.] 

"There are now, in effect, two Americas: the America of high-tech, high-income enclaves that are unaffordable for the less affluent, and the rest of the country," 

In this case, the narrative (heavily pushed by the NYT) is of rich, white NIMBYs who hypocritically claim to be liberal while selfishly denying the rest of the state affordable housing.  You couldn't make it any better if you had the villain twirling his moustache while a title card popped up saying "BOO! HISS!" (I am really starting to regret saying I was going to leave Boyle Heights out of this).

It is always dangerous when an appealing standard narrative (particularly a flawed narrative) attains unquestioned good status (Bowles-Simpson and the education reform movement were two recent examples). The coverage become increasingly unbalanced and the perceived righteousness of the cause lets journalists rationalize exaggeration and distortion, but things get really bad when you have a narrative that supports market forces that are badly misaligned with the public 

Developers play an important role in NIMBYism and for the most part, that's OK because their interests generally align with ours, but there exceptions, including two of the best ways of making a killing:

1. Make a desirable majority-minority neighborhood into a white neighborhood. 

2. Have the newly rich buy their way into the neighborhoods of the established rich.

The problems with the first are obvious, but normally the second is something we can safely ignore. Selling stars to Sneetches can be ugly but in the end, it comes down to annoying wealthy people arguing over tiny stretches of land which generally are not good at all from a city planning standpoint.

There is often an inverse relationship between what rich people look for in a residential neighborhood and what makes an area suitable for smart growth. The elite put a high value on mountain views, ocean breezes, trendy/touristy zip codes, and mainly a degree of isolation from the common folk. In terms of building population hubs, the first three are deeply problematic and the fourth is out and out terrible. It is no coincidence that SF, SM/Venice (adjacent and both so tiny it makes sense to combine them) and La Cañada Flintridge have natural barriers on at least two sides. (Also see Malibu.) This was a feature, not a bug.   

While SF represents less than 1% of the land in the Bay Area, the plurality and probably the majority of the coverage centers on this postage stamp. (Santa Monica is a flyspeck. Venice is the flyspeck's baby brother.)  Even if they weren't so terribly situated, no development policy changes in these "high-tech, high-income enclaves" is likely to have a detectable effect on housing in California. 

Developers, being mostly rational actors will start where the payoff is greatest, then work their way down. That queue moves slowly and may stop dead in the next economic downturn. Any sane conversation about densification in the Bay Area would start with San Jose, not San Francisco. In LA, developing around the Blue Line (and for that matter, pretty much all of Central LA) makes more sense than Santa Monica.

But the main danger of the SF/SM centric YIMBYs is not that they make horrible recommendations (which they do); it's that they've used the trivial to distract us from the vital. In terms of press attention, lobbying and legislative action, the places we need to focus on receive no support nor does the discussion we need to be having about smart growth. If anything, the fixation on these out-of-the-way tourist traps encourages legislators to water down the standards so that the stupidest growth imaginable qualifies as "smart."


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Wednesday, September 22, 2021

Here we go again

I'm sure it's a good show, but almost no one has seen Ted Lasso.
Almost everyone has, however, heard of it because Apple has spent a mind-boggling amount on marketing and particularly PR. 

If this all sounds a bit familiar (modest and quirky feel-good, fish-out-of-water show from a comedy veteran dominates the Emmys), it might be because you're a regular here at the blog. 

MONDAY, SEPTEMBER 28, 2020

I have to admit, it’s kind of a pleasant change to be making fun of trivial things again…

And you don’t get much more trivial than the Emmys.

First off, any show with Eugene Levy or Catherine O’Hara is doing god’s work and having the two work together is going above and beyond. I haven’t gotten around to Schitt’s Creek yet, but I have no doubt it’s a deserving show which certainly makes this a feel good ending:
In 2020, the sixth and final season was nominated for 15 Primetime Emmy Awards. This broke the record for the most Emmy nominations given to a comedy in its final season. During the 2020 Emmys, the show became the first-ever comedy or drama series to sweep the four acting categories (Outstanding Lead Actor, Outstanding Lead Actress, Outstanding Supporting Actor, Outstanding Supporting Actress) and one of only four live action shows, along with All in the Family, The Golden Girls, and Will & Grace where all the principal actors have won at least one Emmy Award.

If anything, this understates how unprecedented the sweep is. If you look at the other shows mentioned here (All in the Family, The Golden Girls, and Will & Grace), you’ll see that they had Emmy wins or nominations every year they ran. Schitt’s Creek had never won a single statue before this year. Until 2019 (note that date), it hadn’t even gotten a nomination. The Television Academy is notorious for playing favorites. To go from nonentity to “honor just to be nominated” to powerhouse in two years goes against the industry’s laws of nature.

The sudden rise in popularity is often credited to a “Netflix bump” from when the streaming service picked it up in January of 2017 (another date to note). Left out of almost all reporting on these bumps is the role of marketing and PR. Netflix spends billions a year on promotion and while it prioritizes its “originals” (which brings up other interesting points), it still has enough for some fairly generous “Now on Netflix” campaigns.

That said, shows getting a ratings boost from syndication has been a recognized and well-documented phenomenon since the business model was established in the seventies. There’s no question that Schitt’s Creek got a bump, but just how big was it? Though not perfect, Google trends can provide a pretty good picture of the interest in a show.




Post-Netflix numbers were certainly better but after settling down, they remained relatively flat for well over a year then, around the fourth quarter of 2018, at which point they started a remarkable climb. On a related note…
In [May] 2018, Debmar-Mercury, a division of Lionsgate, acquired the U.S. syndication rights to Schitt's Creek. The series is scheduled to debut in syndication on Fox Television Stations throughout the U.S. during the Fall 2020 television season. The series is also began airing reruns of series on Comedy Central on October 2, 2020.

Despite its low cool factor, television syndication remains a tremendously lucrative business. For a fairly obscure cable/Canadian show like Schitt’s Creek, awards and media buzz can greatly increase marketability. It would be shocking if Lionsgate, a company with billions in revenue and a substantial PR budget, didn’t launch a major campaign and, given the Q2 acquisition and time to plan the campaign, we’d expect the money to start flowing in October, 2018.



In 2020, this PR push was followed by an aggressive Emmy campaign.





I don’t want to get carried away – this is just one metric (a noisy one at that) and some anecdotes – but the standard narrative (check this Vanity Fair piece for an example that adheres strictly to the form) doesn’t really fit we we see here, neither with the Netflix bump nor with finding an audience. Instead, we have another example of how PR departments shape things like awards and media coverage, and unfortunately not just on trivial matters.
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Tuesday, September 21, 2021

Cage match continues on development

This is Joseph.

So one piece of the ongoing housing debate is that nearly everyone agrees that housing prices are becoming a crisis and there is no shortage of simple solutions. However, what I like about London, Ontario as an example is that no simple solutions are able to be easily proposed. It is a web of problems, working together. Why is the web intractable?

I think it is because of incentives. Government, which heavily regulates housing, has incentives at all levels to push up asset inflation. Matt Yglesias took on the issue of Somerville, which is in liberal Boston and is getting both less dense and more expensive. Housing prices in all of Canada are continuing to go up and I expect that this will accelerate to some extent, as small apartments are less desirable in the context of pandemic restrictions on things like malls, coffee shops, and indoor entertainment (if you think indoors is not important in Canada then I invite you to visit Saskatchewan in January). 

We know that housing wealth makes people more likely to spend and may compensate for things like stagnant wages. We also know that housing price collapses cause underwater mortgages with horrible effects on labor mobility and bank solvency. Imagine if the prices in London, Ontario reverted to the long term mean -- people who had bought houses in the past 5 years would be destroyed and many, many loans would go bad.

So you have an incentive on all parts to increase asset inflation. People like having their houses become worth more money and making a large profit. They like plentiful parking and low levels of local traffic. They generally like affluent neighbors. Cities like taxes and keeping wealthy citizens happy. National governments like to keep the banks solvent and try to use low interest rates to stimulate the economy. Yes, even in the face of a housing bubble so large it might crack the economy open. 

So the reason I am YIMBY sympathetic is that, no matter how daft their ideas are, they at least are not conspiring to inflate assets further. This is less of a crisis in the United States but nobody can look at the Canadian housing market and feel comfortable. 

So this really is my reply to Mark: at least the YIMBY are trying to find a solution. His analysis of Krugman suggests that they are not doing a good job of it, but at least they are identifying a real problem. In my view, the emerging link between housing prices and homelessness is a bit of crisis for low income Canadian and American residents, and it needs to have some solution. Stopping asset inflation would be a good place to start. 
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Monday, September 20, 2021

Krugman then told how the ring of mountains almost kept the Challenger Expedition from finding the lost city of Los Angeles

God, this is painful.

Economists trying to understand the rise and fall of regions within a country often rely on some form of economic base analysis. The idea is that a region’s overall growth is determined by the performance of its export industries — that is, industries that sell mainly to customers outside the region, such as the technology firms of Silicon Valley and the Los Angeles entertainment complex (or, here in New York, the financial industry). Growth in these industries, however, generates a lot of growth in other sectors, from health care to retail trade, driven by the local spending of the base industries’ companies and employees.

...

One way to think about this is to say that California as a whole is suffering from gentrification. That is, it’s like a newly fashionable neighborhood where affluent newcomers are moving in and driving working-class families out. In a way, California is Brooklyn Heights writ large.

Yet it didn’t have to be this way. I sometimes run into Californians asserting that there’s no room for more housing — they point out that San Francisco is on a peninsula, Los Angeles ringed by mountains. But there’s plenty of scope for building up.

I'm a huge fan of Paul Krugman. For me, he's by far the best opinion columnist the NYT has. He's a sharp and insightful writer, but like a lot of smart people (see Felix Salmon on the television industry), when he starts talking about something he knows nothing about, his "maybe I should check this" indicator fails to engage. 

1. SF is not part of Silicon Valley; it's around fifty miles away. 

2. People who want to seriously discuss Northern California housing focus on (or at least mention) largest city in the Bay Area, San Jose.

3. Neither the city nor the county of LA is ringed with mountains. We do have some pretty good peaks (the high point in the city is over five thousand feet. Twice that for the county), but they run mainly to the north.

4. More importantly, LA has tremendous scope for building out. That doesn't mean it's a good idea (it's almost certainly not), but LA County has over four thousand square miles of land including tens of thousands of acres of farmland. Add the Inland Empire and we're looking at around thirty thousand square miles. We are not spatially constrained.

For the record, I'm for building up Central LA (much more than Krugman and the rest of the NYT/Vox NIMBYs who favor developments on the edge of the county). I know first hand how bad the housing situation is in LA, but the NYT's take on this has been terrible.




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