No Mercy / No Malice: Project 2028: Housing
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Marvel Television's Daredevil, born again, now streaming only on Disney+. I'm Scott Galloway, and this is No Mercy, No Malice. U.S. Democrats and moderates need less indignance and more ideas. Project 2028, housing, as read by George Hahn. Democrats need to be the party of ideas, not indignation.

Our Project 2028 series will address critical issues facing American society through a no-mercy, no-malice lens. We begin with housing. The U.S. doesn't have a housing crisis, but an affordability crisis. Roughly one-third of Americans rent, and nearly half are cost-burdened, i.e., they spend 30% or more of their income on housing.

Since 2019, rents have increased one and a half times faster than income in most U.S. metro areas. In purely economic terms, increased housing costs reduce labor mobility and productivity as workers can't afford to live in high-growth areas. When human capital can't be invested in the regions offering the greatest returns, it dampens growth.

One research project estimates that removing housing constraints, i.e. lowering costs, to increase the liquidity of human capital would increase GDP by $1.4 trillion.

In some, there may be an economic as well as a social justification for government investments in housing. Elevated housing costs also take a toll on health, as families who struggle to afford housing often delay medical care, eat less healthy food, and have higher levels of anxiety and depression. But the most catastrophic consequence of unaffordable housing is that 770,000 Americans are homeless.

According to one study, communities where the median rent is more than 32% of the median household income are likely to see sharply higher rates of homelessness. But no matter where they live, homeless people suffer intense physical and mental harm, put a disproportionate burden on public services where they live, and reduce the quality of life for all citizens.

The common denominator for struggling renters and the homeless isn't identity, but money. Increasing support for Section 8 housing and rent control may provide short-term relief, but in the long term, these programs become entrenched and suppress development. The quickest way to help poor people afford housing is simple. Pay them more. As I've written before, I believe minimum wage should be $25 per hour.

There are approximately 32,000 homeless veterans in the U.S. While vets account for only 5% of the total homeless population, housing them is a good place to start as they're politically popular and have access to benefits. A federal no-homeless vets pilot program could be a platform for testing solutions. It could also provide what's missing in American politics right now,

renewed confidence that the government can take on big challenges. Owning a home marks one's progression into adulthood, starting a family, and building wealth. But for many Americans, the American dream has become a hallucination. This is especially true for young people. Between 1984 and 2024, the age of the typical first-time homebuyer jumped from 29 to 35.

Since 1963, home prices have increased three times after adjusting for inflation, while the median household income increased about one and a half times. Nationally, the average home price to income ratio is 4.7%.

It's significantly higher in California at 8.4, Washington at 6.3, Massachusetts at 6.3, New York at 5.7, and Florida at 5.7. Housing experts say we need to build somewhere between 1.7 million and 7.3 million additional housing units. In the same way Ernest Hemingway described the process of going bankrupt, we got here gradually.

Then suddenly, as the pace of home building has yet to fully rebound to the rate before the Great Recession, increased costs for labor, building materials, and regulatory compliance have all contributed to the problem. The cost of building multifamily housing in California, for example, spiked by 25% between 2010 and 2020.

Nationwide, residential construction costs rose 19% over the same period. Construction costs have stabilized since the pandemic. Labor costs grew 3.8% over the past year, while the cost of materials was flat. Mass deportations and tariffs, however, will likely increase the cost of both labor and materials.

Democrats don't have the power over tariffs and immigration, but they can champion cost-effective building. Manufactured homes, which are built in factories and finished on-site, are 35% to 73% cheaper than homes built entirely on-site. In Los Angeles, many homeowners can't afford to rebuild after the fires, as quotes for new construction can be two times or more what insurance will cover.

A partnership between a nonprofit and manufactured home startup aims to donate 100 pre-built homes that cost around $260,000 each. To rebuild L.A. quickly, local leaders should hyperscale this kind of building. When I interviewed housing economist Jenny Schutz on my podcast, she told me housing policy is relatively simple, but the politics are hard. Case in point?

Around 75% of residential land in the U.S. is zoned exclusively for single-family homes, the most costly and least dense type of housing. Rezoning for multifamily housing and taller buildings would make it easier to build. At the federal level, the bipartisan YIMBY Act encourages block grant recipients to track and remove barriers to housing construction.

HUD grants along the lines of Pathways to Removing Obstacles to Housing, which Congress authorized $85 million for in 2023, have helped localities purchase land for affordable housing, streamline the building application process, and add local staff to fast-track affordable housing proposals. We should double down.

Likewise, we should pass the Bipartisan Housing Supply and Affordability Act, which would allocate $1.5 billion in technical assistance to overhaul local zoning rules. Local governments and neighborhoods, however, hold most of the power here. Reform is costly and time-consuming, as new rules must contend with a confusing legislative labyrinth.

The effects of an over-lawyered process are most apparent in blue states. A significant number of Californians left for Texas in search of jobs and affordable housing, the chocolate and peanut butter of economic growth. To win national elections, Democrats need to demonstrate that they can govern. The winning move? Go hard at zoning reform, cut red tape, and encourage development.

Such a pivot could make for strange bedfellows. Zoning reform means taking on environmentalists and wealthy homeowners. The standard property tax model imposes taxes on land and structures. This discourages building, since new construction will be taxed. We should reverse the incentives and tax only undeveloped land, encouraging development while cutting taxes on existing homes.

The idea has been proposed in Detroit and New York City to reduce the number of vacant lots in those cities. In Pennsylvania, several cities have used a similar split-rate tax that taxes structures at a lower rate than land. One study found that split-rate tax models can increase high-density housing units between 2% and 10%.

Embracing the strategy could rebrand Democrats from tax-and-spend liberals to tax-cutting builders. This week, the California legislature released a report examining the state's failure to build enough affordable housing. The author's conclusion? The planning process is slow, crippled by red tape, and vulnerable to frivolous lawsuits, making it too damn hard to build in the Golden State.

Exhibit A. In 2024, the state Supreme Court resolved a three-year battle over a 1,200-unit Berkeley housing project. Neighborhood groups argued that the noise predicted to come from college student housing amounted to a pollutant under the law. The neighborhood groups lost, but the case illustrates the larger problem.

By the way, UC Berkeley has been there longer than any resident, and the scarcity model weaponized by administrations departments and existing homeowners is morally bankrupt. But that's another post. NIMBY homeowners have fashioned a state law, the California Environmental Quality Act, into an anti-growth cudgel.

A California Legislative Analyst's Office study found that CEQA litigation delayed construction by two and a half years. Only 20% of CEQA lawsuits target greenfields, i.e. converting open space to housing, while 85% of CEQA lawsuits were filed by groups with no track record of environmental litigation.

A California state senator has introduced legislation to fast-track CEQA cases. Lawmakers in states and localities with similar laws should follow suit. Rents in Minneapolis increased by only 1% between 2017 and 2022, largely because developers increased the housing stock by 12% during the same period.

Meanwhile, rents in the rest of Minnesota, which only boosted housing stock by 4%, increased by 14%. The unlock? Minneapolis reformed zoning laws to encourage taller multifamily housing projects and eliminated parking minimums that can cost $50,000 per space.

It's a similar story in Austin, where city officials waged a decade-long political fight to tackle housing affordability through rezoning. Austin's new rules allow for single-family homes to be built on smaller lots, apartments to be built closer to single-family homes, and denser development along a planned light rail line.

NIMBY homeowners tend to be loud and politically connected, giving the impression that their views represent the broader community. That is not the case. YouGov polling suggests that Americans may be more receptive to local development than previously thought. Support for building more single-family homes polls at 90% nationally, 81% locally.

For senior housing, national support polls at 88%. Local support is 84%. Nationally, 76% of Americans want more apartments built, while 65% support building more apartments locally. Low-income housing and homeless shelters are the least favored housing types, but even there, local support polls at 2 to 1.

If you're a politician, you've been given a green light to ignore NIMBYs. Despite the conventional wisdom, people lose money in real estate. Homes are illiquid capital-intensive assets that come with phantom costs. Insurance premiums, maintenance bills, and property taxes, all of which are expected to rise due to climate change.

Owning also limits diversification, as homes are close to workplaces, meaning a local economic downturn or a natural disaster could wipe out your equity at the same time you lose a job. Historically, the S&P averages a 10% annual return, outpacing housing at 4% to 8%.

Moreover, real estate brokers typically charge around a 6% commission, 60 times the transaction cost you'd pay for a low-fee ETF that tracks the S&P. The advantage of homeownership is forced savings, as people don't want to risk the hassle and shame of eviction. Another advantage? Owning can stabilize monthly housing costs relative to rents.

I like real estate, as no other asset class allows you to lever up 5 to 1 with a low down payment and a deductible interest rate.

But the idea that homeownership is the best or only way to build wealth is a lie fomented by the National Realtors Association that needs to die. This lie leads to dubious financial advice for the people who buy homes that don't outperform the market. And it makes those who aren't able to buy feel like failures.

But the most toxic byproduct of this lie is that it encourages incumbents to inflate the value of their assets by making housing scarce. Americans want to build wealth, and Democrats should speak in aspirational terms. But if housing is the primary or only vehicle for wealth accumulation, we shouldn't be surprised that our political fault lines are rich against poor, rural against urban, and old against young.

If economic security is the nutrition of a capitalist society, then maybe we need to stop thinking of housing as an investment but a consumable like food, energy, education. The construction of millions of low-cost units for young people, coupled with tax-advantaged incentives to invest in the market, would result in a better path to wealth.

In addition, we need to remove housing from the growing list of sources of anxiety for young people. It's housing, not an investment strategy or the arbiter of whether you're worthy enough to mate, start a family, or earn status. Economic security and deep and meaningful relationships are the American dream, not a mortgage payment. The call sign for the next administration should morph from drill, baby, drill,

to build, baby, build. Life is so rich. Today at T-Mobile, I'm joined by a special co-anchor. What up, everybody? It's your boy, Big Snoop D.O. Double G. Snoop, where can people go to find great deals? Head to T-Mobile.com and get four iPhone 16s with Apple Intelligence on us, plus four lines for 25 bucks. That's quite a deal, Snoop. And when you switch to T-Mobile, you can save versus the other big guys comparable plans plus streaming. Respect. When we up out of here...

See how you can save on wireless and streaming versus the other big guys at T-Mobile.com slash switch. Apple intelligence requires iOS 18.1 or later.