- reverse pyromania
- Posts
- Potpourri
I’m going to clear some tabs — all of these stories seem unconnected but they’re related.
First, given the discussion yesterday about housing, here’s an interesting paper from some Berkeley academics. This is from the first section:
[…] U.S. housing markets have faced a secular shortage of housing supply in the past decade. Since 2011, the U.S. on average added 1.1 million new housing units every year, which is 30% lower than the long run equilibrium annual construction units before the Great Recession, and 34% lower than the annual new construction demand estimated by Freddie Mac (Khater et al. 2018). As home prices have continued to diverge from household incomes over the past 10-15 years, why has housing supply remained so persistently low? Although housing underproduction is widely perceived as a key contributor to fast-growing house prices, the extensive academic literature exploring this question has tended to focus on the distortionary effects of excessive housing regulations (i.e. zoning and building codes). These administrative policies are typically viewed as the central factor in limiting housing supply (Glaeser and Gyourko 2018, Molloy 2020). This paper, however, provides novel evidence documenting that labor supply is also an important channel affecting housing supply. We show that negative shocks to a region’s construction workforce are highly persistent, and lead to sharp reductions in overall residential construction activity as well as subsequently higher home prices.
The labor shortage in housing has remained stark over the past decade (Porter 2019, Freddie Mac 2017). Although the association is not causal, Figure 1 shows the U.S. construction sector lost 2.2 million employment (or 29% of its total employment peak at 2006) during the Great Recession, but barely recovered afterwards although the economy has greatly expanded. Even before the pandemic, construction firms ranked work shortage as the biggest hurdle for their businesses, and 78% of them were experiencing difficulty in filling their job positions.1 We use a national shock to construction labor to quantify the sensitivity of housing market outcomes to labor supply.
Our setting exploits an increase in immigration enforcement arising from a Federal program called Secure Communities, which began in 2008 and eventually rolled out to all counties nationwide by 2013.2 According to ICE records, this program was associated with the deportation of more than 400,000 undocumented immigrants during this time period. […]
The paper also points out that the construction industry has not raised wages to attract more workers, unlike other industries affected by Secure Communities.
So, if we want affordable housing, we need to address the labor shortage in the construction market. We also need to stop being “tougher than Republicans” on immigration, and perhaps try to educate voters about the labor shortage and its affect on housing.
Second:
WASHINGTON (AP) — President Donald Trump announced Friday that he was scrapping U.S. tariffs on beef, coffee, tropical fruits and a broad swath of other commodities — a dramatic move that comes amid mounting pressure on his administration to better combat high consumer prices.
Trump did something, but the real question is whether the importers of beef, coffee and the other commodities will respond in the way he wants. Trump and his minions treat tariffs like a light switch: they turn them off and prices are supposed to magically drop, perhaps overnight. The economy doesn’t work that way, especially after importers have learned that what Trump says one day can be contradicted the next day.
Finally, in the same vein as the other two stories:
The Federal Aviation Administration said Friday it plans to roll back some of the restrictions on commercial flights it implemented at 40 major U.S. airports during the shutdown.
The agency says the current mandatory 6% flight cuts are being downgraded to 3% even though the record 43-day shutdown ended Nov. 12. Transportation Secretary Sean Duffy has repeatedly said restrictions would remain until staffing at air traffic control facilities stabilizes and safety metrics improve.
Again, there’s no light switch that will immediately let the ATC system bounce back to full capacity after controllers have been overstressed and probably driving Uber or DoorDash to feed their families.
On one hand, we have an incredibly capricious, impulsive President and administration that careens around flipping every switch available to them in hopes of lowering prices. On the other hand, we’ve got academics saying that some actions that started in 2008 are part of the cause of our housing shortage. We’ve also got a staff of Air Traffic Controllers — fewer after Trump and Musk’s erratic staffing cuts — who are overworked and unpaid for 6 weeks. And we have trading partners that don’t want to trade with us anymore. Put all of this together and we’ll have still more shortages in housing, continued higher prices, and an ATC system that is verging on dangerous.
It doesn’t matter what Trump does in the short term — it’s going to take a hell of a lot of time to fix this mess. There’s a lot of political hay to be made here, but it isn’t a simple story, so making the case will require some serious skill.
Reply