We have a housing shortage. Time for pro-growth housing policy
Also: Should America start applying its environmental rules to space?
“Platinum, iron, and titanium from the Belt. Water from Saturn, vegetables and beef from the big mirror-fed greenhouses on Ganymede and Europa, organics from Earth and Mars. Power cells from Io, Helium-3 from the refineries on Rhea and Iapetus. A river of wealth and power unrivaled in human history came through Ceres.” - Leviathan Wakes, the first book of The Expanse Series by James A. Corey.
In This Issue
The Micro Reads: Flying cars; Amazon robots; labor market trends; and more . . .
The Short Read: Should America start applying its environmental rules to space?
The Long Read: We have a housing shortage. Time for pro-growth housing policy
The Micro Reads
🚁 How Close Are Flying Cars? - Bloomberg | Better to think of this as the flying taxi industry rather than The Jetsons finally becoming reality. From the piece: “Able to take off and land vertically, they’re a lot like helicopters — only safer, cheaper and far quieter thanks to a cluster of small electric rotors on a fixed wing, allowing the the craft to fly (and glide) horizontally. If one of the fans conks out, the remainder can mitigate a disaster.”
In an interview, JoeBen Bevirt, the founder and CEO of Joby Aviation sees the use case as a “bimodal distribution, where there's a lot of trips that are across town — which take people 45 minutes or an hour stuck in traffic. And then we also think there's a lot of trips that are to nearby cities which save people a few hours.” And as to the headline question: “Joby is locking up leases on rooftops where its mosquito-looking machines will land as early as 2024.”
🤖 Inside Amazon’s biggest warehouse — where you’ll find more robots than people - Philadelphia Inquirer | Some 10,000 robots are helping 1,000 newly hired human workers on the site of a former GM plant. The $250 million “showcase” warehouse has fewer workers than the typical fulfillment center a quarter of its size, although Amazon says it may eventually employ 4000 to 5000 employees.
🔮 These are the top 10 tech trends that will shape the coming decade, according to McKinsey - World Economic Forum | The big claim: “In the next decade, we’ll experience more progress than in the past 100 years combined . . .”
👽 How the Search for Extraterrestrial Life Helped Make Your Smartphone’s Screen Possible - Christopher Mims, WSJ | First, I’ll spoil the the headline: “It turns out that the very same factory where the mirrors for the [James Webb Space Telescope] were polished are now where the optics required for manufacture of OLED displays — short for organic light emitting diode, the screens in the latest generation of smartphones — are made.” More importantly, Mims highlights the “winding path” of American innovation and how funding for NASA and the Pentagon ends up as de facto industrial policy.
🦠 This Week in the COVID-19 Recovery - Mark Zandi, Moody’s Analytics | Always great stuff from Zandi. First the good news: “We continue to expect the economy to return to full employment by spring 2023. Real GDP growth will rebound strongly to a greater than 6% in the fourth quarter and more than 4% next year.” Of course, what counts has “full employment” may be changing, especially if baby boomers accelerate their departure from the labor market. And that is exactly what Zandi is expecting:
According to the BLS’s Current Population Survey, the percent of the population over 55 years old that isn’t in the labor force and doesn’t want a job, which was stable at 58% prior to the pandemic, has steadily risen during the pandemic to its current 60%. . . . The record stock prices and housing values, and bank accounts swollen by the saving they did while self-quarantining during the height of the pandemic, has further empowered the boomers’ exit. With boomers leaving the workforce more quickly, the overall labor force participation rate will not return to its pre-pandemic rate of more than 63%, even when the economy is back to full employment. We expect it to top out closer to 62.5%, about a percentage point higher than it is today.
The Short Read
🛰 Should America start applying its environmental rules to space?
The issue of space regulation is of potentially monumental importance. Messing it up could mean the difference between having orbital habitats and factories — or even space-based solar power stations — in our lifetime or not.
The issue is currently newsy because of an effort by satellite operator Viasat to halt Elon Musk’s SpaceX from launching more of its own satellites as it enlarges its Starlink low-Earth-orbit “mega-constellation.” Viasat has been arguing that the Federal Communications Commission improperly approved SpaceX launches without an environmental review as called for by the Nixon-era National Environmental Policy Act. Back in July, the US Court of Appeals for the District of Columbia Circuit denied Viasat’s request for a stay on further launches as the court review its case. Currently, there’s a deadline at the end of this month for final briefs before oral arguments.
One issue is whether the FCC and SpaceX satisfied NEPA requirements. For the purposes of this essay, at least, I am more interested in whether NEPA should apply at all to human activities in space. Among the key parts of the legal case that NEPA is irrelevant off-planet:
First, unless a law makes a specific mention, American law is presumed not to apply beyond American borders. And the US does not control, much less govern, space.
Second, NEPA never mentions space even though the legislation was written and passed during the Apollo program. As an amicus brief to the US Court of Appeals from the group TechFreedom points out, “NEPA makes reference to ‘man’s environment,’ the ‘human environment,’ and the ‘biosphere’ — thus confirming that it is an Earth-bound statute.”
Third, even if NEPA’s statutory text did deal directly with space and allowed its application there, foreign policy implications would stop that from happening. Again, the TechFreedom brief: “The foreign-policy implications of the present case are weighty indeed. The most recent national space policy directs the federal government to ‘promote the export of United States commercial space goods and services . . . for use in international markets.’”
A more favorably analysis of NEPA’s applicability to space can be found in a new articles in Environs, the environmental law and policy journal of the University of California, Davis, School of Law. In “Major Federal Actions Significantly Affecting the Quality of the Space Environment: Applying NEPA to Federal and Federally Authorized Outer Space Activities,” Alexander Q. Gilbert and Monica Vidaurri make a number of important and relevant points.
First, they find the regulatory language implementing NEPA to be “broad and encompassing — it includes all of the natural and physical environment and can evolve as the relationship of future Americans with the environmental changes following technological and scientific advancements.”
Second, Senator Henry M. "Scoop" Jackson, the main Senate NEPA sponsor and advocate, commissioned a report for his committee that specifically identified the “outer space environment.”
Third, after NEPA’s passage, the State Department issued a memorandum that stated NEPA’s Environmental Impact Statement requirement would to the high seas, Antarctica, and outer space — though not foreign territory.
Their conclusion:
In summary, this review has found that outer space is likely to be considered part of the human environment for purposes of NEPA’s EIS requirements. The statutory of text of the bill does not explicitly mention outer space but neither does it preclude. Rather, courts have consistently found that activities outside of the borders of the U.S. may be subject to NEPA to the degree that are Federal government actions and do not impede on foreign policy concerns. Critically, by excluding the outer space environment from NEPA EIS analyses, federal agencies are missing key terrestrial environmental impacts from space activities. Mega-satellite constellations are causing light pollution that impacts Earth astronomy, increasing use of radio spectrum is impacting radio astronomers, allocation of 5G bands is reducing the accuracy of terrestrial weather forecasts, and the possibility of terrestrial biotic contamination from space activities remains unconsidered. Each of these are distinct environmental impacts that occur in the U.S., and elsewhere on Earth, resulting from US or US-authorized activities that occur in outer space
One solution proposed by Gilbert and Vidaurri is that Congress pass a law clarifying that NEPA applies to space. Or, you know, NEPA doesn’t. Given the importance of the emerging space economy, it seems like a subject worthy of national attention and debate.
The Long Read
🏘 We have a housing shortage. Time for pro-growth housing policy
One could imagine a politics in post-Global Financial Crisis America where housing was a central policy issue. The housing bust was devastating, especially for households with a greater concentration of wealth in their homes: younger households, African Americans, and Hispanics. Home prices nationwide fell by a 30 percent from 2006 through 2012 (according to the S&P/Case-Shiller U.S. National Home Price Index) and the homeownership rate tumbled to 62.9 percent from 69.2 percent. Some 10 million people lost their homes to foreclosure.
And there were a number of legislative reforms in the wake of the bust. But then American politics quickly moved on to other issues such as healthcare, the national debt, taxes, and, eventually, Trump tweets. During the 2012 presidential debates between President Obama and Mitt Romney, which took place as the housing market was still recovering, mentions of the housing collapse were fleeting and relatively insignificant compared exchanges about tax rates. Certainly neither candidate presented a broader vision for housing and how it should fit into national economic policy.
Yet one could argue that housing should be central to our policy debates, even more than decade since the bust. Probably in other rich countries, too. In the recent Works in Progress essay “The housing theory of everything,” authors Sam Bowman, John Myers, and Ben Southwood point out the numerous way that high house prices affect, well, everything. From the piece:
Try listing every problem the Western world has at the moment. Along with Covid, you might include slow growth, climate change, poor health, financial instability, economic inequality, and falling fertility. These longer-term trends contribute to a sense of malaise that many of us feel about our societies. They may seem loosely related, but there is one big thing that makes them all worse. That thing is a shortage of housing: too few homes being built where people want to live.
Let’s just focus on one of those problems: productivity growth. America’s cities are the economy’s high-productivity engines. They’re also where wages are highest. But land-use regulations have made housing in many of them super expensive, disrupting the historical economic process where people raise their living standards by moving to these cities. (They also become more productive as workers.)
Economists Chang-Tai Hsieh and Enrico Moretti find that the “creeping web of these regulations has smothered wage and gross domestic product growth in American cities by a stunning 50 percent over the past 50 years.” Let’s say just three cities — New York, San Jose, and San Francisco — changed their housing rules to the level of restrictiveness of the median US city. The net effect of increased density would be a 10 percent increase in US GDP and an additional $10,000 in average wages for all workers.
Or to put it another way: Land use restrictions limit opportunity. Economist Daniel Shoag in his 2010 paper “Removing Barriers to Accessing High-Productivity Places”:
Though more-productive places were always more expensive than less-productive places, they have become increasingly expensive relative to offered wages. This change in housing markets has made it disproportionately difficult for low-skilled workers to live and work in productive places. … The slow growth in housing supply in productive places has also generated other types of inequality. For example, restrictive zoning rules have been linked to increased racial segregation. … Distorted by excessive land-use restrictions, housing markets are now concentrating more wealth in a smaller share of the population.
The current US housing shortage, which has driven prices up by 20 percent over the past year — provides another opportunity to make housing a central issue in American political debate. Here’s how Goldman Sachs describes the problem in “The Housing Shortage: Prices, Rents, and Deregulation”: “Homebuilders continue to face headwinds that were present before the pandemic — especially a lack of construction workers and a lack of available plots to build on — and the pandemic has exacerbated those problems with further delays from supply chain disruptions, lumber shortages, and now economy-wide labor shortages.” (Indeed, Zillow just announced it’s going to stop purchasing new homes due to labor shortages.)
Not surprisingly, given the economic consensus, GS highlights the obvious solution to the national housing shortage: “Economic research shows that relaxing the zoning rules and other regulatory constraints that have impeded homebuilding for decades would boost supply and lower prices and rents.” First, a chart showing the increase of land-use regulations over time:
And here’s a handy summary of the academic research:
So build, baby, build. Or, rather, allow people to build. (Also: More immigrants so we have enough workers to do the building.) And, as Goldman also notes, there has been some progress on this front, especially — perhaps, most importantly — in California:
The Biden administration, as part of its Build Back Better agenda, has also proposed an incentive program to nudge local governments to remove obstacles to density such as exclusionary zoning laws like minimum lot size. But GS doubts it will survive the reconciliation process. That’s discouraging, as is the emerging anti-density platform in the Republican Party. It would be great if someone in either party on the national stage ran with this issue. Here’s the Shoag agenda if someone wants to run with itL
We missed a key opportunity a decade ago, even though the problems with housing have been a long-term one. Let’s not miss it again.
Given the number of second and third homes that are vacant most the time it seems more like we have an allocation of housing problem rather than a shortage.