Why Housing Is Artificially Expensive and What Can Be Done About It (with Bryan Caplan)

Bryan Caplan: Fantastic to be here, Russ. It’s been too long.

Bryan Caplan: Yeah. Housing, in the United States anyway, is 20% of the typical budget, so it is not just at one little corner: it is a major corner. But, the reason to talk about it is that there is so much the government has done just to strangle this industry. It’s weird because you could say, well, the most vital industry is food. We’ve got to have that. But, probably number two is housing. And, the way that governments around the world treat the industry is basically like they’re a bunch of criminals. Like, ‘You’re trying to build something? Well, we’re not going to let you get away with that.’

It’s really weird, and yet it’s only in the past 10 years probably the people have started to realize that the regulation has gotten so terrible that it’s really hard to actually supply reasonably-priced housing for most of the population.

Bryan Caplan: Yeah. This is what actually motivated me to write the book. It’s one thing to say housing regulation has drastically raised the price of housing. This is bad. But, what made it intellectually exciting is realizing that there’s this long list of other issues that almost no one really thinks of as having anything to do with housing that obviously have a ton to do with housing. Really obvious one is inequality. As you know, Russ, one of the main complaints about the capitalist system is the horrible inequality. It’s like, well, wait a second, housing is a necessity. When you go and raise the price of something that everybody needs to go and have some of–something that poor spend more of their income on or a larger share on than the rich–you are automatically increasing inequality, and not by small amounts.

Bryan Caplan: This is really the main motive for the book is to start out by saying yes, in a sense, supply and demand is the correct answer, but when economists say, ‘Oh, it’s just supply and demand,’ it really does insinuate that it’s a natural occurrence of natural scarcity. And the heart of the book is this is a case where the scarcity is not natural. So, we have this incredible technology for building lots of cheap housing in very desirable locations, and governments generally do not let it be deployed to anywhere close to the physically possible extent.

Let me just back up. So, think about the most desirable locations in the world. For most of human history, it just wouldn’t have been possible for many people to live within walking distance of the Vatican because people didn’t know how to build buildings more than a couple stories tall that wouldn’t collapse.

If you go over Italy, most famously you can see these leaning towers like the Leaning Tower of Pisa. That’s what tall buildings were like in earlier periods. You just had to worry they would tip over because the construction methods weren’t that good.

Then in the 19th, 20th centuries, we basically perfected techniques for building way taller buildings that are not going to tip over. Then governments came along and said, ‘Yeah. Well, we’re going to make it almost impossible to use those techniques.’

So that’s really where we are. There’s no reason why you couldn’t actually make cheap, spacious housing in the most desirable locations just by building more vertically, and yet governments generally make that really hard to do.

Bryan Caplan: Yeah. This is just very basic econ. If you strangle supply, then prices will be high. If you unleash supply, prices will be low. Not because builders feel grateful that, ‘Oh, you were so nice to me; you let me build.’ Well, in that case, I would be quite a horrible person if I didn’t make the prices low. The point rather is that when you let people build a lot more stuff, self-interest requires them to cut prices just to fill the units. It really is just like if you’ve got 10 gallons of lemonade that aren’t selling, well, you’re going to have to cut the price if you want to make that lemonade move. Same thing if you let people double the number of housing units in San Francisco: of course, prices are going to go down. This is not just economic theory: it’s common sense. And finally, it is also what we really see in the places that are much friendlier to–or at least less hostile, much less hostile–to building.

You know, I’d say, in the United States, it’s hard to find anywhere that is truly friendly to construction, but there are different degrees of reluctance to approve, and that’s where we see the difference. Places like Texas, the governments are lot less likely–they’re a lot less reluctant to approve; and so prices just really are much lower. And, even when you have an area like Austin where the government is fairly strict, you only have to get about 30 minutes away before you get to another government that isn’t, and then prices are low, and that’s when once again allows people to use the technology that we have.

Bryan Caplan: Yes. So, this dormitory-style housing especially, definitely it’s one that’s worthwhile. I think that under actual serious deregulation, it just wouldn’t be necessary or there wouldn’t be that much demand for the really small places because we would just make it so cheap that people would say, ‘Yeah, I don’t want to live in a closet.’ But, if you gave people permission to build one building, yeah, they’d probably want to build a building full of closet-sized rooms.

Bryan Caplan: Donald Shoup. Shout out to the great Shoup.

Bryan Caplan: Right. Well, especially for apartments, it’s totally standard for building codes to say you have to have two or three spots. You combine this with–

Bryan Caplan: Yes. For each unit you have to have two or three parking spots. It’s, like: That’s weird. Isn’t one of the main points of living in an apartment that maybe you don’t need a car at all?

And then, you combine this with the chronic underpricing of street parking by governments; and then it’s, like: So people are–they say, ‘We don’t want to let people just go and build apartments without parking spots because we already have a terrible parking problem.’ And the obvious point or the obvious why is: Well, how about governments actually raises the price of street parking so that you can count on it being there and adjust the price based upon current conditions? With smartphone technology, it is super easy to vary the price of parking with current conditions. Obviously, then, combine that with getting rid of these bizarre rules that you can only park for two hours. It’s like, why two hours? Why can’t I park all day if I’m willing to pay the price? Governments just love to go and have all these strange restrictions, and then tell the market you’ve got to go and provide the actual parking that people are really going to need in order to live here.

Well, though possibly, actually the much bigger deal with parking regulation is for commercial parking–because the normal building regulation of the United States or normal parking regulation is that every commercial establishment must create a number of parking spots equal to the number of customers they’re going to have or the number of cars they’re going to have on the very busiest day of the year. Namely, of course, Russ, you’ve been out of the United States but you still know the busiest shopping day of the year–

Bryan Caplan: Black Friday. The day after Thanksgiving.

So, you’re required to have enough spots for all the cars on Black Friday if you charge zero. If you charge zero. The result is that the other 364 days of the year in the United States, you just have piles of empty spots that could have been used to go and do mixed-use housing–for example, so that people wouldn’t even need to go and drive to shopping–and yet generally illegal throughout the whole country.

Bryan Caplan: Sure. You probably need three times the land for the stores-plus-parking as you would need for the stores alone.

Bryan Caplan: So, since you were mentioning about regulation changing, often actually you’ve got regulations that have been on the books for ages, but what happens over time as they just get enforced more strictly and more unreasonably ;and people that want to stop construction learn to game the system. So that, for example, you want to go and build some houses, well, the usual activists will say, ‘Well, we’ve got to get environmental review. That’s going to take a year. We’ve got to get parking review, traffic review. That’s going to take a year.’ And then, after you do the full years’ study, it’s, like, ‘Well, there’s a problem with the study. We’re going to have to redo it from scratch.’ It can often be the case that legally you are totally definitely allowed to build and yet by the time that the process is over, you wish you hadn’t tried.

Bryan Caplan: So, I am a public choice economist. I’m right here in the building–Center for the Study of Public Choice. There’s a very common view in public choice that it’s actually interest groups and not public opinion that really drives policy. One of the main things that I’ve been saying in my career is actually democracies pay a lot of attention to public opinion. It’s just that public opinion is so different from what economists assume it would be that they just have to start looking around for other possibilities. It can’t really be that normal people want to strangle the housing industry. Why would they? Can’t really be, for example, the tenants think that it’s bad to build stuff.

Yet, a lot of what I say in this book is, I go over actual empirical public opinion. And what economists assume people would have to think, is this wrong. People do believe just the craziest things. It really is true that it’s normal for tenants in the United States to oppose new construction. And, if you’re wondering, like: Why would tenants oppose new construction? Obviously they are the beneficiaries of new construction. They are the ones that are going to enjoy the lower prices. And the answer is: most people, first of all–most people deny that allowing more construction will just cause housing prices to go down.

So, first thing is: Basically if you just survey the U.S. public on what would happen if you allow a lot more construction, you roughly have one third saying prices will go down, one third saying no effect, one third saying prices will go up. So, if that’s what people think, then it’s no wonder that they don’t favor more construction because it actually might even make the problem of high housing prices worse.

And then, on top of that, especially people are very on board with everything that could go wrong and government (inaudible 00:18:27) from that long list. So: build more stuff? There could be parking problems, there could be traffic problems, there could be noise, there could be the character of the neighborhood, there could be–birds could be displaced.

And, economists might think, ‘Those are just lame excuses that special interests are going to use to stop stuff.’ Well, these are lame excuses that actually really strike a chord with most of the population.

So I’d say the main reason why it’s so hard to build is that most people think that the world would be a lot worse without this strict regulation. I mean, it’s not literally true that normal people say, ‘I don’t want anything to be built,’ but rather, ‘I only want it to be built if it checks every box,’ and to check every box is so hard that the result is hardly anything gets built.

Bryan Caplan: Right. So, I really doubt that there’s been much change in belief in supply and demand. It’s just one where, I don’t see any sign that people in earlier periods were better. You could read intellectuals and say maybe they were better, but normal people, I just don’t see much sign of that. We don’t have the data, so it’s just guesswork, but probably not.

There has been a increase in the willingness of governments to listen to activists. Probably a better way of putting it is that activists have gotten better organized. There were some actual deliberate efforts by the federal government to help activists organize. So, there’s some regulations that were passed in the 1960s that said if you want to keep getting your federal funding for highways and such things, you need to go and empower community activists and consult with them very closely for any construction or infrastructure.

Now, the important thing to understand is that community activists do not really speak for the general public. They speak for themselves, while in the name of the public.

And, minimum, I think it’s fair to say that the kind of person who becomes a community activist, they might actually share the general vague concerns of the public, but they are just much more intense about it. A normal person might say, ‘Oh gee, rich developers building stuff. Isn’t that a shame?’ and then get on with their lives. Whereas activists are much more likely to say, ‘We can, will, and must stop these horrible fat cats whose sole goal is to make money by disrupting our community.’ There is a lot of that.

I mean, I would say there probably has been this general psychological shift towards being unwilling to just say, ‘Tough luck. Too bad. That’s not a big deal. Who cares?’ That is a general problem.

There is a really good book–you might’ve actually interviewed them–Neighborhood Defenders. Did you interview the authors of that book?

Bryan Caplan: Yes. So, it’s three authors. One of them last name Einstein, so that one’s memorable.

But, anyway, this is a book where they actually got transcripts from pretty much all the land-use meetings in Massachusetts and then they just went through and said, ‘What do people even say in these meetings?’ Very little about property values, very little about trying to keep housing affordable. Instead, it’s primarily just an endless list of complaints, most of which are very petty, like: We can’t build a hundred million dollars apartment complex because there’s some migratory birds that sometimes stop by. And, it’s like: Okay, suppose they do stop by. Is it a hundred million dollars’ worth of birds? So, who cares?

But, the current approach is we’ve got to go and listen patiently and sensitively to every complaint no matter how petty and then do something about it.

Probably my favorite example of this: I was presenting this book to a Zoom seminar based in Wyoming–Scott Beaulier’s group at the University of Wyoming. They were telling me a story about a local developer, had a big plot in Laramie; he wanted to build 30 houses. Caused a giant uproar among neighbors–because of?–light pollution: ‘We want to look at the stars and if there’s new houses, wow, we have to walk another 10 minutes to look at the stars.’ So that’s terrible. They wanted to just completely block the project. In the end, the local government compromised and said 23 homes. But, seven homes got blocked for this very petty complaint. And, you have to say: Once you got 23 homes, isn’t that enough light to go and block your view of the stars anyway? So really you block seven homes for nothing.

Bryan Caplan: Marginal bird?

Bryan Caplan: It’s worth pointing out of course that most people who live in an area would never go to a land-use meeting, either.

Bryan Caplan: Economists sort of like this contrast between the people who don’t live there, don’t go, and the people who do live there who do go. It’s more like: No. It’s like a tiny fraction of oddballs that would go to a meeting. Like, I’m very fond of personality research. When you read it, it’s, like: Wow, these people are really high in what personality psychologists call neuroticism where any change, they just flip out. You might say it’s all an act. Give them an Academy Award if it’s just an act. I think they really are people prone to just hysterical overreactions.

Bryan Caplan: Let’s hear it, Russ.

Bryan Caplan: I would start with: Why do you assume that developers want to make things uglier? I think normally they want to make things better. I just got back from Dubai and Abu Dhabi. These are ultra modern cities where they took something that was a lot less developed and they just made a magical city–two magical cities of the future. It’s very impressive and it’s, one, where it’s like, yeah, if you are going to change San Francisco, why would you make it worse? Of course, there’s always going to be some dispute about aesthetics and someone saying, ‘Oh, it was much lovelier before.’ It’s like, ‘Well, okay, that’s one view. Can you imagine that there’s other people, maybe most people would actually think that it looks better the other way?’

I mean, a lot of the reason why I did this as a graphic novel is I realized a lot of the complaints about deregulation are aesthetic. It’s about: It would look ugly if you allowed development. It’s hard to go and argue against that, but I thought if I could draw pictures of an alternate world where it’s a lot more developed but still looks not only good but better, thought that would be effective. So, I hope that did work.

Bryan Caplan: I like to point out, like, often the areas of the world that are considered most beautiful are generally ones where you combine natural beauty with human development. Just pure unbuilt coastline isn’t as good as, say, the Amalfi Coast in Italy, because human beings then went and did something great with what was previously unspoiled nature. It’s like, yeah, the combination is actually better.

The story that you’re talking about in the book is: in the book I have a Time Machine because, why not? And so, Ed Glaeser and I go back to 1931 to see the original New York Waldorf Astoria Hotel, which was torn down that year. So, the famous Waldorf Astoria Hotel that you see isn’t the original one. And if you look at it, that building was just gorgeous. I love it. And, it’s like, okay. So it’s just a crime to have torn it down, right? It’s like, well, guess what came up two years later? Empire State Building. Maybe the most beloved building ever made. So, I say, look, we should always be thinking about the history of the future. Anytime you see something you really like, normally there was something that was there before that was torn down that somebody previously thought was wonderful and said, ‘Isn’t it going to be a shame to tear this down?’ At least be open-minded, I say, to the possibility that developers want to make things better.

There is a reason why people like to make beautiful buildings, that you can charge a higher rent to live in a more beautiful building. If you look at some place like China, you might say, ‘Yeah. Well, a lot of the people there are too poor to put a lot of priority upon just the looks.’ If it costs that much more, then they don’t want it yet. But it doesn’t mean that if you start off with an area with a lot of rich people that they wouldn’t go and replace what they currently have with something truly gorgeous.

Bryan Caplan: You could say there’s a race between charm and magnificence.

Bryan Caplan: So, what is it you’re really going for? Yes. You might say, ‘Is Dubai charming?’ And it’s, like, ‘No. Dubai is awesome.’ I guess I’m just going to go and confess, I’m more of a person who loves the awesome than the charming.

Bryan Caplan: I think a lot of other people are with me, actually.

Bryan Caplan: Or how about magnificence to the city center and charm as you get further away?

Bryan Caplan: I think that’s what’s going to pass the market test, really.

Bryan Caplan: Well, we both know there’s going to be a bunch of people in any city we name as a dump who will stand their ground and say, ‘No, it shouldn’t be changed.’ That’s why it hasn’t been changed.

Bryan Caplan: People will rationalize the aesthetic wonder of almost any status quo. It’s crazy.

Bryan Caplan: So, here I’m heavily basing this on Glaeser and Kahn’s accounting where they just try to tally up what are the carbon emissions of all sorts of different areas of the United States based upon kind of construction and age of construction and location in the country. So, the punchlines are as follows.

First of all, central cities have lower carbon emissions per person. And a lot of it is, like, you’re sharing walls, so you just have less heat and cooling loss because people are more packed together. So, you’ve got that kind of thing.

Then you’ve got: new construction has lower emissions than older construction because it’s just built with better materials, better insulation. And this is including the fact that new stuff is bigger. So, it’s bigger and also has lower emissions.

And then, the really big thing that they talk about is that just by unfortunate coincidence, the areas of the United States that have the naturally lowest need for heating and cooling–Southern California, Northern California–also have the worst regulation.

And, it’s weird because, you know, I am from California; you spend a lot of time in California. Perhaps you’ll agree with me that Californians are just the most self-righteous kind of American. Like, ‘Oh, we are protecting the planet here in California.’

Bryan Caplan: It’s, like, you can’t protect the planet in California because if you prevent people from getting affordable housing in California, they’re going to move to another place in the country where emissions will be much higher. Yet if you’re worried about global warming, what matters is not which part of the country emissions come from, it matters what the total emissions are. So actually a real green would want to go and give a massive green light to tons of construction in California so that people will move out of the brownest areas–brownest area basically being the U.S. South, and then next being the Northeast.

So, that’s really the heart of the book, is that there are a lot of people in places like California feeling really good about themselves because they blocked construction in the name of the environment, not actually considering the question of: Sure, they’re not going to admit carbon here because they’re going to do more someplace else. So, how is that a fix?

Bryan Caplan: Yeah. I’d say that it’s probably about two-thirds true. The story of there’s just no housing regulation of Houston is wrong, of course.

But, they do just have a lot less regulation. The kind where they really basically don’t have it at the citywide level is classic conflicting-use regulation, where you’re trying to legally separate residential, commercial, and industrial development. Here, there’s this famous book called Land Use Without Zoning, by Bernard Siegan, where he made the point of: Yes, so Houston really barely has any regulation of that sort. That’s actually kind of different from most of the regulation we’re talking about. But then he said: But there’s actual market forces that give you a natural separation. So, most obviously if you’re building industry, you want to be next to railroads and docks. You don’t want to go and build a giant rubber processing plant in a residential neighborhood.

Similarly, commercial development: You want to go and have that stuff on major highways. When you’re doing residential construction, you want to go and build mansions next to other mansions because rich people are willing to pay more to be near other rich people than poor people will pay to be near rich people.

So, a lot of the point of that book was that the regulation is superfluous because there’s a natural separation of uses.

But then, on top of it, if you say, ‘Well, but it’s not perfect in Houston,’ and that’s totally true. It is less perfect of a separation of uses. But, Siegan’s point is: Yeah, it’s too perfect in most places. It does make sense to have gas stations close by to nice neighborhoods. It does not make sense to say you can’t have a gas station anywhere in the vicinity, because rich people need to buy some gas, too. So, we’re like mixed use. It is a good idea (?) sometimes to go and have stores on the bottom level and then residences on the top; and when you have very strict separation, you can’t do that.

In terms of other kinds of regulation–so, yeah. So, Houston is a lot better on things like minimum lot size. It’s easier to go and say, ‘Yeah. I don’t have a lot of land, but I’m going to put a house here anyway.’

What a lot of people have noted is that Houston, it successfully reduces popular pressure for regulation by respecting not only homeowner associations but also restrictive covenants. So, basically people–like, in neighborhoods where they really want to go and lock it in, the government lets them do it contractually. Which means that if the people there have an intense demand for that, then they can do it. Meanwhile, neighborhoods where people are more apathetic stay open, so you just have a lot more variety. Honestly, that variety is crucial. If, say, every major city was half strictly regulated and half wild west, that would probably solve 80% of the problem.

Bryan Caplan: Yeah. Well, so of course you can just go and look at prices and see the prices there are a lot lower than San Francisco or Manhattan.

But probably the best test is just to see how incredible their population growth has been. So, places like San Francisco or New York are very stagnant in population. Houston, on the other hand, has had a large multiplication of population over the last 50 years. I don’t have the exact number in my head, but easy enough to Google.

Of course, the whole state of Texas has actually been doing really well in population growth, too. So, in a way I would say Houston is sort of the icon of low regulation for Texas, but the whole state actually in general looks quite good; and it is a place where you can just still get stuff done.

By the way, so in terms of public opinion, I did get to live in Texas for about four months during COVID. And, what I realized is: it’s not like normal people on the street are there saying, you know, like, ‘Heehaw, we got our (?) regulation here in Texas. I’m so proud of that.’ No normal person says that. It’s rather just that they don’t have the energy to oppose it.

Right? In a way, when I speak in Texas, I want to say I want to get people in Texas here to think of regulation equals California; deregulation, low regulation equals Texas; and then we got to become even less like California. If they’re that, we want to be the opposite. That’s the way that you could get even lower regulation Texas would be just to link any talk of regulation where: ‘That’s when they would say in California, man.’ So, we don’t want to be like that.

Bryan Caplan: So, in general, the slippery slope argument, which I think is underrated, and it just says that bright-line rules have a useful social function even when there are some minor exceptions that seem like they totally pass a cost-benefit test.

And the reason is that exceptions tend to snowball. You make one or two exceptions, then it gets worse and worse and worse.

Right. Now, you may say it’s paranoid, but one of the things I say in the book is that housing regulation is one of the best examples of how bad the slippery slope really does get.

I did go and read this early pro-zoning book from around 1920, I think it was just called Zoning. And, the guy says so many seemingly completely reasonable things about what’s going wrong with laissez-faire. He says, ‘Well, people are deliberately building taller buildings just so they can get the light, and then another rival builds even taller buildings so they can get the sunlight.’ And, things like, oh, let’s see: People building right up to the property line, and how that’s uncomfortable for pedestrians. There’s lots of very reasonable complaints there.

But then, when you realize, yeah: People listen to this guy, they went and they passed regulations to deal with the most reasonable complaints; but they also created a system of complaining. And, once you have a system of complaining, the complaints definitely do not stay reasonable. People just keep showing up with more complaints and more complaints. And then, finally, we are left with the system that we got.

One of the nice examples of this is noise complaints of the Reagan Airport, which I’m sure you remember, Russ. People file noise complaints. And, if I remember, one single human being has filed an absolute majority of all the noise complaints against Reagan Airport.

And then, you just realize there are people like this and have a system that is welcoming to them and respectful and sensitive. It’s, like, you are messing life up for all the people that would never think to go and show up at a meeting. And, the fact that someone is willing to complain does not mean they got a good point. And, if you have a system that is very willing just to address every complaint and just refuse to say, yeah, too bad, tough luck, you end up with a really crummy system–like we got today.

Bryan Caplan: The best outliers are fantastic; the worst outliers are terrible. What is even the alternative view? Outliers in general are good? That would be a weird view.

Bryan Caplan: So, Bastiat has this great essay: “What Is Seen and What Is Not Seen.” He points out that normally people justify government by saying, ‘Look, government is doing this obvious great thing. Use your eyes.’ And then, someone comes along saying, ‘Yeah. Well, we deregulate or cut government spending.’ It’s like, ‘You want to get rid of this wonderful thing? What a monster you are.’

Bastiat’s reply was: ‘You’re assuming that I want to get rid of something and replace it with nothing. What I want to do is get rid of something, replace it with something better, because we’ve got finite resources.’

So, for example, Bastiat’s talked about: suppose you’re in peacetime, you’ve got no worries about national events, and someone says, ‘Let’s go and just cut the size of the military.’ Then someone will reply, ‘Oh, but the military provides great jobs for people. You want to put people out on the street.’ And Bastiat says, ‘Well, let’s think about the jobs they would be doing instead after the government cut spending, cut taxes, and let people spend money on things that would actually increase human welfare.’ So, maybe instead of going and just sitting around guarding something that doesn’t need guarding, they’ll go and open a croissant shop. This being France.

Right now, in the case of housing, here I say you can sit around and say, ‘Look at this lovely neighborhood. How could you destroy it?’ Well, maybe you’re going to build something better. Maybe we’re going to tear down the Waldorf Astoria and build the Empire State Building. Maybe we’re going to go and take this unspoiled coastline and make it a gorgeous developed coastline.

What I thought was really nice about this format is that as Bastiat says, ‘Look, what is unseen, you can only see with the mind.’ And, I realized: Or, we could draw it. Which is easier than–visualizing is harder than actually looking at a picture. So, that’s a lot of what I wanted to do, and to use these insights.

And, I think this really is what’s going on with development. You notice, it’s very unusual after development happens for people to keep complaining about it for very long. Instead, at worst, people just get used to it. And, at best actually they embrace it.

So, that Manhattan skyline is considered one of the best in the world. People travel from all over the world to see it. People pay a large premium to have a view of the Manhattan downtown. So, it’s like: Why did you assume that people were going to do something bad? Right? It’s like, is it possible they’re going to build something bad? Sure. So, they could build the Pompidou Centre, whatever. Right? Although I got to say, I’ve met people that who like that.

Bryan Caplan: Probably a lot of it is just that they got used to it. This is–Step one is: Yeah, well even if you don’t like it, you’ll get used to it. It’s not going to be that bad. And, think about all the people who get to live there every day and enjoy their lives there.

But on top of that, just for the aesthetics, maybe they’re going to build something awesome. Why are you just so stubborn in thinking it’s going to get worse?

Like, I’m going to confess: I’m actually anti-Paris, and I think Paris is a really boring city. When you’re in the Eiffel Tower and you look out, it’s just like a giant, blend thing of mutely colored, six-story apartments. It’s like: that’s so great?

To me, like, the best case for historic preservation is Prague. And, you go there and it’s, like, ‘Wow, these are really gorgeous buildings.’ And, the sculpture–there’s a lot of public sculpture on the buildings. So, that’s one where I can see that more easily being beloved than Paris, which honestly I just find boring.

Bryan Caplan: Yeah. So, just to back up, a key result from public opinion is that you see fairly similar levels of support for regulation for both owners and renters. It’s not just owners in their crafty self-interest are trying to strangle it, while the tenants who don’t show up or don’t live in the area yet get outvoted. It really is just broadly popular. Which should at minimum open your mind and say, ‘Huh. Maybe it’s not self-interest.’

But still there is the interesting question: But isn’t it clearly in the self-interest of existing homeowners–even if they don’t vote their self-interest–to strangle construction? And, that’s where my answer is a definite maybe. And so, maybe. But it’s just not nearly as clear as people think.

The most obvious part of all is: If you’re really just a total greedy jerk and someone wants to do something, does it really make sense to say ‘Absolutely not? No, never?’ It’s, like: no; if you’re greedy though, the sensible answer or sensible thing to say is: ‘Here’s the price. Sure, you can do whatever you want if you go and pay the price.’

That’s what’s very striking about the politics of this, is that it’s just so fanatical, so non-negotiable. It’s like that’s a sign that it’s not actual self-interest, because a real shrewd businessman is, like, ‘At what price? Let’s make a deal.’ Not, ‘No.’ But in any case, so there’s that.

When I was in India, I was actually talking to a guy whose whole dissertation was on the theme of: the reason why existing owners don’t want to allow new construction is that the marginal new development doesn’t pay enough property taxes to cover the cost of school for the kids. And it’s, like, ‘Okay. Why would they then be opposed to retirement communities? Why are they opposed to commercial developments?’ But then, most obviously, ‘How about they say we don’t have equal property tax rates for new and old developments?’ All right. So, there’s that.

But anyway, all that aside, there’s still a few other points, which is: It clearly bad for you as a homeowner if there’s deregulation? The answer is: Well, there’s a number of scenarios where it’s really good for you. Here’s one: How about if you sell out to a developer? Yeah. If you own one of those charming homes in San Francisco and you sell it to a developer, it’s, like, my home is worth $5 million bucks. Yeah. Well now that they can build a skyscraper on it, your home’s worth $20 million bucks. Do you think you could go and find solace elsewhere after selling out your home?

And by the way, remember obviously–or not obviously–but remember that if you are a developer and you want to go and build a skyscraper, you could start by going and buying a bunch of options to buy. And then, you sort between them and say, ‘Which neighborhoods did we actually manage to get all the options we need to actually site the building?’ And, options to buy are a lot cheaper than actually buying. So, one thing is selling out to a developer: you can make a pile of money on that.

And, really when you think about it, the truly selfish homeowner would want to say, ‘I just want my home to get deregulated,’ or maybe, ‘I want my street to get deregulated.’ That would be ideal. Which is kind of the opposite of what people are usually pushing for. Most regulatory pressure is: I don’t want anything getting deregulated within sight of me, but I don’t really care what happens to the other side of the city. Right?

But then another reason why it makes sense for a homeowner to want deregulation is: What if you want to upgrade? What if you’re currently in your starter home and you want to move to a better home? In that case, it does not make sense to want home prices to be through the roof because, sure, you can sell for a high price; but then you buy your better home for a high price, too. So, that’s not a clear win to have high prices.

Then a final one: So, I believe you’ve got four kids, too, right Russ?

Bryan Caplan: All right. So, I’ve only got four. You’ve only got four. That probably doesn’t get as many laughs in Israel as it does here, right?

Bryan Caplan: I’ve heard of people in Israel seriously saying, ‘Well, only five. We failed.’ But, anyway–

Bryan Caplan: Right. But, what if you want your kids to live within 50 or a hundred miles of you? You have a $5 million home in San Francisco. All right, well, you’d like your kids to eventually become adults and get married and have families of their own. How is that going to happen if the price is, for a small home in San Francisco, for $5 million bucks? So, really it puts a parent in a situation where either a kid lives really far away from you or you have to take out a home loan against the equity of your house to pay so they can buy the house. So, then it’s kind of pointless. Like, what was the point of that? Prices are high, but, like, I just had to use it to go and help my kid?

And then, obviously–you didn’t mention this but it’s directly on point–one of the main reasons why people keep living with their parents is because housing prices are too high. And, if you want your kid to go and eventually give you some grandkids, you don’t want to keep them living at home. I was just in India where there is not much of an issue with living at home with your parents while you have kids. But, the United States, there’s a big issue. If you’re stuck at home, you’re very unlikely to get married and really unlikely to have kids. I’m guessing Israel is more like the United States than India. Is that correct?

Bryan Caplan: They need a lot of help–

Bryan Caplan: What about Tel Aviv where it so expensive to get a place?

Bryan Caplan: Yeah. So, on anarchism, just for full disclosure, I’ll just tell people if you’re curious, see my recent debate with Yaron Brook. But, anyway–

Bryan Caplan: So I do know, Russ, that you’ve got a a general issue with over-quantification in social science.

Bryan Caplan: And, I guess I’m going to say I just don’t. And, the idea of a dial, you might say, ‘Look, it’s not just one dial. There’s many dials.’ But, still the general point of: Well, we could come up with an index and of regulation in general, and it does make sense to talk about moving the dial–I actually think that’s fine. There’s actually a new game out called Wavelength where the whole idea of the game is to make people put anything on a continuum. So, it’s the continuum from Russian to American literature. And then, I give a book and you have to go and put it on the dial and then have your teammates guess that it’s, like, ‘Oh, Ayn Rand is at .83 on the dial.’

Bryan Caplan: Sure (?). I mean, honestly, I’m all about eliminating if I can get away with it. So, yes: eliminating restrictions on building heights, you can build as tall as you want–

Bryan Caplan: Yes. You don’t need to get permission. Eliminating minimum lot sizes. You can squeeze your house onto as little land as you want, as long as you are still on your own land. So, that’s another one. Yeah.

So, actually a lot of places have literally gotten rid of parking requirements. So, that one is not even just a fantasy anymore. Plenty of places are saying, ‘Look, if you want to build parking spots, fine. Otherwise don’t.’ That’s one where I would say, really when you’re doing that, you should definitely combine that with changing the pricing of roadside parking so that first of all, you adjust the prices based upon demand. And, second, we also don’t have these crazy ‘maximum amount of time you can park’-regulations. Just raise the price.

Bryan Caplan: The technology is sufficiently good where you could say, ‘Look, if you really don’t like the idea of people parking in one place all day, then at least offer, like, a quadratic price instead of an absolute prohibition.’ So, say that every time you double the amount of time you quadruple the price–something like that. That would make more sense than what we’re currently doing. And, with modern technology, it’s really easy to have nonlinear prices.

Let’s see. And then, yeah, so most–

Bryan Caplan: Yeah. That’s a great question.

So, really what I’m talking about is what lawyers call by-right development, where if you have satisfied the rules, then they must give you the permit and they just can’t be denied. And, there are actually–in the United States there’s a lot of things like that where it’s like, ‘Look, I am building a home in a area zoned residential, you’ve got 10 rules, I satisfy them. You cannot legally deny me the permit.’

And, really what I’m talking about as my preferred is just going and putting a lot more stuff on that by-rights list. So saying, ‘Look, so we own the land and so it no longer matters how big the building is, as long as you’re actually on your lot.’ Or how tall it is.

Or similarly, like, there’s no rule against multifamily. So, worth pointing out until around 1920, there really was almost no regulation of multifamily housing. It’s, like, you own the land; well, you can build multifamily if you want. It was only around then that there’s this Supreme Court case where they said: Well, apartments are just like blowing a pile of smoke on a neighbor’s lawn, and so you can’t do that either. Or at least you need to get permission.

So, ‘by-right development’ is actually the slogan that I like. It requires a little bit of explanation for what it means. But, yes, that’s the solution for–the delay is turning things from ones where you need to get sequential permissions to ones where: Look, I’ve done what I’ve been asked; you must issue the permit.

Of course, if you could really change it to you don’t need a permit at all, and it’s your land you can build, and if somebody doesn’t like it, they can take you to court–that, I think, is actually the best system specifically because it’s so hard to actually do it. I think there is this big bias against construction. So, the fact that it’s a pain in the neck to sue a neighbor over what they’re doing on their land, I consider a feature, not a bug.

Bryan Caplan: Like a shall-issue concealed carry gun permit.

Bryan Caplan: So, it’s one where it’s, like, ‘I’m not a felon. I haven’t been involuntarily committed to a mental hospital. I’m an adult. I am definitely allowed to get a permit if I want to have a concealed weapon.’

Bryan Caplan: Well, let’s see. So, I was just down in Próspera, in Honduras, where I do have friends that are building a charter city. They’ve got a couple of very tall apartment buildings that they’ve been able to go without the oversight of the regular government. There’s recently a Supreme Court case that–they might be getting shut down after all their efforts, so it’s unclear whether that will go forward. But, definitely if you want to go and see what they’re trying to do there, they’ve got a lot that’s already going. There’s a bunch of things that have happened, but it’s not one where, like, ‘Oh my God, I can’t believe that you’ve just filled this island with buildings.’ It’s not there yet. But, nevertheless, I do recommend–and they’re actually having a pop-up city event in a few months where basically a few thousand people just all go there at the same time just to go and have a big working party. So, that’s a good example.

By the way: So, to my embarrassment, I forgot one major kind of regulation that should have been in the book, which is just the massive ownership of land in the United States by the Federal and state government. It’s about 33% of the land in the United States is owned by state and local governments. It’s, like, 10% by states, 23% by the Federal government. And, it’s not just Alaska pushing the numbers up. Actually basically almost all the United States that’s settled after the Civil War, government owns a lot of that land. And that would be a really obvious place to go and build charter cities if some of that land would get privatized.

So, if you can imagine Muskland or Zuckerbergville springing up–and it seems very plausible to me that if you had that big of a name behind it and moving a lot of their existing businesses there, that really could go and solve this coordination problem and just create totally new cities of a million people in a short amount of time. I think actually Trump sort of said something vaguely like this. I’m like, what? Well, maybe. Probably has opened his mouth and forgot about it five minutes later; but who knows?

Bryan Caplan: Fantastic to get to talk to you again, Russ.