John Burn-Murdoch Profile picture
Sep 18 18 tweets 6 min read Twitter logo Read on Twitter
NEW: it’s become popular to say that supply and demand simply don’t apply when it comes to housing, but the evidence is clear:

When you build lots of homes — affordable or market-rate — prices and rents flatten and even fall 😃

My latest

And a thread:on.ft.com/3EMJpcE
A great study by @ClaytonNall and co found that people have a good understanding that if the supply of a product or service increases, its price will decrease, and vice versa...

Except when it comes to housing 🤔

papers.ssrn.com/sol3/Delivery.…
Image
We’re used to Nimbys opposing housebuilding because it lowers their property values, but they’ve found unexpected allies on the left, who argue against new market-rate housing on the basis that it *increases* rents and prices — harming those on low incomes.

But is this true?
No.

As noted by @1finaleffort, the recent evidence on the impact of supply on prices is compelling.

In 2016 much of Auckland was rezoned to allow for higher-density building. The results were threefold:

1) A boom in construction of dense housing, predominantly at market rates Image
2) That caused nominal rent rises to slow in Auckland, erasing a 25% gap vs the capital, Wellington, where supply did not surge and nominal rents therefore increased much faster. Image
3) In fact, once you adjust for inflation, rents in Auckland today are at the same level as they were 7 years ago before rezoning and the surge in supply.

Meanwhile in Wellington renting is now 25% more expensive in real terms.

Build more houses! Image
It’s a similar story in the US Midwest, where Minneapolis has been building more housing than any other large city in the region for years, and has completely abolished all zones that limited construction to single-family housing.

The result?

Rents have fallen in real terms 😃 Image
The same is true right across the region.

From Minneapolis (surge in housing supply) and Milwaukee (shrinking population, i.e falling housing demand), to Indianapolis and Columbus (housing not keeping pace with population), supply and demand are working just as we’d expect. Image
With the headline supply, demand and price issue addressed, we can get into some of the more nuanced counterpoints that are sometimes raised.

@geographyjim has an research note summarising the evidence here, but I’ll zoom in on a couple of key points data.london.gov.uk/housing/resear…
One view especially prevalent among affordable housing advocates is that only by building subsidised housing can you increase affordability. That market-rate dwellings will simply go to people on higher incomes, leaving lower earners high and dry.

The evidence says otherwise.
Studies from the US, Sweden & Finland all show that although most people who move *directly into* new unsubsidised housing come from the top half of earners, the chain of moves triggered by their purchase frees up housing in the same cities for people on lower incomes. Image
The US study found that building 100 new market-rate homes ultimately leads to ~70 people moving out of below-median income neighbourhoods, and ~40 moving out of the poorest fifth.

This holds even if the new housing is priced towards the top end of the market.
NB if you’re wondering why market-rate housing seems to help low-income people more in Europe than the US, the researchers have a theory:

It’s not because of anything to do with the housing; it’s because income inequality and segregation are higher in the US than Europe. Image
Another argument is that building market-rate housing in a lower-income area leads to gentrification, with higher earners moving into a lower-income area and displacing the incumbents.

But the latest research suggests this is almost exactly backwards.
It’s not that rich people merrily choose to move to low income areas, and end up pushing out poorer residents.

Studies show there’s little if any displacement out of the new areas, but it’s the supposed gentrifiers who were displaced out of their own areas due to lack of supply.
Source: https://journals.sagepub.com/doi/10.1177/10780874231169921
Source: https://link.springer.com/article/10.1007/s10901-021-09873-6
In other words, even if you think it’s inherently bad if high earners move into poorer neighbourhoods, the answer is to build more market-rate housing in higher-income areas so those people are not forced out of the areas they currently live in.
To conclude:

If you want to improve housing availability and affordability for all, the good news is that any new housing will help.

Subsidised housing? Excellent. Market-rate homes? Also great.

Here’s the full piece on.ft.com/3EMJpcE
And @geographyjim’s thread and report are worth reading in full to capture all the nuances

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More from @jburnmurdoch

Sep 18
As Lizz Truss reflects on what went wrong, it’s worth noting the mini-budget wasn’t just an economic miscalculation, it was a big political misstep too.

She positioned the party *way* to the right of not only the average British voter, but also the vast majority of Tory voters. Image
It may be popular at certain think tanks, but the libertarian right quadrant of UK’s political compass is virtually empty among the wider public.

If there’s a group in British politics relatively under-tapped by the main parties, it’s the socially conservative, economically left Image
(A lot of the Leave vote in 2016, including those who were not usual general election voters, came from that corner of the compass)
Read 5 tweets
Sep 5
Imagine looking at this chart and thinking "yep this looks legit".

But naturally, despite it being glaringly wrong and misleading, and despite this having been pointed out to the author, it remains up. Image
Ireland’s GDP figures are notoriously distorted by profit-shifting from US tech and pharma companies

Usually GDP per capita and people’s actual individual consumption track each other fairly closely. More GDP, higher living standards

For Ireland, that is very much not the case! Image
To address this, Ireland’s Central Statistics Office publishes Modified Gross National Income, which attempts to strip out all of those profit-shifting distortions.

If we use that preferred statistic, the Ireland vs UK comparison from the original tweet is completely transformed Image
Read 8 tweets
Aug 25
NEW: we need to talk about the dire state of British transport infrastructure.

Of the 52 UK cities with 250k+ people, only 8 (15%) have a tram or metro.

In France & Germany it’s 80%, Poland is on 60%.

Even *American* cities are better served, and the US hates public transit! Image
It gets worse.

US cities are poorly served by public transit, too car centric, but at least you CAN drive to/around them.

Euro cities (+ London) are the inverse: a pain to drive in, but great public transport.

Other UK cities are screwed: 💩 public transport AND bad road infra Image
European cities (+ London) have their successful transport model.

Even as someone who thinks the US is insanely car-centric and this has huge negative externalities, the US transport model does also do its job.

Most British cities outside of London are being failed by contrast.
Read 11 tweets
Aug 18
NEW: the Conservatives are trying to use cultural issues as a wedge to peel off voters ahead of next year’s election. Is this strategy likely to work?

My column:

And a thread: https://t.co/dGeYioWdClon.ft.com/3E3QQMg
Image
There’s a rich history of conservatives using wedge issues.

In the 2001 Aus election, Liberals exploited a migrant boat incident + 9/11, boosted the salience of immigration, took a strong position, and left the opposition bleeding votes on both flanks

australianelectionstudy.org/wp-content/upl…
The UK’s EU referendum was another classic.

Immigration shot up to be considered by far the biggest issue concerning Britons in 2015-16, the Leave campaign positioned itself as the solution, and this combo of high salience plus belief that voting Leave was the answer won the day Image
Read 14 tweets
Aug 11
NEW: America is a rich country. Britain is a poor country with one wealthy region.

People love to compare the UK to Mississippi, but it’s far more informative to look at UK subnationally, too.

London ranks fairly well, the rest of the country does not 👉 https://t.co/UTjooyJ5Jcft.com/content/e5c741…
Image
If you strip out London’s output and head count, the UK’s GDP per capita would drop by 14%.

Whereas if the whole of the bay area from the Golden Gate to Cupertino seceded tomorrow, US GDP per capita would only dip by 4%.

The US is far less reliant on any one region.
Similarly, amputating Amsterdam from the Netherlands would only shave off 5% of GDP per capita, and removing Germany’s most productive city (Munich) would only shave off 1%.
Read 12 tweets
Aug 6
I used to eat 5,000 calories per day, every day, when training intensively, because that’s how much I was burning. Anyone who has done significant amounts of high intensity exercise knows the below is not true Image
It’s also settled science. The only thing that’s not settled is whether *the rate at which* more physical activity translates into more total energy expenditure varies with a) amount/intensity of exercise, and b) whether someone is restricting their energy intake at the same time
The constrained energy model (right) theorises that the body compensates for increased energy burned during exercise by spending less energy on other processes, offsetting some of the extra burn from exercise. Image
Read 12 tweets

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