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Episode: Solutions to the housing shortage

Author: Marketplace
Duration: 00:27:35

Episode Shownotes

he U.S. is somewhere between 3 million and 7 million units short of meeting the nation’s housing needs. What can be done to build up the supply of homes? We asked five experts for their solutions. Also in this episode: A new program to cool down electric grid demand comes

to Texas and an Iowa soybean farmer stays optimistic in the face of a bad harvest and a potential upcoming trade war.

Full Transcript

00:00:01 Speaker_16
Well, that was a week, huh? From American Public Media, this is Market Flash.

00:00:18 Speaker_16
in los angeles and car is no it is friday today this one is november the eighth good as always to have you along we have so very much to talk about never enough time david gura is a bloomer katherine pal is at the washington post a year to

00:00:35 Speaker_16
So, Catherine, let me begin with you and this observation, and I suppose, you know, we'll point out that there was a Fed meeting and blah, blah, blah, quarter percentage point, all that stuff that's been in the news. We are in a place now, Ms.

00:00:46 Speaker_16
Rampell, where inflationary fiscal policy from the Trump administration and a new Congress is going to run headlong into a monetary policy regime that is loosening and therein be dragons, yes?

00:01:03 Speaker_04
Yes. Well, Powell, the Fed chair, was very disciplined about not commenting on what the next administration will do and basically said, you know, they don't want to speculate.

00:01:17 Speaker_04
And it's worth noting that when Trump was waging trade wars before, I believe the Fed continued cutting rates for a while. So because there were, you know, tariffs have multiple effects.

00:01:27 Speaker_04
One is to raise prices, but another is potentially to slow growth. So it can cut both ways.

00:01:34 Speaker_04
I do think it's going to be a real challenge in the next couple of years to manage, to have this sort of push-pull between fiscal policy, not just tariffs, but unfunded tax cuts, among other things, and monetary policy, that they may not be working in the same direction.

00:01:54 Speaker_04
And we could be setting ourselves up for something of a showdown, depending on how much political independence, the Federal Reserve retains, which is another... Hang on, you're skipping ahead in the interview, Katherine.

00:02:07 Speaker_16
You're skipping ahead. Cut it out. David, it has to be, you know, Katherine said Powell was disciplined, but one does not have to try too hard to read between the lines to understand that this is going to be a challenge in running this economy.

00:02:19 Speaker_08
There were some odd vibes at that press conference yesterday, and when he was asked about politics, he was really reticent. to engage with those questions.

00:02:28 Speaker_08
When he was asked about the economy, he was happy to expound at length on what the Fed had done and sort of, to an extent, what it's thinking.

00:02:35 Speaker_08
But this is something that you've pointed out many times, that the pressure on Jay Powell is going to get more and more extreme.

00:02:40 Speaker_08
And there was that very intense Q&A with Victoria Guido of Politico, where she said to him, if the incoming president asks you to resign- You guys are stealing all my questions, but go ahead, David. Oh my God, I'm sorry.

00:02:49 Speaker_16
No, go ahead. Since you're on it, go ahead.

00:02:52 Speaker_08
um would you resign if he asked you to and he emphatically said no quickly said no uh and then she asked him to expound upon that would it be legal no he said as well and then they moved on it was kind of a remarkable moment but this was this was a jay powell in that moment who looked like it was the last thing he wanted to talk about but you could tell just by his expression

00:03:12 Speaker_08
The way he was comporting himself, this is weighing heavy on the Fed chair's shoulders.

00:03:17 Speaker_16
So, Catherine, since you two have taken control of this interview, I'm going to keep going with whatever it is you guys want to talk about.

00:03:22 Speaker_16
There was a follow up actually to that no, I'm not going to resign question in which Powell said not, he was asked, you know, not permitted under the law.

00:03:31 Speaker_16
It sounds a lot like he's saying, I don't want to put words in his mouth, but you know what I mean? See you in court, right?

00:03:36 Speaker_04
I think the hope is that the confrontation won't, if there is to be one, in which Trump is unhappy with Fed policy, it may not happen for a while, right? Because right now, the economy is doing quite well.

00:03:52 Speaker_04
And in fact, the Fed is cutting rates, which is exactly what Trump wants. That's not why they're doing it, obviously, but it happens to be consistent with his desired outcomes.

00:04:02 Speaker_04
Maybe Trump will get into office and realize his great fortune that even though he's been poo-pooing this economy for quite a while, he's actually inheriting a lot of really good trends.

00:04:13 Speaker_04
You know, wage growth above inflation for over a year now, GDP growth pretty robust, unemployment ticking up but still quite low. And maybe, if he's wise, he'll just, you know, lay off of the Fed.

00:04:27 Speaker_04
Now, that doesn't mean their interests will always be aligned or their desired outcomes will always be aligned, his and the Fed's, and I don't know what's going to happen then.

00:04:38 Speaker_04
There have been signals out of Trump world that Trump may not outright try to fire Jay Powell, but may do some other things to try to undermine the credibility, the credible independence of the Federal Reserve.

00:04:54 Speaker_04
And, you know, I really hope it doesn't come to that. But I think it is quite possible.

00:04:58 Speaker_16
David, let's keep going with this, and just because you and I had this exchange in a separate communication, talk to me about that whole shadow Fed chair thing that has been floated, and number one, what it is, and number two, what it might mean.

00:05:12 Speaker_08
Yeah, count that among what Catherine was just talking about, the ways to undermine the independence of the Fed.

00:05:16 Speaker_08
So I think what's been proposed by an economic advisor to Donald Trump, now the president-elect, is to have this shadow Fed, somebody who would be telegraphing what he thinks the Fed should be doing while waiting in the wings, I assume, to be nominated by the incoming president to replace Jay Powell.

00:05:30 Speaker_08
Now, if he serves out his term, that takes us to 2026. So it would be for a while.

00:05:35 Speaker_08
I think that that level of engagement in that way would be confusing to say the least, and I think that it would sort of undermine how most Americans understand what the Fed is doing, and indeed is supposed to be doing.

00:05:49 Speaker_16
Catherine, you were facetious, I think, this morning when you pointed out that really the smartest thing that the president-elect could do would be to get into office on day one, claim credit for the economy, and then basically go golfing.

00:06:03 Speaker_04
I mean, I'm not being totally facetious. I actually do think that's the best possible outcome we can hope for. As I just said, economic trends have been quite good.

00:06:15 Speaker_04
Consumers don't necessarily acknowledge it, in part because I think they're still feeling this hangover from inflation of 2022, 2023. But at some point, I think they're going to realize that their wages have been outpacing price growth.

00:06:29 Speaker_04
and kind of what the economy needs is a hype man.

00:06:32 Speaker_04
You know, you want Trump to go in, take credit for all of these, you know, suddenly he wakes up and recognizes that all of these good things are happening in the economy that I just ticked off and say, victory, I fixed it. The economy is great.

00:06:46 Speaker_04
Everybody should feel great about it. And that would be the best possible outcome because the things he would actually do that he's proposed doing rather to quote unquote fix the economy would be economically very painful.

00:07:00 Speaker_04
So we talked about politicizing the Fed. I'm very worried about that. But there's also the universal tariffs. There's also the mass deportations, which are likely to cause all sorts.

00:07:09 Speaker_04
I mean, besides the sort of humanitarian concerns for all of that, it's going to cause all sorts of problems with the economy and the labor force.

00:07:15 Speaker_04
So there are a lot of interventions that he would like to do to, quote unquote, fix the economy or fix the country in some other respect that would actually have the opposite effect. And you can see that in the markets. You can see that

00:07:27 Speaker_04
A lot of Wall Street economists have revised upward their inflation expectations, downward their growth expectations, et cetera.

00:07:34 Speaker_16
David Gerrard, I'm going to give you the last word and I'm not going to steal your line. What's going to happen in this next administration where we're just talking about it?

00:07:41 Speaker_08
Maybe the stock market will be the economy. Ba-doom-boom.

00:07:44 Speaker_16
David Gerrard, Bloomberg, Katherine Rempel at the Washington Post. We'll be here all week, folks. See you two later. Thank you, Kai.

00:07:51 Speaker_08
Oh, my lord.

00:07:51 Speaker_16
A strong week on Wall Street ends with a strong day. We'll have the details when we do the numbers.

00:08:16 Speaker_16
You want to know what's really going on in this economy, you've got to check with consumers, which the University of Michigan helpfully does for us every single month.

00:08:25 Speaker_16
Their Consumer Sentiment Index, how we all are feeling about the economy, the prices we're paying, the income we are earning to pay those prices, that came out this morning and it shot up.

00:08:34 Speaker_16
heading into early November, rising for the fourth month in a row to the highest it's been since April. And consumer expectations of future economic conditions are at their highest point in more than three years.

00:08:47 Speaker_16
In other words, before inflation did its worst. Marketplace's Mitchell Hartman reports on those improving consumer attitudes and whether they're likely to last.

00:08:57 Speaker_11
First, it's important to note the most recent University of Michigan survey was done before the election, says Director Joanne Hsu.

00:09:05 Speaker_02
consumers have been looking forward to the resolution of this election for some time. Of course, still quite a bit of uncertainty remains.

00:09:11 Speaker_11
What we do know is leading up to the election, Americans have been getting steadily more positive for purely economic reasons.

00:09:19 Speaker_19
It's the moderation and inflation expectations, the strengthening and income expectations and continued belief that business conditions will improve in the year ahead.

00:09:29 Speaker_11
In fact, the conference board, which also reported a big improvement in consumer confidence before the election, finds that most Americans don't think which political leader is in power has a major impact on their economic lives.

00:09:42 Speaker_11
Chief economist Dana Peterson says when surveyors ask consumers what does

00:09:47 Speaker_15
Two words continue to be the biggest in the word cloud, and that's prices and inflation. Consumers are still preoccupied with the fact that prices are much higher than pre-pandemic. Still, says Peterson, it hasn't stopped them from spending.

00:10:02 Speaker_15
Even at the stimulus checks ran out, they were still working and they had money coming in.

00:10:07 Speaker_11
And lately, consumers have been cheered by lower gas prices, down about 10 percent nationwide since last year, and likely to dip below $3 a gallon soon, says Andrew Gross at AAA.

00:10:18 Speaker_00
For this Thanksgiving, they're going to be really low.

00:10:21 Speaker_11
He says that'll leave consumers with a bit more to spend for the holidays. I'm Mitchell Hartman for Marketplace.

00:10:31 Speaker_16
Much has been said and written about the power grid in Texas. You remember those blackouts after that big ice storm a couple of years ago, surging air conditioning demand in those hot Texas summers?

00:10:43 Speaker_16
Now though, hundreds of thousands of Texans are gonna have a chance to save on their electricity bills thanks to a new virtual power plant that's gonna be in place next spring.

00:10:52 Speaker_16
Virtual power plants don't actually generate power, of course, they optimize it. From Houston, Marketplace's Elizabeth Troval explains.

00:11:00 Speaker_03
Imagine you keep your house at 69 degrees on a hot day, says Renew Home CEO Ben Brown.

00:11:07 Speaker_10
Power prices could go up 30%, 50%, 100% within a given hour.

00:11:13 Speaker_03
His company's new virtual power plant in Texas would have a smart thermostat cool your house to 68 degrees at the top of the hour when prices are lower.

00:11:23 Speaker_10
And then in the second half of the hour, when electricity prices spike by double, let it rise up to 69 degrees. That is a perfect example of how you're saving customers money, but also the grid itself.

00:11:34 Speaker_03
He says those energy savings add up when you multiply them by thousands of customers. Energy consultant Doug Lewin says this project helps shift demand around so we can get more out of the electricity we're already producing.

00:11:49 Speaker_07
Rather than just curtailing it, which happens a lot now, we literally just let power go to waste.

00:11:55 Speaker_03
And we have that extra electricity because of the nature of renewables. The sun is shining and the wind is blowing, whether we use that energy or not. Karen Palmer is with Resources for the Future.

00:12:09 Speaker_01
Those are resources where the supply of electricity doesn't necessarily come when people are demanding it. But if you provide incentives, you can switch

00:12:20 Speaker_03
Incentives like a cheaper energy bill, which is what consumers can get if they move their energy usage away from peak times. I'm Elizabeth Troval for Marketplace.

00:12:42 Speaker_14
We can just start making it legal to build more types of homes in more places.

00:12:48 Speaker_16
Oh, okay. First, though, let's do the numbers. Dow Industrial is up 259 on this Friday, 6 tenths percent, 43,988. The Nasdaq added 17 points, about a tenth percent, 19,286. The S&P 500 up 22 points, 4 tenths percent, 59 and 95.

00:13:08 Speaker_16
For the five days gone by, the Dow up 4.6%, the Nasdaq surged 5.75%, the S&P 500 grew about 4.7%. Axon Enterprises up 28.7%. Today, the company manufactures tasers, body cameras, drones, and other law enforcement gear.

00:13:25 Speaker_16
Geo Group, which owns, leases, and manages correctional facilities, expanded 3.8%. Today, bonds up, yield down 10 years at 4.30%. You're listening to Marketplace.

00:13:53 Speaker_13
Understanding personal finance can feel like an impossible task, but it doesn't have to be that way. I'm Janelia Espinal, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future.

00:14:08 Speaker_13
Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts.

00:14:44 Speaker_16
This is Marketplace. I'm Kai Risdahl. One of the principles of this program is that economic headlines are all well and good, but they just don't matter if people aren't feeling it in their day to day. That is part of what happened on Tuesday.

00:15:00 Speaker_16
One of the headlines about the economy to come in a second Trump administration is tariffs. So we've been talking about that a lot this week. And now we're going to talk about it with somebody who definitely feels it in their day to day.

00:15:11 Speaker_16
April Hemmings is our corn and soybean farmer in Iowa. I caught her just as she was setting up for our interview this morning.

00:15:18 Speaker_18
All right. New recording. There we go.

00:15:21 Speaker_16
New recording, there we go. It's like we don't even have to tell you what to do anymore, April Emmes.

00:15:26 Speaker_18
I know. Hey, hey buddy, have you had anything to talk about this week?

00:15:30 Speaker_16
Nah, it's been kind of empty this week. You? Oh my goodness.

00:15:39 Speaker_18
What a wild ride.

00:15:41 Speaker_16
What a week. I want to start, first of all, by asking the same question I usually do, which is, how's business? Except I want to ask you how you think business is going to be for you with the change in administrations. What do you think?

00:15:59 Speaker_18
Here's what I said. Here's what I said to people before. Ag is screwed, no matter who gets in there. Can I say that on public radio? Yes, you can. Okay.

00:16:10 Speaker_18
Because, you know, this administration has done very little for trade and agriculture and the new administration... Sorry, this administration, you mean the Biden administration? The Biden administration.

00:16:21 Speaker_18
Yeah, we haven't had any new trade agreements and AG has been screaming for them. And then we also know now what the Trump administration is going to do, which has us running scared because, you know, half of our over half of our soybeans are.

00:16:36 Speaker_18
exported to China. Corn, our biggest trading partner is Mexico. And quite honestly, I have all John Deere equipment.

00:16:45 Speaker_18
And if he puts a tariff of 200% on John Deere parts coming from Mexico or anywhere else, you know, farmers are going to be in a world of hurt more than we are. But bean market just came in and beans are up $4. That's unbelievable.

00:17:02 Speaker_16
Explain that to a layperson. I don't know what that means.

00:17:05 Speaker_18
I don't either because so evidently there, you know, the stock market reacted and now the soybeans, but the, the soybeans went up and I have to go a little bit farther. We had a USDA report come out today and they lowered the yields.

00:17:20 Speaker_18
So that's my interpretation of why the markets went up.

00:17:24 Speaker_16
Right. It seems like every time we talk to you, you are jetting off to one international conference about agriculture or another.

00:17:32 Speaker_15
Yes.

00:17:33 Speaker_16
Number one, what are your travel plans? But number two, what do you expect your counterparts either in China? I know you go there, you go to Europe and the Middle East sometimes. What do you expect them to be saying to you?

00:17:44 Speaker_18
Well, here's something that happened just last week. They were at the China International Expo, which is a half a million people, all the people China trades with. And the soybean people last year went, met with all the Chinese government officials.

00:17:59 Speaker_18
This year, USDA wanted to set up the meetings, and the Chinese wouldn't accept meetings with them. Really? That tells you. And then I got a text from the United Soybean Board chairman who was there and they said, yeah, they just announced buckle up.

00:18:15 Speaker_18
It's going to be a fun ride. Wow. There you have it. Yeah. That's fun.

00:18:23 Speaker_16
All right, two more and then I'll let you get back to work. Number one, have you harvested yet? It's November, right? You've already had your harvest, right? Yes.

00:18:29 Speaker_18
Yep, I'm done. And last year, if you remember, I had like one of the best harvests I've ever had. This year was the worst harvest I've ever had. Yes. And so my husband goes, it's not the worst.

00:18:42 Speaker_18
And I go, maybe not, but it's the worst since I've been able to glean all the information off of every acre, you know, have the technology to do that. So that's why we have crop insurance. Remember, I always say that.

00:18:54 Speaker_16
Yeah, no, totally. What happened? Was it like too dry? It was too dry.

00:18:58 Speaker_18
So it was too wet early. So some spots drowned it out, but not much. And then it just shut off.

00:19:06 Speaker_18
There was just no rain, and I'd been in a drought for four years, so I said, this is going to catch up to me someday, and we're all hurting in my little part of the world here.

00:19:16 Speaker_16
So that gets me to the last question I have for you, and it kind of goes like this. We've been talking, I don't know, five, six, seven, eight years, whatever.

00:19:23 Speaker_16
And we've talked a couple of times about how tough agriculture is and how you guys are at the mercy of the weather and you're price takers, not price makers, you're at the mercy of the market. And you always are resilient as all get out.

00:19:36 Speaker_16
And are you still feeling that?

00:19:40 Speaker_18
Yeah, I am. Well, you almost have to be because, like I said, I've been doing this 39 years. It'll come back and you take your profits while you can. And fortunately, I'm old. Your age. Hey now, hey now. I know. More experienced. There.

00:20:01 Speaker_18
I'm a more experienced farmer and I have got a lot of things paid off. So I'm lucky that way. You know, we've been farming this ground for over 125 years and we've made it this far. So it's just like any business, you know, you watch your expenses.

00:20:17 Speaker_18
So yes, I'm yes. Kai, I'm still optimistic.

00:20:21 Speaker_16
All right. Well, hang in there. We'll talk to you soon.

00:20:23 Speaker_18
All right. Thanks. Bye bye.

00:20:36 Speaker_16
We do not have enough housing in this economy. That is the straight-up fact with which we begin the setup for this next story. The unknown is what, if anything, President-elect Trump and the new Congress might decide to do about that fact.

00:20:51 Speaker_16
Depending on who you ask, we are short somewhere between 3 and 7 million housing units. There are a lot of potential solutions at the local, state, and federal level.

00:21:01 Speaker_16
So many solutions, in fact, that our housing correspondent Amy Scott has been asking experts for their favorite ideas, which she has put into this handy dandy audio listicle.

00:21:11 Speaker_06
You know, doing a list on the radio is kind of hard. So when you hear this doorbell, that's a new idea. Ready? Solution number one to the housing crisis

00:21:26 Speaker_14
We can just start making it legal to build more types of homes in more places.

00:21:30 Speaker_06
David Garcia is policy director at Up for Growth, a pro-housing advocacy group.

00:21:37 Speaker_06
Most of the residential land in this country is zoned for detached single-family houses, and minimum lot size and square footage requirements and height limits make it really hard to build anything else.

00:21:51 Speaker_06
Garcia says just allowing more apartments and duplexes and those backyard cottages known as accessory dwelling units would make a big difference.

00:22:01 Speaker_14
So that is one thing that can be done that can unlock a supply of a really popular type of housing that doesn't cost any money. It is really just a change either that a city itself can make or the state legislature can make.

00:22:15 Speaker_06
But many homeowners and their elected officials are resistant to zoning reforms that might change their neighborhoods, which brings us to our second solution. from Lisa Rice, CEO of the National Fair Housing Alliance. Incentivizing zoning reform.

00:22:35 Speaker_06
Rice says tying federal money for housing and community development, transportation, even disaster relief to zoning reform could motivate officials to do more.

00:22:46 Speaker_17
Congress could say things like, look, if you're a community that is building your fair share of affordable housing, when we have a disaster, you're first in line.

00:22:56 Speaker_17
But if you've got all these exclusionary zoning policies, you can foot your own bill for certain things.

00:23:03 Speaker_06
All right, solution number three to the housing shortage, cut tariffs on Canadian lumber.

00:23:10 Speaker_09
We're adding thousands to the cost of framing a new house because of a tiff with our closest ally.

00:23:16 Speaker_06
This is Saleem Firth with the Mercatus Center, a free market-oriented think tank at George Mason University.

00:23:24 Speaker_09
I understand the idea of being protectionist towards China and that, you know, free trade is traded off against security. There's no security trade off with Canada. And the spillover is massive in terms of the cost to constructing new houses.

00:23:37 Speaker_06
Now, housing solution number four. would help more people become homeowners.

00:23:44 Speaker_05
A moratorium on capital gains tax for investors who are selling to first-time homebuyers.

00:23:52 Speaker_06
This one comes from Laura O'Connor, a real estate industry consultant.

00:23:57 Speaker_06
She says, though we hear a lot about big institutional investors buying up single-family homes, most are owned by smaller landlords with fewer than 10 properties, and a lot of them may not even want to be landlords.

00:24:12 Speaker_05
There's a significant number of investors today that are accidental. They inherited a home.

00:24:19 Speaker_06
They don't know what to do with it. But if they sell that home, their tax bill could be 15 or 20 percent of the proceeds.

00:24:27 Speaker_05
If Congress suspended that tax for a year or two... We can help spur them towards turning that property over and allowing it to become something that feeds that entry-level buyer.

00:24:40 Speaker_06
Finally, number five comes from Reid Hunt, CEO of the Coalition for Green Capital.

00:24:48 Speaker_12
allow office building owners to put all of this unused space into the market as residential. This is very well understood, but it's not cheap.

00:24:59 Speaker_06
To make it more appealing, Hunt suggests creating a tax credit for developers who convert office space into housing that kicks in when it's occupied. And the more quickly that happens, the bigger the credit.

00:25:13 Speaker_12
Let's not let people rebuild only for the high end and then wait a long time for the occupant. Let's have the tax credit be monetized when the person moves in. That way they'll be pricing to the market.

00:25:25 Speaker_06
Each of these solutions has potential downsides. Tax credits and incentives cost money. Cutting tariffs on Canadian lumber could hurt U.S. producers. Freeing up more housing for homeownership could take away much-needed rental housing.

00:25:41 Speaker_06
But all the experts I talked to agree there's no single fix to the housing shortage. It's going to take all the fixes. I'm Amy Scott for Marketplace.

00:26:00 Speaker_16
This final note on the way out today, Tesla is, as of the close on Wall Street this afternoon, worth a cool trillion American dollar. Shares are up 29% since the events of Tuesday.

00:26:13 Speaker_16
The CEO of that company, of course, a key donor and close advisor to the president-elect. Tesla is now worth about 16 and a half General Motors is. GM sells more than six million cars a year. Tesla, not quite two million.

00:26:31 Speaker_16
Our theme music was composed by BJ Lederman. Marketplace's executive producer is Nancy Fargali. Donna Tam is the executive editor. Neal Scarborough is the vice president and general manager. I'm Kyle Rizdal. Have yourselves a great weekend, everybody.

00:26:42 Speaker_16
We'll see you back here on Monday, all right? This is 8 p.m.

00:26:47 Speaker_13
Understanding personal finance can feel like an impossible task, but it doesn't have to be that way. I'm Johnnelia Espinel, and on Financially Inclined, I'll guide you through simple money lessons that will change your financial future.

00:27:02 Speaker_13
Learn about credit scores, how to avoid scams, and why you need a savings account. Plus, we explore the brain science behind FOMO and what you can do to make smarter money decisions. Listen to Financially Inclined wherever you get your podcasts.