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Episode: The Housing Shortage, Explained

Author: NPR
Duration: 00:44:55

Episode Shownotes

The U.S. is short approximately 4 million homes. Wharton professor Ben Keys traces the beginning of the housing crisis to the 2008 financial meltdown — and says climate change is making things worse. Also, Justin Chang reviews the Iranian film The Seed of the Sacred Film.Learn more about sponsor message

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Summary

The episode discusses the significant housing shortage in the U.S., estimated at around 4 million homes, primarily caused by the 2008 financial crisis and exacerbated by rising costs due to climate change. High home prices, coupled with interest rates and restrictive zoning laws, are driving up housing unaffordability. The discussion covers innovative solutions, like Alabama's hurricane-preparation program and Minneapolis's zoning reforms, while also addressing community resistance to housing developments and the pressing need for more housing options amid increasing demand, particularly in urban areas.

Go to PodExtra AI's episode page (The Housing Shortage, Explained) to play and view complete AI-processed content: summary, mindmap, topics, takeaways, transcript, keywords and highlights.

Full Transcript

00:00:00 Speaker_02
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00:00:19 Speaker_06
This is Fresh Air, I'm Tanya Mosley. As we head into 2025, housing is still one of the most important issues on the minds of millions of Americans. The dream of owning or even renting a place is in peril.

00:00:34 Speaker_06
People are paying a million dollars for starter homes, new construction is moving at a snail's pace, and the latest data shows that in 2023, home sales were the slowest in three decades.

00:00:45 Speaker_06
Many homeowners aren't selling or upgrading because the market for getting into another house is just too high. Renters aren't catching a break either. On average, they're spending 30% of their income on housing.

00:00:57 Speaker_06
And that stat includes people who live in places that had the reputation of being more affordable, like the Midwest and the South. changes to our climate are also redrawing real estate maps, impacting where people can live and what they can afford.

00:01:12 Speaker_06
President-elect Donald Trump says some of his plans to tackle the crisis include regulations on construction, opening up federal land for housing, and mass deportation.

00:01:23 Speaker_06
How feasible are these ideas, and why is this such a dire moment in the housing crisis? Well, our guest today to talk about all of this is Ben Keyes.

00:01:33 Speaker_06
He's the Rowan Family Foundation Professor of Real Estate and Finance at the University of Pennsylvania's Wharton School. He is also a research associate at the National Bureau of Economic Research. And Ben Keyes, welcome to Fresh Air.

00:01:46 Speaker_00
Yeah, thanks so much for having me.

00:01:49 Speaker_06
You know, Ben, one of the more frustrating issues right now is that there just isn't enough affordable housing. And from my understanding, like so much of this current housing crisis, this can be traced back to the financial crisis of 2008.

00:02:06 Speaker_06
It's like a snowball effect.

00:02:09 Speaker_00
That's right. I mean, I think we can characterize the current state of the housing market as being deeply unaffordable. That's a very expensive market right now.

00:02:17 Speaker_00
High home prices and high interest rates making, you know, entering the housing market or moving up the property ladder very challenging. And I think you can trace back

00:02:26 Speaker_00
some of these issues back to the financial crisis of 2008 where We saw a collapse in construction.

00:02:35 Speaker_00
And so we just stopped building Houses, we stopped building apartments for a few years there and and an even longer I would say Structural change in our ability to build and our willingness to build and so those two factors have really driven a shortage of housing and now we're seeing estimates of

00:02:53 Speaker_00
as much as 4 million houses that were short if you think about where we need to be as a growing population and growing household formation.

00:03:02 Speaker_06
Can you delve a little bit deeper into that because why 17 years later if demand is high, people are working, they're looking for places to live, what are some of the factors that continue to keep home builders from just building more housing?

00:03:17 Speaker_00
It is a bit of a puzzle, right? I think we can separate out the factors into three main areas. One is the high cost of materials and labor. And we've seen an inflationary episode where we have a very high cost of building materials.

00:03:35 Speaker_00
We are also in a very tight labor market. So there are not a lot of, you know, laborers who are available to build. So that's one category. Another category is related to financing.

00:03:48 Speaker_00
It is very challenging to finance many of these large building projects. And it's not always as easy as it might seem to obtain financing, especially multifamily financing. So building apartment buildings, the financing there is quite challenging.

00:04:04 Speaker_00
And then the third is related to zoning and land use restrictions and other policies that create a lot of hoops to jump through and make it challenging for developers who would like to build at the scale where they would like to build.

00:04:19 Speaker_00
And so each of those three factors, financing, construction, and zoning, are all putting downward pressure on the ability to create more houses and more housing units where people would like to live.

00:04:33 Speaker_06
You know, President-elect Trump, he's been talking about some of the ways he plans to help remedy this crisis. And one of them is proposing tariffs on imports, which include construction materials.

00:04:47 Speaker_06
How could that impact housing costs as it relates, I guess, to the to the price of building materials?

00:04:53 Speaker_00
Yeah, well, I think this ties back to one of the fundamental misunderstandings of how tariffs work. But basically, if we're going to raise the costs of construction materials, that's going to raise the cost of building a home.

00:05:05 Speaker_00
Now, a lot of the materials that are used for construction are domestic, so we do have a lot of those in the U.S., but we also import a number of construction materials like lumber for things that would be covered under NAFTA from Canada.

00:05:19 Speaker_00
But the simple math is that if we are going to impose additional tariffs on building materials, it's going to be more expensive to build rather than less expensive to build. So that's going to only make the affordability problem worse.

00:05:33 Speaker_06
Then one of the more controversial ideas that Trump has spoken about is how he plans to deport 11 million or so undocumented immigrants and how that will free up housing.

00:05:47 Speaker_06
Is there a link between the undocumented and housing affordability besides it being a numbers game?

00:05:53 Speaker_00
Well, first, I think the impact of a policy like that would have impacts that are so devastating to many communities in the country that the effects on housing affordability feels second order or even third order.

00:06:11 Speaker_00
But I don't think that there is a strong connection between this idea of removing immigrants from our country and making housing more affordable. And there's a couple of reasons for this.

00:06:26 Speaker_00
that immigrants and undocumented immigrants make up a large fraction of the construction workforce. So it's been estimated by Pew that 14% of the construction workforce are undocumented immigrants.

00:06:41 Speaker_00
And so it is going to make labor costs more expensive to build, and that's going to drive up the cost of housing. The trade-off there from a housing market standpoint, we're talking about this in a very narrow sense,

00:06:55 Speaker_00
is that there will be fewer people in this sort of numbers game of supply and demand.

00:07:00 Speaker_00
But if we think about the types of housing that immigrants and undocumented immigrants tend to locate in, they tend to be renters, and they tend to locate in low-income neighborhoods.

00:07:13 Speaker_00
Now, of course, that's not uniformly true, but that's where they are concentrated. And so if we're thinking about the high cost of home ownership,

00:07:21 Speaker_00
removing undocumented immigrants from the pool of potential homebuyers is simply not going to move the needle on affordability.

00:07:29 Speaker_00
As we're thinking about the big picture, you know, this incoming administration has sort of framed tariffs and removing immigrants as a panacea for all of our problems.

00:07:40 Speaker_00
And neither of those things are going to make a dent into our housing affordability crisis.

00:07:47 Speaker_06
One of the other things that President-elect Trump has talked about is opening swaths of federal land for large-scale housing construction, and he's calling these areas freedom cities.

00:07:59 Speaker_06
The Biden administration was doing sort of an impact or research study on this, and Kamala Harris also talked about this as well in generalities.

00:08:09 Speaker_06
So, I just want to get to the bottom of like, is there some value there in looking at federal land as a potential solution?

00:08:19 Speaker_06
Maybe not in the way of building new cities on federal land, but is there a way to use that land to help offset some of the challenges that we're seeing?

00:08:29 Speaker_00
So I think there's two pieces where we might see some headway. One is related to federal land that's in urban areas, that's already where the jobs are and where we already have high demand.

00:08:41 Speaker_00
So one example of this is an assessment that the Biden administration did with the U.S. Postal Service and looking at the location of post offices, whether there's additional space for redeveloping some of those spaces, right?

00:08:56 Speaker_00
Why have a one-story post office when you could have a five-story post office with four stories of apartment units up above? And so that's been an initiative that's going on. There is federal land in cities. There are a number of federal buildings.

00:09:10 Speaker_00
And the USPS is one that has quite a large footprint. When we're thinking about this federal land out west, I'm pretty skeptical that we're going to see, you know, cities spring up out of whole cloth.

00:09:23 Speaker_00
That just takes an enormous amount of coordination and effort, and it would need a significant amount of private buy-in to locate firms there. You could potentially see those having some uses for

00:09:38 Speaker_00
for energy generation, so solar farms, wind farms, other kinds of things that do require that space and where there may be more desirability out west. And so thinking about ways to encourage our energy transition on that federal land seems promising.

00:09:56 Speaker_00
But as a solution to our affordability crisis, I just don't see it.

00:10:00 Speaker_06
Oh, that's so interesting about the post office, the post office idea.

00:10:04 Speaker_00
Yeah, it's a fun one. And I think, you know, the nice thing about that is, you know, when you start walking around cities, when you put on your housing hat, and you think about where could more people live, you start to see opportunities everywhere.

00:10:21 Speaker_00
buildings that are small for their space. You see areas with big side yards. You see old office buildings that could be converted to residential.

00:10:34 Speaker_00
And so when you put those glasses on of how do we reach housing abundance in these places where the jobs are located, you start to see opportunities everywhere.

00:10:45 Speaker_06
I know, I now can't unsee it. As you were talking about the post office, I started going through my neighborhood and thinking about all of the other areas where there could be housing.

00:10:53 Speaker_00
Yeah, there's a neat example of this. It's not housing necessarily, but in West Philly near Penn's campus, there's a McDonald's on the corner. And they basically tore down the McDonald's.

00:11:10 Speaker_00
That was a one-story traditional McDonald's with the usual McDonald's roof and everything. Difficult to put apartments or additional use up above that.

00:11:19 Speaker_00
Well, they tore that McDonald's down and now there's a building there with McDonald's on the first floor. And so the McDonald's has returned. The retail is still present. But now we're using the space above the McDonald's more efficiently.

00:11:33 Speaker_00
And those are the kinds of smart opportunities that we're going to need to see happen at a scale we haven't operated at in decades.

00:11:43 Speaker_06
Is there an example elsewhere in the world where they've been successful in building density?

00:11:49 Speaker_06
It changes, really, our perception of the American dream to live in high-density areas, you know, that no longer is the big story house with the front yard and the backyard and all of that and the driveway, but it is, what you're talking about sounds like something I might see in Japan.

00:12:09 Speaker_00
Yeah, you hit the nail on the head. Certainly we've seen this kind of development in a place like Tokyo, which has kept housing relatively affordable by building intensively in the city.

00:12:25 Speaker_00
And that has required a forcefulness that we are not comfortable with in the U.S. in many cases when it comes to having community oversight over what gets built. A zoning code that requires a lot of hoops to jump through.

00:12:40 Speaker_00
And so there are a number of ways in which a city like Tokyo has cut the red tape and recognized that some historic buildings can coexist next to large apartment towers.

00:12:54 Speaker_00
And so I think that's maybe an extreme example where the pendulum has swung in the direction of development, but we just need to loosen the gears. And so looking to a city like Tokyo as an example is potentially a promising one.

00:13:11 Speaker_06
I want to talk a little bit more about some of the things that President-elect Trump has said he will do to help offset some of the challenges we're seeing in the housing markets.

00:13:21 Speaker_06
And one of the things he says he will do is to bring down mortgage rates to make home buying more affordable. We know the president doesn't set mortgage rates or interest rates, but we do know that his policies can affect the rates.

00:13:34 Speaker_06
And I'm just wondering from you, what do you think he could do to influence mortgage rates?

00:13:40 Speaker_00
Well, we know that the president can affect mortgage rates, but I'm not sure that he knows that the president can affect mortgage rates. This is something that is very challenging for the executive office to influence.

00:13:54 Speaker_00
Mortgage rates are set usually off of the 10-year treasury rate, and the 10-year treasury rate is determined by the bond market. It's determined by the willingness of long-term bondholders to demand a certain return in exchange for the bond.

00:14:12 Speaker_00
Part of the reason that we're seeing high mortgage rates is a high 10-year treasury rate. And that's because those bond investors are anticipating inflation.

00:14:20 Speaker_00
They're anticipating that this new administration is going to keep the Tax Cuts and Jobs Act in place. That's going to continue to worsen our federal deficit. That there's probably more and bigger tax cuts on the horizon.

00:14:38 Speaker_00
And that the tariff policies that have been proposed would likely be inflationary. And so, you know, it's largely inflation expectations over a longer time horizon that are driving that 10-year Treasury rate and ultimately driving the mortgage rate.

00:14:53 Speaker_00
And so because mortgages are these very long duration products, the president has very little scope for directly influencing mortgage rates.

00:15:01 Speaker_00
When we think about the policies that they could implement, keeping inflation down and having a very disciplined fiscal policy is probably the main thing that they could do directly.

00:15:13 Speaker_06
I'm just curious because I know that you study the impacts of climate change. How climate change is attributing to the rise in costs for homeowners.

00:15:23 Speaker_00
I think there's a very direct line to be drawn between rising climate risks and the costs of homeownership in the form of property insurance.

00:15:32 Speaker_00
And property insurance, to me, is the most direct way where we're seeing the effects of climate change on Americans' pocketbooks. And in just the last three years, 2020 to 2023, my research with Phil Mulder has shown

00:15:48 Speaker_00
that property insurance has gone up by over 33% on average in the U.S. and over 50% in the areas of the country most exposed to climate risk. And so property insurance, over 50% in the riskiest zip codes,

00:16:06 Speaker_00
And that's, you know, the places that might come to mind are places like Florida and the Gulf Coast, wildfire zones in California, but also some surprises like parts of Oklahoma where they're hit with a lot of hailstorms and tornadoes.

00:16:22 Speaker_00
And there we've seen big run-ups in property insurance costs. And so what this has done is it's made the sort of predictability of home ownership a little bit less predictable.

00:16:33 Speaker_00
Usually, when you think of buying a house, you say, well, I'm kind of locking in my costs. I'm taking on a fixed-rate mortgage, and I have a predictable path of my expenses.

00:16:42 Speaker_00
And what's happening in property insurance markets is unraveling that, and we're seeing these big increases.

00:16:48 Speaker_00
And I worry a lot for homeowners who had bought on a fixed income or were sort of constrained in how much they could afford, and now they're seeing their insurance costs rise sharply.

00:17:00 Speaker_00
And so this is a reflection of climate change and our changing climate, which is inducing more frequent and more severe disasters. But it's also a function of mobility patterns and where we've moved in this country over the last really 50 years.

00:17:15 Speaker_00
We've been moving into the danger zones. We've been moving into harm's way. The population of Florida has quadrupled since 1970. And when you look at the reports of

00:17:27 Speaker_00
the insurers and then the reinsurers, which is the industry that insures the insurance companies, they point especially to the larger concentration of residents in risky areas as being the main contributor to rising insurance premiums.

00:17:43 Speaker_06
What could municipalities and states do to offset that? I mean, I'm just thinking about zoning issues and things like that that could help stave off that increase in people moving into places that are these danger zones.

00:17:57 Speaker_00
Yeah, I think this is one of the challenges where the incentives are especially misaligned. Local governments generally want to have more of a tax base. They want to see more properties in their municipality.

00:18:12 Speaker_00
And that means that they're willing to allow development on swamps and marshes and other sorts of risky areas. You see the development into the wildfire risky areas. So I think that there's some misaligned incentives at a municipal level.

00:18:31 Speaker_00
What you then have at the state level is potentially more room for some discipline there to impose tighter rules and restrictions. But at the end of the day, we're operating in a world of a housing shortage.

00:18:44 Speaker_00
And so anything that we do to raise housing costs is going to be unpopular and restricting the areas where people can build and increasing the material quality that they're going to use is going to raise those costs even further.

00:18:58 Speaker_00
And so that's the tension that we're facing right now in the context of the housing shortage makes all these issues quite tricky.

00:19:06 Speaker_00
There's one bright spot on making these climate-related adaptations that I think is going to be a model for a lot of places, and this is Alabama's efforts to fortify the roofs in hurricane-exposed parts of the state.

00:19:23 Speaker_00
There's been a large program in Alabama to provide grants at the state level and a recognition that doing this ex ante is far cheaper than replacing all of these roofs ex post.

00:19:38 Speaker_00
And so providing grants to help homeowners afford upgrading the quality of their roofs, it's been supported by the insurance industry. They offer discounts on the insurance premiums thereafter. if you've gone through this fortification process.

00:19:54 Speaker_00
And so I think there's a number of these pilot programs, which are still, for the most part, quite small, but are quite successful. And I think we're going to see more of these play out across the country.

00:20:05 Speaker_00
Insurance markets are regulated at the state level. And so that sort of creates those 50 different laboratories that we hear so much about for different states to be able to try out new and different things.

00:20:16 Speaker_06
Our guest today is housing expert Ben Keyes. We'll continue our conversation after a short break. I'm Tanya Mosley, and this is Fresh Air.

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00:21:41 Speaker_06
I want to talk a little bit more about some of the challenges with housing. I think that we all have either heard the stories or seen firsthand the increase in homelessness.

00:21:55 Speaker_06
One of the interesting things we saw in November is that several states voted on housing affordability measures and many of them passed. For instance, Los Angeles and Denver

00:22:05 Speaker_06
passed an increase in sales tax to cover affordable housing and to help reduce homelessness. I mean, homelessness in general, it feels like such an intractable issue even before the housing crisis.

00:22:21 Speaker_06
And so I'm wondering from you, are these types of measures, of course they feel like a step in the right direction, but what are your thoughts about them having true impact?

00:22:31 Speaker_00
I think some of these will have true impact. I think they are big enough potentially to create enough units to make housing first be a major element of a reduction in homelessness.

00:22:45 Speaker_00
And certainly, you know, the Biden administration has tried to align efforts at a number of different levels. One of the challenges with homelessness is that it is ultimately a very local problem. because people are mobile.

00:22:59 Speaker_00
And so, you know, they're going to move around to locations where they're going to find a better quality of life, you know, and what form that takes for those on the streets might be quite different.

00:23:09 Speaker_00
But, you know, this is one of the challenges why you need sort of state and federal coordination. You can't simply have programs that are a one-off program in one city. And so seeing things that are more broad-based is an important

00:23:23 Speaker_00
element of this, I think it fits into a broader network of support that needs to be provided, whether that's drug treatment, whether that's mental illness help, whether that's just related to food insecurity and job training and other needs.

00:23:38 Speaker_00
But in terms of what we've seen in the homelessness space, housing comes first, and solving that problem first seems to be the way in which better solutions follow.

00:23:49 Speaker_06
You've mentioned how Minneapolis is a place that has reduced zoning and building barriers and prices have kind of like slowed there. It hasn't risen as fast as other places.

00:24:04 Speaker_06
And I actually looked it up and found that the vacancy rate there is about 4%, which is the lowest of any major U.S. city. What are they getting right?

00:24:14 Speaker_00
Yeah, Minneapolis reacted responsibly to a local housing crisis. They were seeing this lack of affordability and a lack of units and they took meaningful steps to make it easier to build in the city of Minneapolis.

00:24:30 Speaker_00
And I think this is something that is going to be used as a model around the country. We're hearing from a number of cities that they're looking into this in much more detail. Again, this isn't about building skyscrapers on every corner.

00:24:43 Speaker_00
It's about sensible densification, especially around transit, where we can reduce dependence on cars. And so this is relaxing single-family zoning and lot sizes. So allowing for things like duplexes or four-unit, very small multifamily developments.

00:25:02 Speaker_00
This is related to parking requirements and some of the other things that might be required in an apartment building that take up a lot of additional space where units would otherwise be useful.

00:25:14 Speaker_00
So there's a number of things along those lines that I think when combined with transit-oriented development, so developing near where public transit is available, can greatly relax some of these affordability constraints.

00:25:28 Speaker_00
And we've seen this play out in Minneapolis already. And it's an early stage because building takes time. Acquiring land, acquiring financing, and actually getting the buildings built is very time consuming.

00:25:38 Speaker_00
And so I think we're still in the very early days of measuring the consequences in a city like Minneapolis. But thus far, we've seen prices grow more slowly in Minneapolis than in many other cities. And I think that that is

00:25:51 Speaker_00
something that we should keep a close eye on and potentially think of those steps as a model for other local governments who say, we want to do something about this that isn't necessarily drastic.

00:26:02 Speaker_00
It's not going to change the fabric of our city or the culture of our city, but it's going to allow more development to happen, bring more people into our cities and allow them to afford living there so that they're not simply fleeing to less expensive markets.

00:26:18 Speaker_06
How much does nimbyism, you know, not in my backyard factor into? the potential changes of zoning in these communities that could build density in this way.

00:26:28 Speaker_00
It's huge. It's huge. I think we see a lot of people who move into a neighborhood and then refuse to think about how their house was built. So at some point, your home was built in that neighborhood.

00:26:41 Speaker_00
And it's sort of this idea that, well, the current number of houses in our community is the exact right number, even as our nation's population grows and grows. And so I think there's a tension there.

00:26:53 Speaker_00
Now, some of the concerns and complaints are quite valid when we think about traffic, when we think about congestion, when we think about scarce numbers of seats in the local public school.

00:27:02 Speaker_00
Those are all reasonable concerns, but they're solvable problems. When you look at the nimbyism movement, You know, one of the challenges is related to who has voice in our communities.

00:27:15 Speaker_00
And when you look at the zoning meetings where these proposals are discussed, they're often held early in the evening on a weeknight when people with young families can't necessarily attend.

00:27:26 Speaker_00
And when the only attendees are those who currently live in the community, not those who would benefit by moving into the community. And so, you know, there's a real tension there.

00:27:35 Speaker_00
And I think we've seen over the last few years a softening of those positions, a recognition that it's not just about my house, but about my children's houses and my grandchildren's houses and where they're going to live.

00:27:48 Speaker_00
We're seeing these initiatives in a number of different cities and even states passing. that are seeking to override some of the strongest NIMBYist urges.

00:28:00 Speaker_00
And you can see where they're coming from, but in the long run, that type of position just isn't tenable as a nation if we are going to address the affordability crisis.

00:28:09 Speaker_06
You mentioned Alabama and Minneapolis as a city that are bright spots. Are there other examples of community housing experiments or new approaches that have worked?

00:28:21 Speaker_00
Well, we have to be excited about what's happening in New York City, which just recently is dedicating itself to adding 500,000 units over the next 10 years. It's an incredibly ambitious goal. New York hasn't built like that since the 1960s.

00:28:37 Speaker_00
But in many ways, that's what we need. We need a return to a period where People are comfortable with the messiness of construction happening around them as we find ways to accommodate so many missing housing units. So I'm excited about that plan.

00:28:52 Speaker_00
I want to see it move forward into some more specifics, but I think there is a renewed support for development. And this is growing out of a movement, a recognition that is a long time coming.

00:29:04 Speaker_00
I think where we see some bright spots is the fact that city governments that are, in many cases, the critical choke point for development, looking for ways to cut red tape, to improve their zoning code, to make life simpler for developers, and ultimately get units built.

00:29:24 Speaker_00
And so I'm excited to see what happens in New York, and that will be a test case going forward if they can hit that ambitious target.

00:29:31 Speaker_06
Our guest today is housing expert Ben Keyes. We'll continue our conversation after a short break. I'm Tanya Mosley, and this is Fresh Air.

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00:30:35 Speaker_06
You know, there's been lots of reporting lately about what's being called the silver tsunami that those 55 and older with no children and have these houses with like extra bedrooms could eventually flood the housing market with their homes and help make homes more affordable.

00:30:53 Speaker_06
What does the data say, though, on that? making a meaningful impact over the coming years, especially in some of the more expensive markets.

00:31:03 Speaker_00
Yeah, the silver tsunami sort of sounds like a low-budget Marvel superhero. I think that generally in the housing market, things move quite slowly.

00:31:13 Speaker_00
And so what we're talking about is a generation essentially turning over its housing to the next generation. And that's unlikely to cause a flood of housing or

00:31:23 Speaker_00
or some dramatic glut of housing, I think ultimately it comes back to the question of, are the houses near where the jobs are?

00:31:30 Speaker_00
And if the houses are near where the jobs are, then that can be very desirable and would be something that would relax some of the pressure on these high-cost markets.

00:31:40 Speaker_00
But when you look into the data, and Zillow had a nice report on this recently, a lot of those mismatched houses where you have older homeowners with a lot of extra bedrooms, a lot of those are located in

00:31:52 Speaker_00
in some of the Rust Belt cities, your Detroits and your Buffalos and cities like that. And so that's not necessarily where the jobs are being created. And so what you need to find is that kind of alignment.

00:32:03 Speaker_00
I think there's also sort of a taste alignment that, you know, we'll see how that plays out if younger generations are interested in the same McMansions in the suburbs and the exurbs or if, you know, now that they've spent more time living in

00:32:15 Speaker_00
in denser environments because they can't afford to move into the suburbs, whether they're now looking for those townhome, rowhome experiences. And so I think there may be a question there about tastes as well.

00:32:25 Speaker_00
So I think it is going to be a very gradual process. I don't expect anything like a tsunami. I think it's going to be a much more gradual process where homes will be passed down over time.

00:32:36 Speaker_00
The other thing that happens when homeowners age in places is they tend to cut back on the upgrades and the repairs to the house. Usually much older homeowners are not the ones who are upgrading the kitchens and renovating the spaces.

00:32:52 Speaker_00
And so there's often some large fixed costs that are necessary to bring those properties up to the level of the neighborhood. And so I think that's one more way in which this isn't going to be an immediate solution.

00:33:05 Speaker_00
That said, there are a lot of people who will ultimately move into those homes.

00:33:11 Speaker_00
And so there's going to be a process where we'll see that generation turn over their home ownership stake to a younger generation, and that is going to create opportunities.

00:33:21 Speaker_06
I'm really interested in something you mentioned about the Rust Belt and the situation there.

00:33:27 Speaker_06
In Detroit in particular, we know like 10, 15, 20 years ago, I can't believe it's been that long, but there were all those stories about, oh, you can buy a home for $10,000, $15,000, $20,000.

00:33:36 Speaker_06
Even families saying, we'll pass down our homes to you, but as you said, if there aren't jobs there, that will bring people to those areas that may not have as big of an impact.

00:33:49 Speaker_06
There were also those stories that like rumors that Chinese investors were coming in and buying blocks and blocks of homes because they were $10,000, $15,000.

00:33:57 Speaker_06
I'm wondering what's the reality of a place like that today that Detroit has now seen a resurgence. There's growth there. The cost of housing is now rising and almost at pace with some other areas. What are you seeing in a place like Detroit?

00:34:16 Speaker_00
I think you've captured it well. Detroit's a city that was declining for basically 50 years, a really prolonged period of losing population. And that's very challenging for the built environment. You have a street grid, you have houses built.

00:34:35 Speaker_00
that are not able to be moved.

00:34:38 Speaker_00
And so as the population of a community shrinks, you are then faced with all of the challenges of urban decline, where you're trying to right-size the city, right-size the services that are provided, which schools should stay open, all these kinds of challenges.

00:34:55 Speaker_00
And in that case, the housing market adjusts. at the speed of depreciation. It adjusted the speed at which these properties ultimately lose their value and reach that kind of floor of, you know, please take this property off of our hands.

00:35:10 Speaker_00
At this point, we are seeing some of these upticks as you're describing in rent growth. We're seeing a resurgence in a number of different ways. We're seeing jobs returning to Detroit in certain ways.

00:35:23 Speaker_00
At the same time, the land bank in Detroit, so the city government owns about 20% of all of the parcels in the city of Detroit. And so what that means is, you know, they're taking these parcels off the market.

00:35:37 Speaker_00
And at some point, there will be opportunities to redeploy those parcels for sale and for development. You alluded to the sort of investor strategy in a place like Detroit.

00:35:50 Speaker_00
That would have been a very poor strategy for a very long time, as you had to wait decades, in many cases, for some of these neighborhoods to turn around. And some neighborhoods still have not turned around or are now much depopulated relative

00:36:05 Speaker_00
to where they were before. And so as an investment strategy, you're really looking for that type of upswing where you're buying low and selling high.

00:36:12 Speaker_00
And I think then that there are going to be those targets of opportunity where you have neighborhoods that sort of meet that profile, where there's potentially some job growth there.

00:36:22 Speaker_00
Potentially you're near a good school district or near public transportation that's going to get you where you want to go.

00:36:29 Speaker_00
I think that's where those opportunities come up and that's usually a sign of a community where there's at least the potential for some upswing.

00:36:37 Speaker_06
You know, I thought it was really interesting when my producer Monique asked you for bright spots. One of the things you said was, the market is very bright for boomers who bought a long time ago and have built tremendous wealth through the market.

00:36:48 Speaker_06
I mean, that doesn't feel very bright for millennials or really anyone else.

00:36:54 Speaker_00
No, it doesn't. But if we take a step back and we think about the state of the housing market, in a sense, we've traded stability for a lack of affordability.

00:37:05 Speaker_00
And so what we've done in the housing market by under-building housing, we've kept supply scarce, and that's increased housing values. We've also, during the recent COVID period, kept people in their homes.

00:37:18 Speaker_00
We avoided having the foreclosure crisis that we went through. during the global financial crisis.

00:37:25 Speaker_00
And in doing so, what we've done is we've allowed a great deal of home equity to build up for the baby boomer generation, for older homeowners who own their homes. Many of them own their homes outright with no mortgage attached.

00:37:39 Speaker_00
And just looking at the numbers, there's an enormous amount of housing wealth that we've built up In the US, we have about $35 trillion in home equity in the United States.

00:37:50 Speaker_00
And that is disproportionately held by older homeowners who have owned the homes a much longer period of time. And so for those groups, the house represents, in many cases, their largest asset. And that is a great success story for those generations.

00:38:05 Speaker_00
And it's provided a great deal of economic stability for older families. But it comes at a price. And it comes at the price of affordability and access for the younger generations.

00:38:16 Speaker_06
What advice would you give for those who are debating whether they should buy a home right now or just wait and see?

00:38:23 Speaker_00
So first, do your homework and figure out the cost of housing in the market that you're looking in, both for owning and for renting. I think it makes a lot of sense to continue to rent in markets where prices are high and interest rates are high.

00:38:39 Speaker_00
In many cases, right now, you'd be better off putting your savings into something that's delivering a safe, predictable return that might be more safe and predictable than returns on housing. So from an investment standpoint,

00:38:55 Speaker_00
investing elsewhere is very sensible.

00:38:58 Speaker_00
And then I think as you're approaching the decision to buy a house, think long-term because there are large fixed costs to buying a house in terms of transaction taxes, in terms of broker fees, title insurance, and other costs that need to be rolled into that cost when you're doing an apples to apples comparison.

00:39:18 Speaker_00
The right comparison isn't just comparing the mortgage payment to the monthly rent. And then on top of that, there's a challenge with rising insurance costs and property taxes.

00:39:29 Speaker_00
And so you need to take a view on, can I afford the property insurance, flood insurance, wind insurance, other supplemental insurance policies in a few years when those may be more expensive than they are today? So I think it takes a

00:39:45 Speaker_00
a more careful budgeting approach than we've seen in the past. And in many of those cases, my sense is that that's going to come out on the rental side of the ledger rather than owning, given our current affordability crisis.

00:39:59 Speaker_06
Ben Keyes, thank you so much for this conversation.

00:40:01 Speaker_00
Well, thanks so much for having me.

00:40:04 Speaker_06
Ben Keyes is a professor of real estate and finance at the University of Pennsylvania's Wharton School.

00:40:10 Speaker_06
Coming up, film critic Justin Chang reviews The Seed of the Sacred Fig, the latest drama from Iranian filmmaker Mohammad Rasuloff, which premiered this year at the Cannes Film Festival, where it won the special jury prize. This is Fresh Air.

00:40:27 Speaker_06
Earlier this year, Iranian-descended filmmaker Mohammad Rasuloff fled his country to escape an eight-year prison sentence.

00:40:35 Speaker_06
He made it to the Cannes Film Festival just in time for the premiere of his latest drama, The Seed of the Sacred Fig, which was filmed secretly in Iran.

00:40:45 Speaker_06
The movie won a special jury prize at the festival and was submitted for the Oscar for Best International Feature by Germany, where Rosoloff now resides. Our film critic Justin Chang has this review.

00:40:58 Speaker_03
In the nearly 20 years that I've been attending the Cannes Film Festival, I've rarely witnessed anything as emotional as I did last May, when the Iranian director Mohammad Rosoloff arrived for the world premiere screening of his new movie, The Seat of the Sacred Fig.

00:41:15 Speaker_03
As he walked up the red-carpeted steps and entered the theater to thunderous applause, Razulov didn't look like a man who had been on the run just two weeks earlier.

00:41:25 Speaker_03
He fled his country after receiving an eight-year prison sentence, hardly the first time he's run afoul of the government, which since 2010 has frequently arrested him, jailed him, and banned him from filmmaking.

00:41:39 Speaker_03
Like some of his other movies, The Seat of the Sacred Fig was shot entirely in secret. That can't have been easy to pull off, though in some ways it makes a certain sense for a drama that's all about the corrosive nature of secrets and lies.

00:41:55 Speaker_03
Misog Zare'e plays a lawyer named Iman who's just been promoted to investigating judge, a job so dangerous that he's been issued a gun for his protection. His wife, Najmeh, played by Sohaila Golestani, is excited about the news.

00:42:12 Speaker_03
With Iman's higher salary, they can at last afford a bigger home. But they warned their two daughters, 21-year-old Rézvan and teenage Sanaa, that they must be irreproachable in their behavior so as not to harm their father's reputation.

00:42:28 Speaker_03
That means wearing the hijab in public, keeping a low profile on social media, and not hanging out with the wrong people.

00:42:37 Speaker_03
But Rezvan and Sanaa are both smart, observant, and increasingly critical of their parents' traditionalism, especially in light of the news. The story takes place in 2022, during the early days of the Woman Life Freedom movement.

00:42:54 Speaker_03
Those protests erupted after a 22-year-old Kurdish-Iranian woman died in the custody of the morality police, which had arrested her for allegedly wearing a hijab improperly.

00:43:06 Speaker_03
Razulov includes real-life footage of the protests and ensuing acts of police violence, giving the movie a jolt of documentary immediacy. But he also shows us how Iran's social unrest impacts the family directly.

00:43:22 Speaker_03
When one of her friends is injured at a rally, Rezvan becomes increasingly supportive of the movement, to her parents' chagrin. But even Iman has his doubts about the government he serves.

00:43:34 Speaker_03
He's demoralized by his new job, which forces him to interrogate, and likely imprison, hundreds of protesters.

00:43:43 Speaker_03
Razulov has never been shy about calling out Iran's authoritarian regime, as he did in earlier movies like Manuscripts Don't Burn and There Is No Evil.

00:43:53 Speaker_03
What makes The Seed of the Sacred Fig so gripping, over its nearly three-hour running time, is how assuredly it blends domestic drama and topical thriller, the personal and the political.

00:44:07 Speaker_03
The family home becomes a psychological war zone, where secrets fester behind closed doors, and every character has something to hide. The actors are uniformly superb.

00:44:19 Speaker_03
I especially liked the nuanced sibling dynamic between Masa Rostami as the sensitive, thoughtful older sister, and Setare Maliki as the slyer, more mischievous younger one.

00:44:31 Speaker_03
Razulov's sympathies are clearly with them and the woman life freedom protesters. But he also extends compassion to the parents, especially Iman, who, as Rizvan courageously points out, is too entrenched in the system to see that the system is wrong.

00:44:50 Speaker_03
Just as the family's home is starting to feel unbearably claustrophobic, the movie shifts gears. There's a sudden change in scenery.

00:44:58 Speaker_03
And after the slow-simmering suspense of the first half, Razulov pushes the drama into full-blown action movie territory.

00:45:06 Speaker_03
There's a high-speed car chase, an on-camera interrogation, and finally a tense climax that suggests a showdown out of a classic western. It's a bold stroke.

00:45:18 Speaker_03
And while not everyone will make the leap, I appreciate Razulov's willingness to flex his genre muscles in service of a larger point. The family in this story isn't just a family.

00:45:31 Speaker_03
It's a kind of microcosm of middle-class Iranian society, with deep rifts between people across genders and generations. Meaningful change may be possible, Razulov seems to be saying, but it will be inevitably painful and violent.

00:45:48 Speaker_03
It's a bleak conclusion, but it's also suffused with a deep sense of mourning. Mohammad Razulov may have left Iran, but not once during this stunning movie is his love for his country ever in doubt.

00:46:04 Speaker_06
Justin Chang is a film critic for The New Yorker. He reviewed The Seed of the Sacred Fig. Tomorrow on Fresh Air, Stephen Colbert and Evie McGee Colbert.

00:46:14 Speaker_06
They're partners in marriage and in their production company, and she makes regular appearances on his late-night show. They've written a new cookbook together called Does This Taste Funny?

00:46:25 Speaker_06
They'll talk about food, coming close to death mid-show, meeting the Pope, and more. I hope you'll join us. To keep up with what's on the show and get highlights of our interviews, follow us on Instagram at NPR Fresh Air.

00:46:57 Speaker_06
Fresh Air's executive producer is Danny Miller. Our technical director and engineer is Audrey Bentham.

00:47:02 Speaker_06
Our interviews and reviews are produced and edited by Phyllis Myers, Anne-Marie Baldonado, Sam Brigger, Lauren Krenzel, Teresa Madden, Monique Nazareth, Thea Chaloner, Susan Nyakundi, and Anna Bauman.

00:47:15 Speaker_06
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00:47:27 Speaker_02
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00:47:37 Speaker_02
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00:47:50 Speaker_02
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