12 Comments

Might end up being the best thing I read in 2025, which is sad because 2025 just started. Amazing work, thank you.

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Thanks!

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Your premise is right of course. But Isn’t the primary issue for RE that there are highly vested interests keeping supply restricted? I think it’s unfair to focus exclusively on the bystanders “voting against their interests” with their poor frameworking.

The family who bought a fancy house in a construction restricted suburb (with perhaps limited physical capacity in its local schools) is a reasonable NIMBY protecting their investment. The rent-controlled apartment renter doesn’t care about average rents declining in NYC, they want to keep their cheap apartment!

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I think it's useful to contrast RE supply restrictions with something like taxes. People generally seem to understand that the first order consequence of a tax cut will be more money in their pockets but that there will necessarily be an equivalent second order consequence of lower government spending on services which might be expected to completely offset that benefit.

RE supply restrictions are really complicated to think about. Ok, let's say you own a nice house in a desirable neighborhood. Allowing construction would likely be a windfall to you, because you can knock down your house and build a 20 unit apartment building on your lot. Schools? Well, the yuppies who move into one bedroom apartments will likely not have school aged kids and will pay a ton of property taxes. Or maybe it will bring in enough kids so that your district doesn't have to shut down your neighborhood school due to declining enrollment. And so on.

Anyway, that's why I'm more inclined to say this is likely a case of people not understanding the real consequences of what they are pushing for.

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Interesting — Thanks.

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Really well constructed - though maybe I only think that because my paradigm was already aligned…

Thank you for writing!

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Thanks!

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I hopped on the YIMBY bus 20 years ago (back it was just garden variety libertarianism). I read Kuhn 18 years ago, but to this day I never really connected the two. Great insights.

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Thank you!

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Wait, sorry this might be my fault but I am confused, after rereading it to a friend. "The only cities with housing prices meaningfully above replacement cost are those that have growing demand and strictly limit new construction, such as San Francisco and Honolulu, where housing prices are triple what they should be" But there are news articles like this saying it is below replacement costs... I need to look at that paper more closely... https://therealdeal.com/sanfrancisco/2024/02/12/heir-of-torontos-reichmann-family-looks-to-buy-sf-offices/

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Right, so that's a Zell approach, but that's specifically for commercial real estate. It might be true that office buildings are $200-$300 psf but you can look on Zillow and see that residential is $1k psf and higher. Unfortunately there is no easy way to convert office buildings to residential.

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You're overthinking it. Zell didn't overthink it. He stuck to a simple model: Buy low, at a rate low enough to play the long game, and wait it out. It's really nothing more than that, except that in the 1980s, Fast Buck Fever took hold with the likes of Milken, whose junk bonds pushed the envelope when it came to short term flips. "Short term" became one more ingredient (along with Carter's CRA) that ended up in the financial meltdown of the early 2000s. Everyone who was high-leveraged for short term gains got killed -- just as they are right now. Long term holds simply sat outand watched, waiting to pick up the next round of distressed properties. Just like now.

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