Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning again, everyone. With us now Annie Lowrey, who writes about money and politics for The Atlantic, and she wrote the 2018 book, Give People Money: How a Universal Basic Income Would End Poverty, Revolutionize Work, and Remake the World. Based on an Atlantic article she wrote last week, maybe she should write a new book called Give People Home Ownership. The article is called, It Will Never Be a Good Time to Buy a House: Maybe in 2030, and this isn't just about New York and San Francisco and places like those.

This is a national take, and no, it is not primarily about the recent rises in mortgage interest rates. We'll also touch on some other recent Annie Lowrey articles as she just keeps provoking us to think more deeply about money and politics kinds of things with articles like her newest one called Inflation is Your Fault and recent ones like Maybe Don't Drive Into Manhattan, Is Single Parenthood the Problem? If You're Worried About the Climate, Move Your Money, and The New Meaning of Tattoos. Annie, always good to have you, even though our main hook today is your housing doom loop article. Welcome back to WNYC anyway.

Annie Lowrey: Thank you for having me for more bad news. [chuckles]

Brian Lehrer: Yes. Let's first establish that you say unaffordable home buying prices are not just in the big cities like New York and San Francisco right now. How national a problem are you describing here?

Annie Lowrey: There are certainly places where homes are still affordable for middle-income families. There are absolutely places. In the Rust Belt, a lot of housing remains affordable, in some of the upper prairie states it does. There's parts of Florida, there's parts of Texas, but it used to be, if we were talking 10 years ago, that you would have just really extraordinary housing prices in your New York, in your San Francisco, Seattle, big high productivity cities like that.

Now we've seen a lot of suburbs and rural areas become really, really unaffordable and the root problem here, there's probably more than one, but one of the root problems is that we have been under-producing housing on the coasts for decades, and now everywhere in the country since the Great Recession basically. It's been a really, really long, slow buildup and we just don't have enough houses where people want them. It's a really profound problem that's having all kinds of effects.

Brian Lehrer: You're right. This is not primarily about the currently high mortgage rates. The two main factors are what you call longstanding housing shortage and a frozen housing market. What does frozen housing market mean?

Annie Lowrey: Mortgage rates are really important to this story. What happened is that in 2020, COVID pandemic hit, the Fed pushes interest rates down to zero, and then as folks start engaging a little bit more activity and as some of those local lockdowns stop, there's a huge surge in home buying and prices go up a lot. Then we have inflation and so the Fed jacks up interest rates, mortgage rates go up through the roof, and everybody who has a low interest rate has less incentive to sell a house into this market now.

Why would you give up a 2.5% or a 3.5% interest rate on your mortgage if you're going to have to rebuy a home at a 6% mortgage or a 7% mortgage rate? People aren't putting things on the market. Nobody can afford to buy because the monthly cost of, just imagine the same house at the same apartment, just the mortgage cost is going to make your monthly payment about 50% higher.

The markets are really frozen up and the problem is when mortgage rates drop again, more people are going to flood into the market because so few people are buying right now and we have a really big-- It's like you're filling up the water balloon with water and everybody's going to want to rush into the market and that's going to keep prices really high as they are right now. Maybe they'll go even higher.

Brian Lehrer: I see. They're high now because the interest rates make them high, at least their monthly payments are high, and when that eases up, so many people will want to buy homes that supply and demand will mean that there's more demand than supply and so prices will stay high because of that. I think that's what you're saying, right?

Annie Lowrey: Exactly.

Brian Lehrer: On the housing shortage, you cite more than a decade of underbuilding after the Great Recession that began in 2008. Why underbuilding?

Annie Lowrey: This is a complicated phenomenon to explain, but it has to do with the price of land. The price of land has gone up a lot. That means that home prices need to go higher, it's harder to make construction projects pencil out. Construction costs have gone up a lot and construction productivity hasn't. The cost of raw materials has been high. There's been labor shortages. The cost of labor has been high and then you've seen a lot of restrictions on building that happen at the local level that have really had a national effect.

These are probably most exaggerated in a city like San Francisco where maybe just to get the permit to put a little cabin in your backyard and accessory dwelling unit will take like six years and cost $200,000 or something. I'm making those numbers up. We started to see that in a lot of places. Even our big cities are often heavily zoned for single-family homes. They're not zoned for density.

It's been this confluence of factors that has really led to a pretty significant housing shortage. The estimates vary, but probably, we're short somewhere between two million and six million homes. Again, the location of those homes matters because we want to be placing those homes where people want to be living all across this big and diverse country.

Brian Lehrer: Yes. Is there a deeper question there about the so-called laws of supply and demand? Don't the textbook say if there's a lot of demand, producers will build more supply, in this case, more homes because there's money to be made?

Annie Lowrey: Yes, absolutely. What is making it such that supply can't meet demand, in a lot of cases, it's zoning and restrictions. In some cases, it's because the cost of building has become too high, again, because of those labor issues, or materials issues, or because land has become too expensive depending on where you are. There's a million things just getting in the way of supply meeting demand.

I'd also note that the mass does not work to build affordable housing units in any American city at this point. If you are going to be providing them as rental units to people who are making average incomes, below-average incomes, or really low income, you need a large government subsidy for that and the government subsidy just isn't that big. We've not done enough to incentivize affordable housing production and not enough is "trickling down" because we're just not building enough either.

This is one of the root causes of the gentrification that people get really mad at. Hey, that new building is going up. Where are the people who are working for per hour as opposed to a big salary supposed to live?

Brian Lehrer: NIMBY. Nobody wants affordable housing built in their neighborhoods.

Annie Lowrey: No, they do not. They do not want social housing. They don't want public housing. They don't want any construction. I don't want to paint with too broad a brush there, but yes, it's this consistent problem that people who show up at community meetings with a big megaphone say, "Hey, what about my parking? What about construction noise? I don't oppose this housing, I just oppose it in my backyard." You get enough of those people doing it, and lo and behold, you underproduce housing dramatically. That's what we've seen happen across the country.

Brian Lehrer: You say, "Not in my backyard," too many times, and then you don't have enough backyards. Listeners, help--

Annie Lowrey: Exactly, and we need the backyards that are close to transit and close to people's jobs and where people want. Especially if you're living in a dense urban area, it means living around a lot of construction, social housing, public housing, low-income housing, different types of housing, housing that is changing. I think that there's a lot of small-c conservatism on the part of homeowners who again, they say, "Hey, I liked my neighborhood, how it was, I don't want it to change."

Brian Lehrer: Listeners, help us report this story. Are you a millennial? I think this is mostly a problem for millennials or disproportionately so. Annie, you'll tell me if you think that's right, but roughly late 20s to early 40s looking to stop renting and buy a home for the first time but you're shocked by the prices and carrying costs, including the mortgage rates out there. Tell us what you've been looking at and how it looks to you. 212-433-WNYC, 212-433-9692.

Or are you someone who wants to sell your home but the frozen market, as Annie Lowrey from The Atlantic has been describing it, has you stuck as well? Help us report this story if you're in the seller's position. 212-433-9692. You can also ask Annie Lowrey, who writes about economics and politics for The Atlantic, about some of her other recent stories I mentioned, some of which we'll get to, like Inflation is Your Fault, Maybe Don't Drive Into Manhattan, Is Single Parenthood The Problem, and If So, Should Government Try To Fix It? If You're Worried About the Climate, Move Your Money, and The New Meaning of Tattoos. 212-433-WNYC, 433-9692.

On interest rates and dissuading home buying, hadn't interest rates been historically very low for a long time before the pandemic? After the first tech bubble burst around the year 2000, followed by the 9/11 economic shock in 2001, followed by a few years later the Great Recession that began in '08, hasn't the Fed just kept pushing interest rates to near zero for 20-plus years?

Annie Lowrey: Yes, interest rates have been at unusual historical lows, and I think nobody quite knows whether they're going to go back down to historically low levels. They are high right now. One thing I'd like to note, I was talking with some readers who said, "Hey, back in the '80s and '90s, in the 70s, it was pretty common to have a 7% mortgage or an 8% mortgage rate. What is so different now that people don't want to be buying a house unless it's a 3% rate?" The difference is that home values are higher.

Your average monthly cost wouldn't have been suppressed by the mortgage rate. It would've been suppressed by the fact that the house was cheaper. It was probably also smaller and that there was just more housing supply back then. I think both of those are critical elements. Yes, we have been in a period of extraordinarily low interest rates. There's some thinking that interest rates will be low for a long time once we get out of this unusual moment in which the Fed is really trying to tackle inflation.

Again, I don't know about that, but there's some thoughts about the aging of the population, meaning interest rates will be lower. I certainly don't know, nobody knows whether mortgage rates are going to go back to where they were or whether after being 7% or even 8% they'll go back to something more like 4% or 5% in that middle range. I think that's a big question mark.

Brian Lehrer: Yes, I guess it's a question of what we should consider normal because now you can get 5% on a CD or a regular savings account, which means mortgage rates are a few points above that, which people are experiencing as shockingly high. Normal used to be that bank interest rates were 5% in the '60s, '70s, or '80s. Then they came down for so long. I don't know if economists or policymakers or anybody has a handle on what the ideal new normal should be for the most people.

Annie Lowrey: Yes, absolutely. I think that the ideal is very different than just what normal is and what it will be. There's just so many factors that go into determining that rate. Who knows? What did it feel like and how did it [unintelligible 00:13:17] our economy change in the next recession? There's going to be huge questions about that because we have no idea why that might happen or when it might hit. These things are just enormously hard to predict. One thing we do know is that, because people when mortgage rates are really low, they also have this incentive to refinance so people lock in those low mortgage rates.

That often locks them into their house because again, people who sell homes often buy a home at the same time. You're trading for a different place, a different location. Sellers and buyers are often the same people. If you've locked in that rate, you have that incentive to stay in your house. Would you give up a 3% rate for a 5% rate? Maybe, but it's really hard and really expensive to give up a 3% rate for a 7% rate. That's part of the reason I think also that nobody's really buying homes right now.

The very large shares of buyers are buying in cash. In Manhattan, which is obviously a very unusual housing market all the time, but in Manhattan, in the second quarter of this year, two out of three buyers bought in cash, two out of three. It's just an extraordinarily high rate. Across the country right now, more than 30% of buyers are buying in all cash.

Brian Lehrer: That's a mind-blowing stat. The high percentage of people-

Annie Lowrey: Isn't that crazy?

Brian Lehrer: -buying. What it really tells you is the only people who can buy right now are rich enough to be able to buy in all cash, right?

Annie Lowrey: Absolutely, or they're so rich and so liquid that they're investors picking up second properties to rent out type thing.

Brian Lehrer: Well, how much of the housing shortage comes from speculators who maybe-- I've heard there are these new home developments going up around the country, but they're largely being put up by investors, speculators, you might even call them, who are mostly using them as rentals. There isn't even that much supply for buying homes as there would be if these corporations weren't developing them or buying them up and using homes that would've been purchased homes for rentals.

Annie Lowrey: Absolutely. I think that that is having less of an effect on the overall supply of homes. As you pointed out, it's making it such that there are more rentals happening and fewer purchases. I'm not even sure that that's such a bad thing on [unintelligible 00:15:58]. I think we saw in the housing crisis and the Great Recession that followed it, home ownership comes with a lot of risks. There are many ways to save money, and we've had a lot of government policy that has encouraged home ownership. It means that you've got all of your eggs in one basket, in one basket that's pretty expensive to maintain.

If there's a hurricane or a tornado that's really hard, it means that you're stuck in place. It's harder to move. I think we want to be more agnostic to the question of, is it always such a good thing to be a homeowner versus a renter. I think that really the question is affordability. We have such profound affordability problems in so many American communities now, and the problems are especially acute for renters. Again, that comes back to a lack of supply. I think that everything would start to feel good if there was supply such that people could rent for meaningful rates.

It's really painful to people when they're renting and they're spending more than they're frankly even comfortable to rent, and as soon as you write that check, the money is gone. It's not like a mortgage payment where at least you feel like you're saving it in this kind of abstract but somewhat real way. It's a really deep underlying problem, and it's going to take us a long time to get out of it. I really hope that we do, as somebody who lives in New York myself and pays rent.

Brian Lehrer: James in Brooklyn has a story. James, you're on WNYC. Thanks for calling in.

James: Hi. Yes, I just wanted to say that I moved back to New York from out-of-state a few years ago, just to be back. I was renting. I had a nice place, and I got a significantly smaller place that was significantly cheaper in order to try to save money to buy a place and you just can't do it. The cost of living in New York is insanely expensive as everyone knows.

You can't just get that money together for a down payment. You're getting taxed, congestion pricing now, and [unintelligible 00:18:09]. Then on top of that, you got people coming in, like you were saying, with all cash in real estate, speculators, and it's just keeping the prices so high, and then throw a huge interest rate on top of that.

You can't do it, you can't get out. You're just stuck, spinning your wheels, not making any progress. It's a shame because you're going to end up with a generation of people that are renting their entire lives and not building that nest egg. Even if, like your guest was saying, all your eggs are in one basket, at least you got the eggs. When you rent, you don't got the eggs.

Brian Lehrer: James, thank you. Unfortunately, you exemplify exactly what Annie is reporting on so well. Good luck. Alex in Brooklyn, you're on WNYC. Hi, Alex.

Alex: Hi. I had bought my apartment in 2017 in Brooklyn, and my plan had been to sell it and buy a new place this year, but instead, the interest rates are too high and I have no spending power, buying power, so I decided to rent an apartment and rent out my current apartment instead.

Brian Lehrer: Alex, thank you very much. We have two different situations, but related. One who can't get out of renting, the other, who doesn't feel like he can sell his first owned home to get a bigger, a better-owned home. Two stuck people in this frozen housing market, as you call it, Annie. Andy in Brooklyn, you're on WNYC. Hi, Andy. All these callers coming from Brooklyn. Andy, hi.

Andy: Hi, Brian. Hi, thanks for taking the call. A long-time listener. My family and I, we live in Bay Ridge and we love it around here, but looking at prices to purchase a home, it just looks completely out of reach. I feel like we make a comfortable salary. I'm from Connecticut originally, and when I look at home prices around the New Haven area where I could reasonably work in New York still for, I don't know, $400,000, there, you might get an entire house and a pretty decent one at that. Whereas here, you're not getting nearly the same thing. It just makes the equation a bit more muddled.

Brian Lehrer: Andy, thank you very much. Alexis in Red Bank, you're on WNYC. Hi, Alexis.

Alexis: Hi, Brian. Guys, I was a realtor for about 12 years and there is no more normal. We are dealing with the Wild Wild West right now. I sold real estate during 9/11 and what happened is a lot of people from Manhattan came to the suburbs. That made sense. They were done with the city. That drove prices up. Prices never came back down from that period. Now we've just gone through COVID. Again, in regard to supply and demand, there's not enough supply for the amount of people that want to leave.

In regard to the interest rate, which is a big factor in how people make decisions, I own a home now at around 3%. New Jersey is incredibly expensive. I have no more children in the school system. The only way I could do it is to sell my house. I will earn quite a bit and I will need to buy in cash. It's not that I'm wealthy, but then I must either buy a townhome in New Jersey or have to leave New Jersey. I'll tell you, there are some surrounding states that offer, I don't even want to give them away, but amazing deals.

Delaware, and then the tax structure in Delaware, at 65 years old, you don't have to pay property tax anymore. I'm here in New Jersey. I'm in my late 50s. I have to think like that. I could leave New Jersey, buy something in cash, have no mortgage, and in a few years not have to pay the exorbitant property taxes. I don't have children in school. One other thing I'd like to say to your guest-

Brian Lehrer: Go ahead.

Alexis: -home ownership. I think it's very risky to say to people or to suggest, is home ownership the right idea? Home ownership in this country historically has been the main driver to move people from one socioeconomic group into another group. It is the vehicle on which people can hopefully retire. It also is like having your own bank. When you own your house, you can refinance, you can take out a loan. Banks look at you differently if you own real estate, and you are able to actually maybe start a business.

Owning a home is a really, really great thing to do. I do think we are now at the point that politicians have to get involved to try and correct what's happening. Last thing, I bought two pieces of plywood to make a repair yesterday. They were $90 a sheet of plywood. That's $180. Yes, the other complication, as your guest said, zoning, it's the supply chain, since COVID the cost of getting the products [unintelligible 00:23:22].

Brian Lehrer: Alexis, let me jump in for time because we're almost out of time in the segment, but since you said government has to jump in and do something, do you have a number one or one and two policy prescription?

Alexis: One, I do believe that they have to work with the property tax in the environment. The property taxes are state by state. Everybody talks about this. If everything's incremental, incremental too much, the property taxes have to come down. There should be age consideration. If you're too old to be childbearing, then why are you paying these high taxes? There has to be the interest rate. The Federal Reserve is given far too much power to set these rates and there has to be some consideration for what is it doing to the American people.

Brian Lehrer: Alexis, I'm going to leave it there. Obviously, the Fed would say, "We think inflation is the bigger problem, so we have to raise the interest rates." Those were great calls. All of them were great calls, Annie. The last two, Alex in Brooklyn who's looking to buy maybe in the New Haven area, New Haven's pretty far, but commuting from all the way there to New York City, and Alexis, also in the burbs in Red Bank, but talking about how things that close in just have gone up and up and up and up and up and up since 2001. What do you think about the policy prescription?

Annie Lowrey: One interesting thing about the way that we do housing policy in the United States is that federal government has a lot of influence over mortgages and mortgage policy. We do a lot to subsidize mortgages through Fannie and Freddie, which help reduce the effective cost of mortgages for folks through tax policies like the home mortgage interest deduction.

Federal government does a lot to subsidize rent, so that happens through HUD, through the Housing Choice Voucher Program. We don't do national housing supply policy here. That's a constitutional issue that zoning and land use is the prerogative of the state, not the federal government, and the states generally delegate it to local areas. I think that one of the profound political problems is that means that you get San Francisco homeowners saying, "Hey, we don't want that apartment building here." Or we get folks in Chicago saying, "We don't want that development here. Why don't you try someplace else in Chicago?" You have that same problem over and over again.

One thing that I think is hopeful here is that I do think that many, many more places are recognizing that we need a lot more housing. You've seen a broad variety of states, everything from our really blue states like Massachusetts and California to our really red states like Montana, starting to work on housing supply issues, getting rid of those zoning constraints, really pushing for more dense development for environmental reasons and for housing cost reasons.

I think that there is so much more national emphasis on housing affordability because we are in the midst of an affordability crisis that was here before COVID and we need to get out of it and it's going to take a long time to get out of it. I would note that the increasing cost of housing pulls up other prices too for things like childcare, for things like food. It's a really profound problem, but I do think the politicians have come around to it, and I think we should be looking for a lot of national attention on the issue met with really, really powerful state and local political change.

I think we're starting to see that in more places. I'm really hopeful if we have a follow-up to this 10 years from now that the story will be really different.

Brian Lehrer: All right. We're definitely going to have you on the show before 10 years from now. Let's take our last two minutes and do a little lightning round on some of your other really interesting stories recently in The Atlantic if you think you can do it that way. Inflation is Your Fault, that was the headline on your most recent article just the other day. Why?

Annie Lowrey: It was a very spicy headline and people were reasonably very angry about that. I certainly do not blame people for inflation. The point of the story was twofold. One is that though we have a lot of inflation right now, people haven't actually really meaningfully traded down. They haven't stopped shopping. Even accounting for the higher prices, people are broadly feeling financially comfortable enough to keep spending. Even though people hate inflation, they despise it, it's awful. It's muddling through that.

The second is, there's been an unbelievable rash of papers coming from economists showing that people have become less price-sensitive over time, so they're spending less time shopping, they're doing less comparison shopping, they're using fewer coupons, and they have become less sensitive to price changes. That probably has something to do with the whole economy getting richer. Maybe it has something to do with the fact that so many more women are in the workforce and so they don't have as much time to compare [unintelligible 00:28:47]. Maybe it has to do with targeted advertising and price settings, all those little trackers that follow you around on your computer and affect the prices that you pay.

Brian Lehrer: They know what you'll pay.

Annie Lowrey: They know exactly what you'll pay. [laughs] The piece is looking at that. I think the broad point is prices are really high. Inflation has slowed down a lot. It's really, really, really troubling for a lot of folks. [unintelligible 00:29:11] people are probably better off, but people hate high prices. They really do.

Brian Lehrer: One more because I can't resist, your headline, The New Meaning of Tattoos. What was the old meaning of tattoos?

Annie Lowrey: Oh, this is such a fun story. I'm a good tattooed millennial myself with a variety of tattoos. It's a look at how the availability of tattoo removal is changing tattoo culture. It's really only been in the last 10 years or so that it has been-- it's still quite painful to remove a tattoo. It takes a long time. It's a pretty imperfect process, but we've seen dramatic increases in tattoo removal, and understood as a viable thing that you can do now in a way that it never was before. Tattoos were supposed to be permanent. You weren't supposed to even think that you could take them off because how are you going to take them off?

I do think that that's affecting the tattoos that people are getting. Definitely, you talk to young people and some of them understand a tattoo is semi-permanent. They're like, "If it doesn't look good, I'll take it off." It's like, "Wait, what?" That's what the story is about. It's not against tattoo removal because, obviously, people get to decide what to do with their own bodies, but it's just such an interesting cultural phenomenon to me.

Brian Lehrer: Annie Lowrey writes about economics and politics and tattoos for The Atlantic.

Annie Lowrey: And tattoos.

[laughter]

Brian Lehrer: Annie, thanks so much.

Annie Lowrey: Thank you so much for having me.

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