NOTE: This transcript is automatically generated and cleaned up by AI to make us look like most of the time we speak complete sentences. It may not be verbatim and could contain mistakes that are different from the mistakes that we make on the podcast. Reader beware.
Kathryn: I have once put on an economist wedding card, like, congratulations on your upcoming household formation or your successful household formation. Um, I wish, like clearly I would only give to an economist
Kathryn: 'cause everybody else would be 
Robin: Yeah. I hope, 
Kathryn: this is not right.
Kathryn: Hello And welcome to Optimist Economy. I'm Kathryn Anne Edwards, economist.
Robin: I'm Robin Rauzi and I'm an editor.
Kathryn: On this show, we believe the US economy can be better and we talk about how to get there one problem and solution at a time.
Robin: Today on Optimist Economy, we're gonna be talking about the housing market.
Kathryn: we're gonna talk about housing and if there's really a shortage of housing and if supply is the answer to all of our housing cost woes. And I'm gonna say no, but you should listen anyway.
Robin: Do we have any announcements?
Kathryn: Uh, give us money. Other than that,
Robin: Oh, yes, we do have an announcement.
Kathryn: oh, wonderful.
Robin: Optimist Economy relies on people like you donating to our show. over the hiatus, we got donations at the spiritual sponsor level from four people, including Sonya Gill, and we wanna thank her for her donation. Is that
Kathryn: Thank you. You too could become an on-air named spiritual sponsor by giving us money.
Robin: At optimist economy.com?
Kathryn: Yay. All right. Our next section is really the one that I I own, which is Retcon, where we go back and talk about episodes, reflect on episodes, as well as fix things that I said that were wrong, 
Kathryn: but Robin has one today.
Robin: I do, uh, you mentioned Bendit like Beckham in our last episode, and it is Parminder Nagra, who is the actress from that movie who shows up at the Angel City Football Club, women's soccer games here in Los Angeles, and everybody goes wild.
Kathryn: I would lose my mind.
Robin: Yeah, people, I imagine if you're seated, I'm not in those expensive seats, but if you are, I'm sure it'll be like, it'll be crazy.
Robin: Okay. Next chapter is Terms and Conditions. Kathryn, I see you looked something up.
Kathryn: I did. I looked at Bloviate 
Robin: Bloviate. 
Kathryn: Yeah.
Kathryn: It means to talk or write at length.
Robin: To talk yourself hoarse.
Kathryn: Yeah. yeah. Okay. the only reason why I wanted to include it is I'm trying to get back into writing Bloomberg columns and, man, it was slow going and I was trying so hard to get words on the page and I was having my favorite Bloomberg subject, which is to knock Congress for being bad at its job and not doing anything.
Kathryn: And I, I brought up a hearing that they had in which they took turns yelling at health insurance CEOs and then yelling at each other for being like the real cause of the problem. And I was trying to come up with a term for talking into dead air. And then I was like, maybe I don't wanna look it up. May, maybe it doesn't exist and I shouldn't look it up and bring it up. Anyways, bloviate to Bloviate. Um. 
Robin: a good word.
Robin: Good. Very good. I looked up a term that turns out is not an economic term, but it is, one-legged stool. So there's a story in the paper. Today as I as we're recording this, about the one-legged stools holding up the fragile economy. And in this case, they're talking about, in the space of consumer spending.
Robin: It's just highly wealthy people doing most of the consumer spending in the labor market. It's healthcare and social assistance jobs that are creating all the jobs growth. And in, in the stock market, it's basically seven tech companies creating all the returns. So all of these are, unstable, like a one-legged stool.
Robin: But when I looked it up, I also discovered that apparently when, uh, Alfred Nobel had his first nitroglycerin factories, he actually had one-legged stools for the guys who had to supervise the, vats of chemicals making nitroglycerin so that they stayed aware. It was also called a suicide stool, so you didn't fall asleep while sitting down on the job.
Kathryn: I was like, is a one-legged stool just like a pole?
Robin: no, it's got a, you know, a seat on it, but then yeah, just, but just one, it looked a little, and they had a picture of it on the Nobel website. I was like, is this a real thing? And indeed it was a real thing.
Kathryn: It is a real thing. 
Kathryn: we're gonna take a quick break and we'll be back with the biggest Pilcrow of them all.
Kathryn: The biggest Pilcrow,
Robin: The biggest Pilcrow 
Robin: Bigger than any pilcrow we've ever 
Kathryn: Bigger than any Pilcrow. 
[BREAK]
Robin: I dunno if you, did you see this poll yesterday that, the New York Times Santa Poll about affordability?
Kathryn: No.
Robin: It said that, basically Americans are deeply pessimistic about their economic future, but also specifically, they said more than half of people surveyed said that housing and education are now so expensive that they're actually unaffordable.
Robin: Housing was 54% I think
Kathryn: Mm-hmm.
Robin: 58% said education is unaffordable.
 Kathryn: Americans have said quite clearly housing is unaffordable and. The narrative you hear around this is supply. We need to build, we need to deregulate, we need to juice the market in order to ease prices. And I think what we try to do on this show and what we wanna do specifically today, is to get at what's, what's wrong with that story. It's not, it's not wrong, wrong, wrong. 
Robin: It is just not the whole Yeah, it's not the whole story.
Kathryn: It's not the whole story. And if you don't think about the whole story, if you don't think about the actual cause of the problem, you'll never solve it. And we want to solve housing affordability, but it's not as simple as let's just build some stuff.
Robin: I think the other things that we, you know, just to keep in mind about what's been going on is, of course, the president has proposed and then backed away from the idea of 50 year mortgages and a way to make housing more affordable. Sorry, wait. Is that a spit take?
Kathryn: Mm-hmm.
Robin: Okay. and
Kathryn: this, it's such a bad policy and they, I don, I, it was so bad I just deleted it. But then I did remember, I don't know if you saw the reporting of the 50 year mortgage where the guy Bill Pulte.
Robin: Bill Pulte.
Kathryn: He put like a poster board with FDR's face and then Trump's face. And under one he put 30 year mortgage and on the other he put like 50 year mortgage.
Kathryn: He's like, you're gonna be like FDR. And then as soon as it came out, people were like, this is the stupidest thing I've ever heard. 
Kathryn: That just made me crack up, like nailed it.
Robin: Yeah, fascinatingly, Bill Pulte So Bill Ty's the um, he directs the Federal Housing and Finance Agency, which is like oversees Freddie Mac and Fannie Mae, and they've been just like just firing all the people whose jobs were about housing, affordability programs, fair lending programs, teams that focus on counseling, people on mortgages.
Robin: his idea is just like, let let banks do whatever they want to. we know, get rid of all the regulations that came after in the wake of the 2008 recession and, housing crisis. Just, that's the solution.
Kathryn: Boom. 50.
Robin: And here we are. It's, it's fixed.
Robin: Yeah. Failing that.
Kathryn: So, so failing that. Failing the 50 year mortgage, being the solution to all of our problems. You know, how do we, how do we talk about housing? What do you, what do you need to know to have a, you know, proactive, productive conversation of what is going on with housing in the us?
Kathryn: I think that there's a, like kind of a north star here, is that when we're talking about home affordability, we should look at the home ownership rate. It peaked. 2005 with the peak of the housing bubble and after the housing bubble crashed, the home ownership rate in the US fell for 11 years, and it went down to 62% from a peak of 69, and it didn't stop falling until 2016 and then it started to rise again. 
Kathryn: Now a lot of weird things happen with the home ownership rate and the pandemic, but right now it is around 65 to 66%. It's kind of bouncing between there, so it's it's stable. Maybe you would argue it should be rising, but it's not crashing. Uh, it has been stable for the past few years. So the home ownership rate is, is.
Kathryn: Not like falling off a cliff the way that it did after the housing bubble, uh, burst. The second is if you look at mortgage debt service, this is the amount of money that all Americans piled together are spending on their mortgage payment and express that as a share of income and all the disposable income they have.
Kathryn: Mortgage payments now are a smaller share of disposable income than they were before the pandemic. Again, it peaked with the housing bubble peaked a couple years later in 2007, but we now spend less on mortgages as a country than we did even six years ago. As a percentage of income were there some kind of catastrophic crisis in the housing sector.
Kathryn: Those two things would not be stable. And so that's, I don't say that to, to, to be like, oh, and here's the economist with the data that says your struggle is fake because the data says you're wrong. It's to, in some ways, allay the concerns of how big of a problem we're dealing with because we have some basic level of stability in the market and in home ownership.
Kathryn: So that's, that's, that's good. It's good. It might make you, it might make you feel like I'm erasing your experience, but it's good, uh, that those things are stable and they're not flashing red, but I think. The second thing to understand, and this is this is also pretty important, is that when we think about housing, we don't in how many houses we need, like what are the total number of units we need.
Kathryn: The denominator isn't people, it's households, and we build housing for households, not people.
Robin: You mean how many houses? How many housing units you need is based on how many households there are, not how many individual humans there are in the country.
Kathryn: right. Right. 
Kathryn: So bit of terminology here, a household in kind of the economics definition is whoever has a key. So if you live in an apartment with three roommates, you and your roommates are one household. If you live in an apartment by yourself, you are one household. If you live in a house, but there's two families in the house and you guys are split up, You are one household, two families. The household is basically whoever is under the roof, whether they're related or not.
Kathryn: Over the past 15 years, we have seen a big slowing of household formation, which means you go out and you get a new key. So when I moved in with my boyfriend, I left my, group house with three roommates and he left his group house with two roommates, and we moved into a place together.
Kathryn: We have formed a new household. 
Kathryn: So there has been a lot of reasons why we have not had new household formation. And one of them was, after the great recession, a lot of people were staying with their parents, like living with their parents longer. Marriage rates are down, independent living amongst young adults is down.
Kathryn: And some of this is because housing is expensive, but at the same time, it also reduces the total need for housing. So it, it's, it's definitely a two-way street. Like
Kathryn: the total like household formation in the US is down by several million, over the last 15 years and is projected to stay down.
Robin: One question I've always had about this is whether there's also a mismatch between. The types of housing that are available and the housing that people need, at various stages of their life. So, you just moved into an, into a house in Texas. You've got kids, you wanted to be in a house with multiple bedrooms.
Robin: Like in, in Southern California where I live, a huge amount of the construction that's happening is apartments. They are mostly one bedroom and two bedroom apartments. They're probably not ideal for people who have, more children or more than one child. Um, and granted, you know, Southern California think it's the Midwest and we should all have backyards um, but.
Robin: I've often wondered if there's also that, right? And, and likewise, a,shortage of not just the size of the units, but whether you are at a stage where you wanna be buying a house versus renting. Like, I think a lot of these things get really mashed up together into, like housing shortage when the shortage could be, it's, we've got housing. It's just what you said, it's not affordable.
Kathryn: Yeah. I think that's the exact instinct that, that you can understand at a really fundamental level. What it means to be mismatched to the housing supply because you want to live in a house, but there's only condos or you want to live in an apartment. Uh, but there's only like houses far from the city center, right?
Kathryn: That mismatch of preferences. Is really like translate that to income and that is the housing supply problem. That is the housing affordability problem we have is that the distribution of housing is mismatched to the distribution of income. And we have a, to the extent that we have a housing shortage, it's not a net shortage.
Kathryn: Like we have more people than housing. It is a distributional shortage where we don't have enough housing for the people at the place that people can afford. Right. Supply is not like it's a, it is a problem, but it's a really subtle version of the supply problem. And maybe some would say not really a problem at all.
Kathryn: It's about mismatch between what people can afford in the bottom and what is being built, right? So it's not a matter of like, as long as we got rid of certain regulatory and tax policy, people are suddenly gonna build housing that someone who makes $50,000 a year can afford. That's why the, the answer, the supply answer is mist.
Kathryn: Is not fitting with the actual supply problem, which is income. We don't have housing for people who don't make that much money. That is the problem. It's not that we don't have housing, it's that we don't have the right price of housing and what people are building is not at that price point. At least what private developers wanna build is not at that price point.
Robin: Yeah, that's interesting. And this affordability problem, I mean, again, I live in Southern California. The affordability problem came to us a long, long time ago. so it's, been kind of interesting to see it catch up to other places. Like for instance, we lived for two years in Spokane, and I watched it happen in Spokane in like in this period of time where, where between basically 2019 to, what is it, 2022 or 2023 when housing prices shot up. Like, what is it, 48% or something? there was in fact this gigantic leap in, in home prices as people moved. and then also a, a gap in purchasing power because of largely because of interest rates and housing prices outpacing Wage growth.
Kathryn: So I wrote about this in 2024. I wrote about it at the start of summer, like really getting into home buying season and interest rates were high. And there was all this talk about how like we had to push housing supply and construction forward. And I, I said, you know, affordability is a function of price, and income.
Robin: Mm-hmm.
Kathryn: Like, if I can't afford something, it could be that it's expensive or I just don't have that much money. And I said, I think the US will have a housing crisis so long as it pursues a low wage policy in the labor market. So if you give no more than 30% of your income towards housing, that's, that's the typical standard for affordability. And that standard has a policy precedent behind it. subsidized housing is paid back based on 30% of your income. So if you were in federal subsidized housing, they're, tagging it around 30%.
Kathryn: So it's not just like a number that came out of the air, like there is a lot of, federal policy behind it. 
Robin: Yeah.
Kathryn: So it's, you know, we can talk about housing supply, but like there are wages in the US for which there is no housing that is affordable for someone who makes that little money. And we will not build it. No one out there is like, we've gotta go out and build housing for people who are gonna pay me less than $800. Yeah, they're not, it's not, that's not what they're building. 
Kathryn: 
Robin: One of the things I read was that the change between 2019 and now, is that in 2019, 54% of houses were affordable to a median household income, and now that number is like 28%.
Robin: So I was just also curious if half the houses are affordable, is that like kind of where you would want it to be? Like, to me, 2019 already felt unaffordable, but I live in Southern California. Like it was, it's, I know that I'm in this hyper, totally crazy real estate bubble.
Kathryn: We merely adopted the dark. You were born and it's, 
Robin: no, I moved here. But, 
Kathryn: yeah. 
Robin: yeah. Uh.
Robin: anyway, Back to my question, which is if like 54% of the housing stock that was for sale is, is affordable to the median household income, is that in balance?
 Kathryn: 54% of the housing stock that was for sale is affordable to meeting household is in a balance… Not necessarily. Because it all depends on the distribution of home prices relative to the distribution of income.
Kathryn: And it could be that like at the exact middle point half, you know, which you could have, the middle person could afford middle housing, but that does, that says nothing about the people underneath. I, you know, the US income distribution, um, has a big clump of people, you know, below average. And we have more people below the average income, uh, than we do above it because the tail is really, really long, right?
Kathryn: So if you, if you take an average, right? Just one of my favorite measures of central tendency. But if you take an average, right? You're just like, here are the number of people, and that's divide. Uh, here's the total income, here's the number of people we divide. That average can be above what even 60 or 70% of Americans make because we have a.
Kathryn: Big clump of people that are below average and then a long tail of people that are above average. So I say all this because you know what? What that big clump can afford really depends on if it has an equally big clump of housing right there. And the middle point is instructive, but it's not necessarily gonna be indicative of what happens to everybody else below them.
Robin: does that mean the crisis or the real crunch point is people trying to get into the housing market? It's people trying to buy their first home,
Kathryn: yes, I think
Robin: or, or I guess maybe trying to move, uh,
Kathryn: in a lot of ways that's a function of interest rates. That interest rates have pushed up, mortgage payments, which, they're intended to do. and that as a result of that, You either can't afford, the mortgage payment because it's higher than rent, or it crowds out other spending.
Kathryn: Now, I, you know, not to be like, I don't know that, like jerk economist, that's like actually. It's not supposed to be, but like, this is one of the reasons why we push up interest rates when inflation gets out of controls. Because when you push up interest rates and it makes things like mortgage payments more expensive, that crowds out other spending and that reduces demand lowering the pressure on prices in the economy.
Kathryn: I mean, this is, we're essentially all feeling the pain of having to try and conquer inflation. this is one channel of doing it. I mean, it is a, Blunt tool to raise interest rates, and you get all kinds of pain points like this.
Kathryn: So that's, one reason why the, the supply question feel, or the supply concern and the need to build, build, build is, I think out of step with the reality that the escalation of home ownership, affordability, and the crisis around it does coincide really well with interest rates climbing.
Robin: Mm-hmm.
Kathryn: And then I, and then the second part would be that I don't, I'm not convinced that we are actually millions and millions of short of units, so much as I'm convinced that we do not have a housing stock that reflects the, accumulated toll of five decades of income inequality.
Robin: Mm-hmm.
Kathryn: and a lot of developers will build for the top of the market, and the bottom market becomes affordable. You know, basically when it grows so old or dispossessed that like other people can afford it. Well that's not an affordable housing strategy.
Robin: Just to wait, just to wait for houses to get old and, and in need of rehab?
Kathryn: Yeah, that's actually called noaa. naturally occurring affordable housing. No's.
Kathryn: Yeah. And there, there are people who are like work in urban areas to try to preserve no's because you have people who come in with a lot of income and they decide a neighborhood is desirable and they push up the home price in a neighborhood.
Kathryn: And you have all these Noahs that are lost because people are willing, you know, kind of going back to what we said about hedonic pricing, the neighborhood itself has become more desirable and then that has altered the, the home price and the affordable housing is gone.
Robin: Yeah. And you certainly see that in big cities where even the, houses that probably should be torn down because they weren't ever really, like, I live in a neighborhood where tons of houses, Los Angeles boomed in the 1920s, they built so many houses that they just, they weren't built to last, but they do because it would now be so expensive to do to rebuild them on those lots.
Robin: Um, in part because of engineering thinks that, thinks that they didn't do a lot of a hundred years ago. Um, and so you just, if you wanna live in the center of the city, um, you live with the old housing stock and you pour money into that instead of trying to, you know, build something new or move farther out where there's land.
Kathryn: Yeah.
Kathryn: it would be really nice to just like be able to sprinkle some housing on a city and say like. There, like the problem's solved. But I think what I wanna stress about housing is that the problems go much deeper than just is there a pile of bricks for you to move into. And I think it's a function of how, uh.
Kathryn: Of how we, re remunerate workers in our economy. I mean, you, you go decades and decades without, meaningfully reforming the labor market regulations without, raising the minimum wage. And then you have a housing affordability crisis and you're like, and the answer is to build more.
Kathryn: I'm like, or think about it. We might have enough houses and not enough income, and one of those problems is a lot. there are a lot of people who wanna jump in the game and say like, well, let's develop and let's build stuff here, as opposed to, you know, let's start getting incomes higher. I mean, I was looking up this morning, the median mortgage payment in the US right now is $2,259.
Kathryn: The median weekly earning of a full-time worker in the United States is around 1200 bucks, right? 1200 bucks. It's a lot lower for women. but 1200 bucks is the median.
Robin: You say it's a lot lower for women. 
Kathryn: yeah, it's 1200 bucks, but it's around a thousand for women and 1300 for men.
Robin: Okay.
Kathryn: Uh, so median weekly earnings, $1,200 median mortgage payment.
Robin: 2200. Mm-hmm.
Kathryn: Okay. That comes out to needing $7,500 a month of income in order for that payment to be affordable. So you can think of that $7,500 a month of being around $1,700 a week.
Robin: Okay.
Kathryn: So there is a $500 weekly gap between what your median mortgage payment is and what the median worker earns. That $500 gap is not going away with a supply, like a infusion of supply. That is an income and wage problem.
Kathryn: And the more we focused on supply, like supply is not getting you out of this, 
Robin: Yeah. 
Kathryn: supply will only get you out of this if you have the government aggressively building homes that are below market rates. The market will not build below market rate homes. The government can go out and build below market rate homes. That is what they would have to do to actually change supply in a way that matters for, you know, affordability.
Kathryn: I mean, it's worth going back to history and thinking that like we have had housing supply shortages in the United States. They were very acute during World War ii and people who worked at factories related to wartime production, they were living in shanty towns and tent villages, even though they were making good money because there 
Robin: there's just no, no house to bed that happened here and, and there in fact are still literally quo huts that were divided into like duplexes, that were housing into the sixties, I think, um, because they just couldn't build housing fast enough to absorb all the people who moved here after the war. in addition to all the returning soldiers and, you know, all the people who had worked in the ports and and such, and in the aerospace industry here.
Kathryn: Well, I mean the US coming out of World War ii, you had a lot of, constrained household formation as it were. Like you had people, like they were married, but they were in their parents' house because like, there was just not a house to be found in the city. And it was not about preferences and it was not about, what they could afford.
Kathryn: I mean, it was just, there was a not enough housing where people lived and you saw a just absolute flourishing of home development. A lot of it with the government's help, if not the government building directly, some of the histories you'll, you'll read will say like. Yeah, because otherwise people would've like outright revolted.
Kathryn: Like they need, like people were so desperate for housing, they wanted to get out of their parents' house. They didn't wanna, and they wanted to all live alone. And you saw this like era of single family housing as a reaction to how much doubling up occurred out of necessity during World War II when there wasn't enough housing, especially in areas near production.
Kathryn: Well, you know, I think about that, um, not just because of what we should build, but but also of, of. Like, I do this all the time, but like, this is not your grandfather's housing shortage. This is like, people can't afford housing 'cause we've been building too much expensive housing, not enough affordable housing.
Kathryn: And incomes have started to, you know, have just not taken off the way that they should have. And if we don't have incomes rising at the bottom, like we will never have affordable housing for half of Americans if the market is building for the top. Uh, it's just not, and I think there's this kind of idea of like, oh, but more supply would reduce payments.
Kathryn: I, I just, you haven't 
Robin: I haven't seen it. Actually, I found this story, by the way, about what it would take just to get back to the 2019 affordability levels. the analysis was from actually realtor.com, which I believe, put out a report about it, but they said to get things back to, what you were talking about, where, the mortgage payment would be about 21% of median household income compared to more than 30% today. Uh, they say mortgage rates would have to fall to 2.65%, or home prices would have to fall 35% or incomes would have to rise 56%.
Kathryn: Yeah, so it's not gonna be just one.
Robin: Yeah. It's not gonna be just one thing.
Kathryn: And I, I guess the income side is overlooked here. And there's a degree to which enough income can solve this problem. Enough housing cannot solve this problem. more housing can help, but it cannot solve this problem if people don't have enough income or if incomes are being so left so far behind housing price.
Kathryn: Now there's a whole other piece to this, that there are a lot of people out there who do not want more housing. Now they say that they do and they want housing to be affordable, but I get the sense that really they wanna keep housing as kind of the privileged good that it is because they treat it like a piggy bank.
Kathryn: I mean, most Americans view their home as an investment, like they're trying to get equity out of it. 
Robin: Yeah, I guess, I mean, I can't speak to everybody, but to have savings outta their house, if not an investment, you know what I, does that distinction make any sense to you?
Robin: I'm gonna just say like, so when I bought my house, I was very young compared to my peers. I was 27 when I bought my house, and I did it because housing prices were low and, but I was paying so much in rent that I really couldn't afford to save at the rate I wanted to save.
Robin: So I wound up buying a duplex and it allowed me to at least use the money that I was, was putting towards rent to a certain extent that it was also going to build up the principle and the equity in the house. I did not expect that the mor, that the housing market would do what it did.
Kathryn: What year did you buy your
Robin: yeah, 1997.
Kathryn: 1997?
Robin: You know, I mean, I was a newspaper reporter. I wasn't making a lot of money, but I did also read the newspaper and it told me that housing, housing costs in, in Southern California were at 10 year lows because of riots. The earthquakes, the recession, like that combo pack meant that housing prices were at 10 year lows. And I was like, this is my chance. I gotta go. I gotta do it now.


Kathryn: I think a lot of people view housing as an investment that they, you know, the boomers bought houses for 50 grand in 1980 and now they're worth millions and like they want to do the same
Robin: Mm-hmm.
Kathryn: And that they want, they think of a house as this, like equity, you know, skyscraper of like, once you get in, like you go straight to the top and like all you need to be a millionaire is buy a house and have it like, just hold onto it and it just goes up, up, up, and up. 
Kathryn: I don't think people should make money off their houses. I think it warps a lot of decision making to have so much of an investment, you know, putting a lot of money in just one stock, like it warps decision making.
Robin: Yeah, it does. I mean, we keep passing laws and constitutional amendments and all sorts of things in California trying to incentivize people to do different things with their housing, right? So we have rules that say you can take your property tax basis with you when you move if you're over 55.
Robin: because they just feel like people are locked into kind of the, the same way that people talk about being locked into low mortgage rates, that it would cost so much more. You'd have to essentially downsize your house. the feeling is it was for, boomers, but now it's gonna be Gen Xers, and you know, housing prices shot up so much that you can't afford the property taxes on the place that you would go. And I mean, we live in Los Angeles, in part because we are locked into those, to all those things.
Kathryn: I mean, yeah, portable mortgages, which we talked about once on a q and a episode. like if you're credit worthy and you're paying down a 25 year mortgage and that's worth, $500,000, like, why does it have to be fixed to that one, address, like you could pay a fee and just move basically your house. And the thing about portable mortgages is like, sure, sure. It's basically someone is giving you a, an asset backed loan 
Robin: Mm-hmm. 
Kathryn: and kind of letting you, like, 
Robin: I do. So you're swapping assets.
Kathryn: You're, you're swapping like the little, a asset for the big, a asset of like, I own a house, but like 
Kathryn: That kind of changes the perspective that people have on mortgages as well as how they, like how long they stay in a house, how they invest in a house, what they think of equity outta the house. It's almost like you're prepaying rent for 30 years and then you're shifting location of, I'd rather prepay rent with an interest on a loan rather than pay it in like real time.
Kathryn: And then that I think would change a lot of people's calculus of like, do I need to buy? When do I need to buy? I mean, there's so much wrong with the housing market that's not supply. 
I think every time I hear a supply thing I just, it's just this like eye roll for days of like, oh yeah, let me guess. We need to be able to kill more birds and build houses and floodplains like, I get it.
Kathryn: We shouldn't have regulations. And that's the answer to all of our or hear me out fix, all the problems that we have. alright, optimism, optimism.
Robin: Yeah.
Kathryn: I'm gonna do two things. One is I bet someone's gonna be listening and be like, nice for two homeowners to talk about it. And we're gonna get like a lot of slack, especially if this goes up as a TikTok
Robin: We're not gonna get a, we're gonna get a lot 
Kathryn: flack
Kathryn: people are gonna talk about 
Kathryn: slack, 
Robin: not gonna get any slack re.
Kathryn: Flack, dammit. Why? Why do I
Robin: That's why you have me here.
Kathryn: I don't know.
Robin: I know that people think that I correct you 'cause like I'm an asshole, but I really am trying to help.
Kathryn: you help so much. Um, I, I think we will get flack because we're too homeowners talking about out.
Robin: I'm a landlord. I'm the worst kind of homeowner.
Kathryn: a landlord. My god. You're
Kathryn: like 
Robin: I'm like, I, I should just like, draw a mustache on my face and like twirl it. I know,
Kathryn: We just lost production.
Robin: I know. Yeah. That just, just quit. Um,
Robin: hey, in, in fairness, I have a, I have a, uh, rent control. I have a rent controlled unit.
Kathryn: oh, snaps. Okay. They're back. We got production back. Um,
Robin: Derek also listens to the show. He's gonna be like, wait, what?
Kathryn: I mean, yeah. It's, it's a lot for like two people who own houses, and refinanced houses to be like, supply isn't the end all, be all. And I, it's not to downplay how hard it is to buy a house that I bring up all these other things. I think it's to make the narrative much more empowering, right?
Kathryn: Like, Hey y'all, good news. Our salvation doesn't come from housing developers deciding to take a chance on a market. That's good. Don't listen to our housing developer president or whatever legion of bros who are following him. It's not there. Our fate is in the hands of like better banking policy, better lending policy, and better labor market policy where people actually earn an income.
Kathryn: And that is where our salvation comes from and not from whenever some asshole decides to build a big building and say like, it's mixed use and one of the units are affordable, fuck you. Come on. Like y'all, let's put this power, this is back in our hands here. You need to go out there and demand unionization. If you want affordable housing, like we need better income. Sorry, I didn't mean to, um, I didn't mean to rant.
Kathryn: So I know I focus on income,
Robin: Sure.
Kathryn: but think for a minute about our, like if you listen to the first episode, we talked about the just enormity of income inequality, right? we have, over the past 50 years, seen this incredible increase in incomes at the top versus this is this paucity of growth for the bottom 90% missing out on so much of the economic growth.
Kathryn: So if I were to tell you think of like two housing markets, one in 1975 and one in 2025 or 2026. How much has our housing supply kept up with the gross income
Kathryn: inequality? Right? Like these are fixed buildings, many of them built before the time we're talking about if you were to just like kind of close your eyes at the end of the first episode and say what are the consequences of having five decades of growing income inequality in which the top incomes are taking off and the bottom are not growing enough at all?
Kathryn: Well, yeah, we're gonna be mismatched our housing stock eventually. 
Robin: Hmm.
Kathryn: this is a consequence of long-term income inequality that we now are mismatched to our housing stock.
Kathryn: And that is a big part of the problem. And that is not just a matter of like stripping down environmental regulations and making sure that we can build like at a watershed or at a national park. it's a bigger problem than that, but it's also that makes that solution seem so, like,
Robin: Uh, that solution has so many other benefits, right? I mean, there's so many things that are happening because of housing affordability, including like far reduced mobility of Americans. People just aren't moving anywhere. and in part because they don't have the money to move and buy a house in a new city. there's a lot of things that, that people get locked into because they can't afford to move.
Kathryn: the answer to that is not
Robin: Build more housing. Yeah.
Kathryn: Or maybe the answer to that is not like, more market built housing. I think that government building below market housing is the answer. Americans are terrified of that now. We're terrified of it now. We didn't, we weren't always, but I mean the government building below market housing that is actually affordable, you know, most of our intervention into the housing market is for the very poorest, right? We don't have median public housing. We have low, low, low income public housing. 
Kathryn: We kind of ask private developers to, like in some places, set aside some units for people who are at like 30 to 50% of area income. that is not the same thing as building housing for the middle or, or having government subsidized housing for the middle, which we don't really have. We do more at the bottom, not enough in the middle. and the private action takes place kind of at the top half. 
Robin: we do also act as if, I dunno that it's, that it's anathema to American capitalism for the government to be interfering in the housing market. Right. That it's a market, but of course they interfering it in all sorts of ways. so why not in a way that actually increases affordability instead of, I don't know, subsidizing banks with, mortgage interest deductions.
Kathryn: It strikes me how often there's like the right kind of intervention, and it never applies to, like most of us. 
Robin: seems to apply to JP Morgan Chase more than me. Yeah, I know.
Kathryn: Like we have, we have low income housing tax credits to help build very low income housing, but there's not enough and, and there's no reason why the government. Can't build housing alongside of housing building that it's subsidizing if it wanted to try, if it wanted to take a chance on housing affordability in a way that it had control over, and not like we're gonna subsidize developers, but we're gonna, Ugh, I'm rambling, but I think it's all a matter of like the solution to the housing affordability problem is truly about what we are willing to ask for.
Kathryn: That is optimism because that puts agency back in our hands. It's not waiting for a developer to decide that our neighborhood or our city or our price point is suddenly worth it to them, or they can squeeze the government for more in order to make it worth it, right? If we make this about what the government can directly intervene in the housing market, we get to design our solution.
Kathryn: We are more empowered in that process than. Build, build, build. So let's become empowered. Let's tell them exactly what we want them to do and, and make sure that the housing that is built and the supply that is addressed is something that will benefit the bottom 70% of Americans and not the top 30 who can afford a housing.
Robin: Alright,
Kathryn: Okay, we
Robin: take a little break and we'll be right back with executive orders.
[BREAK]
Kathryn: Executive orders and we're back to continue to tell people how to live their lives, how society should be organized. smaller ways. Smaller ways.
Robin: So I have an executive order as, listeners of the show know I was in Houston last week visiting Kathryn and her family. And, um, I flew back on Delta Airlines, and I'm just gonna say, bathrooms on airplanes have become criminally small. I am an average sized woman, I don't know how anybody larger than me is fitting into this bathroom. I'm waiting for an Americans with Disabilities, uh, um, lawsuit on these. They're criminally small.
Kathryn: some listener is gonna know how airplanes get around ADA
Robin: Don't understand it. Yeah. Like,
Kathryn: how, how bathrooms on planes work for people with a disability.
Kathryn: yeah. Bathrooms on airplanes need to be bigger. I mean, try going in there with a kid
Robin: Oh yeah.
Kathryn: Trying to get a toddler to a bathroom on an airplane before there's an accident.
Kathryn: yes, I endorse this executive order, make bathrooms on airplanes, bigger a la , Amtrak, where like you and your eight best friends gonna go to the bathroom together. Like everybody on this, let's all go. Why don't we all go? There's a big group down to the bathroom on the Amtrak.
Robin: All right. What's your executive order?
Kathryn: my executive order is very self-serving, but I need to be involved on the remaining casting decisions for the movie that, that they're making about the 1999 Women's World Cup, about the 99 ERs, the girls of Summer.
Kathryn: I need to be involved in the rest of casting. They did great with the, I mean, the Mia, she looks just like her. I'm very excited, but like, you can't exclude me anymore. I need to be a part of this. I have so many ideas of who should play everyone, and I swear to God, I swear to God if they cast the wrong person as Michelle Akers, like, I don't know what I'm going to do. 
Robin: Who do you think should play? Michelle Aker.
Kathryn: God, I don't, I don't have everyone yet. I just need to be in the room when the decisions are made to make sure that there's, like, 'cause
Robin: You want approval?
Kathryn: I need producer approval. A lot of actresses are like five foot, nothing, 75 pounds, and I'm like, Michelle Akers is like a force of nature and I, you can't just do casting, you can't just do like angles. Like, I need a person of substance in the most amazing wig. Yeah. let's not skimp out on the wig budget for this one. Like, let's,
Robin: They gotta have that. All those curls.
Kathryn: got so many anyway, so me being a producer with like a lot of opinions on the 1999 ERs movie is my executive order benefits. No one but me, but I just, I feel like I'm gonna install myself there.
Robin: Okay. That sounds good. 
Robin: All right. Optimist economy doesn't have any financial sponsors except you guys, but we do have spiritual sponsors and those are the things that are keeping us going. Kathryn, what's your spiritual sponsor this week?
Kathryn: Lily Allen's new album, west End Girl.
Robin: I listened to this on your recommendation while I made dinner the other night.
Kathryn: Oh, what did you think?
Robin: great. It's great. I mean, I, it's a reminder, don't break up or screw over a songwriter man, like
Kathryn: That's, that's all I keep thinking is like, wow, this sounds so painful. And she's been through so much. But at the same time, I have benefited from this personally by having such a banger album. 
Kathryn: 
Robin: yeah, I felt like I'd been on a, I'd read a novel by the time I finished cooking dinner.
Kathryn: I've been through such a journey. Yeah. And also, the SNL skit that features her, where they reference the album is like equally as good. it's when Josh O'Connor hosted, but I would recommend watching the Lily Allen, SNL. Skits, but I, I can't help but thinking that, like, that one song of like love and light, Madeline it is, I'm like, that is the new bless your heart of like, if I walk up to someone and I'm like, love and light, love and light, I'm like, wow.
Kathryn: That's what a devastating thing to say. Love and light. The new, bless your heart. If we, if there's hope in the world, the new bless your heart will be love and light. Madeline, oh man, that was so good. What is, who is your spiritual sponsor? What is your spiritual sponsor?
Robin: spiritual sponsor this week is actually Japanese Grand Sumo tournaments. And, um, I didn't know a lot about Sumo wrestling. I won't go on and on about it, but here's what I can tell you.
Robin: The champion Sumo wrestler in Japan right now is a guy who's actually a 21-year-old Ukrainian, and he's got, so everybody's a wrestling name, and his wrestling name is oniki.
Robin: And, you know, it references because he is Ukrainian. It, it references blue as the Ukrainian flag. It references, peace and calm, and then Shiki is the name of the, was his mentor in wrestling.
Robin: But anyway, his, but his real name is Dlo Yesian, no Vu Shian. And he's a 21-year-old Ukrainian. He moved to Japan, after the Russian invasion of Ukraine. But he had been a wrestler and a sumo wrestler. And sumo is done like this. It's, there's like 20 odd guys, and they, and they each wrestle one person every day for 15 days.
Robin: And then at the end it's, you know, how did you do? And each wrestling match. Sometimes they last seconds. Sometimes if for a sumo wrestling match lasts like two minutes, it's like epic. and it's full of ritual and it's full of, these amazing outfits and this huge stadium full of people looking down on this one little, do yo, which is the ring where they wrestle.
Robin: And, anyway, it's pretty great. There was a Wall Street Journal article, actually it turned out just I think today or yesterday about, about this guy, the wrestling champion. but we watched the whole tournament and you can watch, you can also watch a days, bouts in about 30 minutes 'cause they're so short.
Robin: and they're on YouTube on NHK, which is the National broadcaster of Japan's YouTube. Sumo. Yeah. And you know, for our video listeners, I do have sumo wrestlers in the painting on the back wall here, but.
Kathryn: Oh my God. You do? I've never pieced together what your painting is of 'cause of the 
Kathryn: window.
Kathryn: my, my mind is blown on so many levels. I,
Robin: Yeah.
Robin: That's it for another episode of Optimist Economy. The Optimist Economy. Oops, sorry. That's you.
Kathryn: Yeah. optimist Economy Podcast is edited by Sophie la. Our video production for social media is by Andy Robinson Video Consulting.
Kathryn: Thank you Andy and Sophie for making us sound like a podcast. If you agree with the things we say, we post video clips from the show for you to share with your friends or your foes.
Kathryn: We're on TikTok, Instagram, YouTube, and LinkedIn. You can find us on those platforms to share some highlights, from the show
Robin: If you're on Substack, you can follow us there too. And we have an optimist chat going. and while optimist economy is a labor of love for me and Kathryn, we do have bills to pay. So if you have the means to contribute, you can do so@optimisteconomy.com where we will also happily sell you a t-shirt or a hat,
Kathryn: or a really good tote
Robin: or a really good tote bag.
Kathryn: Okay, thanks Y'all love and light.
Robin: Madeline.
[END]
Kathryn: no house I will ever own will ever come close to how cool my Chicago apartment was that we rented. It was just, it will never, nothing will ever come close. it was one block south of like the northern border of the Chicago fire. So it was in that like beax-arts
Robin: Mm-hmm.
Kathryn: Sophie: I have the opposite experience in Chicago.
Robin: [laughing]
Kathryn: Sorry Sophie. My Chicago apartment was so cool.