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Questioning the Shortage Narrative: How Small Assumptions ReW the Housing Storywww.cato.org/blog/questioning-shortage-narrative-how-small-assumptions-rewrite-housing-story
172 sats \ 6 comments \ @0xbitcoiner 30 Sep econ
Claims of a relentless housing crisis are prevalent in policy circles, politics, and the media. But as we have described in several blog posts and a working paper, there are good reasons to be critical of that view. Proponents of this theory often uncritically cite estimates of the housing shortage ranging from one million to twenty million, and that range itself is enough to question the usefulness of those estimates.
In this post, we further analyze Freddie Mac’s most recent shortage estimate of 3.7 million units in the third quarter of 2024. The analysis suggests that policymakers should avoid relying too heavily on these kinds of estimates. At the very least, these kinds of estimates are highly subjective measures of the state of the housing market.
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52 sats \ 5 replies \ @Undisciplined 30 Sep
@SimpleStacker, are they using "shortage" the same way we do?
It makes sense that all the taxes and regulations would create a shortage but I sense that they're using the word differently, especially since reducing taxes and regulations never seems to be in the solution set.
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42 sats \ 4 replies \ @SimpleStacker 30 Sep
I didn't know that Freddie Mac uses such an ad-hoc method for estimating "shortage". Anything based on something as hard to define as an "ideal vacancy rate" or "target vacancy rate" doesn't have a lot of credibility to me.
But I think it's fair enough to say that housing demand has grown faster than housing supply (especially in major cities), which has put upward pressure on house prices and rents.
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0 sats \ 3 replies \ @Undisciplined 30 Sep
Sure, but that's not a shortage
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42 sats \ 2 replies \ @SimpleStacker 30 Sep
I'm fine with the colloquial term... I don't know what Q_D > Q_S looks like in real life, or how we'd even know, because Q_D would be unobserved in that instance.
I guess we can detect it with the presence of non-price based allocation mechanisms, like lotteries, lines, etc. But with a market as heterogeneous as housing, I'm not sure how easy that is to observe.
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30 sats \ 1 reply \ @Undisciplined 30 Sep
That's fair, and I don't generally mind colloquial terms either.
I just wanted to know how I'm supposed to interpret the statement. Seems like it boils down to "3.7 million fewer homes than some bureaucrat thinks there should be."
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42 sats \ 0 replies \ @SimpleStacker 30 Sep
Yeah, pretty much. And then people bandy about these numbers as if they were gospel truth. Which is annoying.
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