We Don't Have a Housing Shortage. We Have a Paycheck Shortage.

Recent polls show 54% now consider housing unaffordable and the cost of homeownership dominates Americans’ economic anxieties. The popular “abundance” narrative says there’s a housing shortage and suggests cutting zoning or environmental rules will let us build our way out of it. But we don’t have a simple net shortage of units—we have a deep mismatch between what gets built and what workers get paid. After 50 years of wage stagnation, the median mortgage payment is over $2,200 while median weekly earnings are $1,200. That’s a gap deregulation or more luxury condos won’t close. The solution isn’t to just build more. It’s also to pay people more. END NOTES: To be considered affordable (30% of income) the median mortgage of $2,259 https://www.bankrate.com/mortgages/average-monthly-mortgage-payment/ would require weekly earnings of $1,737. But the median weekly wage for full-time workers is $1214 https://www.bls.gov/news.release/pdf/wkyeng.pdf. Where is the Housing Shortage? https://www.tandfonline.com/doi/full/10.1080/10511482.2024.2334011?src=exp-la Of the nation’s 381 metropolitan areas, only four experienced a housing shortage between 2000 and 2020. (Op-ed from the author https://www.barrons.com/articles/housing-crisis-build-more-homes-1342c24f in Barron’s here.) The US Housing Crisis is Really About Low-Wage Jobs https://www.bloomberg.com/opinion/articles/2024-07-09/us-housing-crisis-is-also-an-income-crisis. Kathryn’s take from 2024 in Bloomberg Opinion. Rate of U. S. homeownership https://fred.stlouisfed.org/series/RHORUSQ156N has been climbing since bottoming out in 2016 (Federal Reserve Bank of St. Louis). Mortgage Debt Service Payments as a Percent of Disposable Personal Income https://fred.stlouisfed.org/series/MDSP is about what it was in 2019 (Federal Reserve Bank of St. Louis). Median Sales Price of Houses Sold for the United States https://fred.stlouisfed.org/series/MSPUS shot up about $90,000 from 2019 to 2025 (Federal Reserve Bank of St. Louis). Housing Affordability and Housing Demand https://www.frbsf.org/research-and-insights/publications/economic-letter/2026/02/housing-affordability-and-housing-demand/#toc_Housing-demand-and-the-labor-market (Federal Reserve Bank of San Francisco) Watch video clips from this episode at the Optimist Economy YouTube channel⁠⁠ https://www.youtube.com/@optimist_economy. Follow us on Instagram at ⁠⁠@optimist_economy https://www.instagram.com/optimist_economy. Follow us on TikTok at ⁠⁠@optimist_economy https://www.tiktok.com/@optimist_economy. Read some stuff on our Substack https://optimisteconomy.substack.com/. Consume leisure in an O. E. hat or shirt: https://merch.ambientinks.com/collections/optimisteconomy Support us and our tireless editors and producers by donating: https://optimisteconomy.com And send your economic questions, concerns, or executive orders: [email protected] mailto:[email protected]

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  I have once put on an Economist wedding card, like, "Congratulations on your upcoming household formation," or "Your successful household formation." Wish, like, clearly, I would only give to an Economist, because everybody else would be like-

• 0:42Robin Rauzi?

  Yeah, I hope.

• 0:43Speaker 02

  "This is not right."

• 0:50Speaker 02

  Hello, and welcome to Optimist Economy. I'm Catherine Ann Edwards, Economist.

• 0:53Robin Rauzi?

  I'm Robin Rousey, and I'm an editor.

• 0:55Speaker 02

  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.

• 1:07Robin Rauzi?

  Today, on Optimist Economy, we're going to be talking about the housing market.

• 1:11Speaker 02

  Housing. And is there's really a shortage of housing, and if supply is the answer to all of our housing cost woes, and I'm going to say no, but you should listen anyway.

• 1:24Robin Rauzi?

  Do we have any announcements?

• 1:27Speaker 02

  Give us money?

• 1:29Robin Rauzi?

  Oh, yes, we do have an announcement.

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  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 Sondhi Gill, and we want to thank her for her donation.

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• 1:50Robin Rauzi?

  At optimist economy dot com.

• 1:51Speaker 02

  Yay.

• 1:54Speaker 02

  All right, our next section is really the one that 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. But Robin has one today.

• 2:08Robin Rauzi?

  I do. You mentioned Bend It Like Beckham in our last episode, and it was Parminda Nagre, 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.

• 2:24Speaker 02

  I would lose my mind.

• 2:25Robin Rauzi?

  Yeah, yeah. People, I imagine if you're seated, I'm not in those expensive seats, but if you are, I'm sure it would be like, it would be crazy. Okay. Next chapter is Terms and Conditions. Catherine, I see you looked something up.

• 2:39Speaker 02

  I did. I looked up bloviate it?

• 2:43Robin Rauzi?

  Bloviate? Yeah.

• 2:44Speaker 02

  Bloviate. It means to talk or write at length.

• 2:48Robin Rauzi?

  To talk yourself hoarse.

• 2:50Speaker 02

  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. 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. And 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 want to look it up.

• 3:31Speaker 02

  Maybe it doesn't exist, and I shouldn't look it up and bring it up. Anyway, it's bloviate. It's bloviate.

• 3:37Robin Rauzi?

  It's a good word. 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 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, 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 job growth. And 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. But when I looked it up, I also discovered that apparently When Alfred Nobel had his first nitroglycerin factories,

• 4:19Robin Rauzi?

  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.

• 4:34Speaker 02

  I was like, is a one-legged stool just like a pole?

• 4:38Robin Rauzi?

  No, it's got a, you know, a seat on it. Yeah, but just one.

• 4:43Robin Rauzi?

  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.

• 4:50Speaker 02

  We're going to take a quick break and we'll be back with the biggest pill crow of them all.

• 4:59Speaker 02

  The biggest pill crow.

• 5:00Robin Rauzi?

  The biggest pill crow. Bigger than any pill crow we've ever recorded.

• 5:04Speaker 02

  Bigger than any pill crow.

• 5:05Robin Rauzi?

  I don't know if you, did you see this poll yesterday, the New York Times/Siena poll about affordability?

• 5:10Speaker 02

  No.

• 5:11Robin Rauzi?

  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 are actually unaffordable. Housing was 54%, I think. 58% said education is unaffordable.

• 5:31Speaker 02

  Yeah, I mean, 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 want to do specifically today is to get at what's, what's wrong with that story. It's not, is that wrong, wrong, wrong?

• 5:55Robin Rauzi?

  It's just not the whole.

• 5:56Speaker 02

  It's not the whole story.

• 5:57Robin Rauzi?

  It's not the whole story.

• 5:58Speaker 02

  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.

• 6:10Robin Rauzi?

  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 as a way to make housing more affordable.

• 6:25Robin Rauzi?

  Sorry. Wait, is that a spit take?

• 6:27Speaker 02

  Mm hmm.

• 6:29Robin Rauzi?

  Okay.

• 6:29Speaker 02

  I'm sorry, this is, it's such a bad policy. And they, I don't, 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 who, Bill Pulte.

• 6:43Robin Rauzi?

  Yeah, Bill Pulte.

• 6:44Speaker 02

  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. And 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. That just made me crack.

• 7:06Speaker 02

  Like nailed it.

• 7:08Robin Rauzi?

  Yeah. Fascinatingly, Bill Pulte, so Bill Pulte is the, um, he directs the Federal Housing and Finance Agency, like oversees Freddie Mac and Fannie Mae. And they've been just like firing all the people whose jobs were about housing affordability programs, fair lending programs, teams that focus on counseling people on mortgages. His idea is just like, let banks do whatever they want to. We don't get rid of all the regulations that came after, in the wake of the 2008 recession and housing crisis, just that's the solution.

• 7:41Speaker 02

  Boom, 50, you're welcome.

• 7:43Robin Rauzi?

  And here we are.

• 7:45Speaker 02

  So failing that.

• 7:47Robin Rauzi?

  Yeah, failing that, failing that.

• 7:50Speaker 02

  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? I, 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 homeownership rate. It peaked in 2005 with the peak of the housing bubble. And after the housing bubble crashed, the homeownership 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. Now, a lot of weird things happened with the homeownership rate in the pandemic. But right now, it is around 65 to 66%. It's kind of bouncing between there. So it's, it's stable.

• 8:35Speaker 02

  Maybe you would argue it should be rising, but it's not crashing. It has been stable for the past few years. So the homeownership rate is not like falling off a cliff the way that it did after the housing bubble 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. 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 of 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.

• 9:19Speaker 02

  Were there some kind of catastrophic crisis in the housing sector? Those two things would not be stable. And so that's, I don't say that 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 homeownership. So 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 is good 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 and how many houses we need, like what are the total number of units we need?

• 10:04Speaker 02

  The denominator isn't people, it's households. And we build housing for households, not people.

• 10:11Robin Rauzi?

  You mean how many housing units you need is based on how many households there are, not how many individual humans there are in the country?

• 10:18Speaker 02

  Right, right. So. Bit of a 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. 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

• 11:03Speaker 02

  left his group house with two roommates and we moved into a place together. We have formed a new household. 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. And some of this is because housing is expensive, but at the same time, it also reduces the total need for housing. So it's definitely a two-way street. Like, the total, like, household formation in the US is down by several million over the last 15 years and is projected to stay down.

• 11:44Robin Rauzi?

  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 a house in Texas, you've got kids, you wanted to be in a house with multiple bedrooms. 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 are probably not ideal for people who have children or more than one child. And granted, you know, Southern California thinks it's the Midwest and we should all have backyards. But I've often wondered if there's also that, right? And likewise, a shortage of not just the size of the units, but whether you are at

• 12:28Robin Rauzi?

  a stage where you want to 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, we've got housing, it's just what you said, it's not affordable.

• 12:40Speaker 02

  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, but there's only like houses far from the city center. Right? That mismatch of preferences translate that to income. And 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, like we have more people than houses. It is a distributional shortage where we don't have enough housing for the people at

• 13:24Speaker 02

  the place that people can afford. Right? Supply is not, like, it's a, it's a problem, but it's a really subtle version of the supply problem. And maybe some would say not really a problem at all. It's about mismatch between what people can afford in the bottom.

• 13:39Robin Rauzi?

  Yeah.

• 13:39Speaker 02

  And what is being built.

• 13:41Robin Rauzi?

  Yeah.

• 13:41Speaker 02

  Right? So it's not a matter of like, as long as we got rid of certain regulatory and tax policy, people are suddenly going to build housing that someone who makes $50,000 a year can afford.

• 13:50Robin Rauzi?

  Yeah.

• 13:50Speaker 02

  That's why the, the supply answer is not fitting with the actual supply problem, which is income.

• 13:55Robin Rauzi?

  Yeah.

• 13:56Speaker 02

  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 want to build is not at that price point.

• 14:11Robin Rauzi?

  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 between 2019 to what is it, 2022 or 2023, when housing prices shot up, like, what was it, 48% or something? There was, in fact, this gigantic leap in, in home prices as people moved. And then also a gap in purchasing power because of, largely because of interest rates and housing prices outpacing wage growth. So.

• 14:58Speaker 02

  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. 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 assume that 30% of your income is affordable, right? If you give no more than 30% of your income towards housing,

• 15:40Speaker 02

  that's, that's the typical standard for affordability. And that standard has a policy precedent behind it because that 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%. So it's not just like a number that came out of the air. Like there is a lot of federal policy behind it. 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 got to go out and build housing for people who are going to pay me less than $800. Yeah, they're not, it's not, that's not what they're building.

• 16:21Robin Rauzi?

  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%. 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.

• 16:53Speaker 02

  We, we merely adopted the dark. You were born in it.

• 16:59Robin Rauzi?

  No, I moved here. But, um, anyway, back to my question, which is, if like 54% of the housing stock that was for sale is affordable to the median household income, is that in balance?

• 17:15Speaker 02

  54% of the housing stock that was for sale is affordable to a median household is in a balance. Not necessarily, because it all depends on the distribution of home prices relative to the distribution of income. 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 says nothing about the people underneath. The US income distribution has a big clump of people below average. And we have more people below the average income than we do above it, because the tail is really, really long, right? 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's the total income,

• 17:59Speaker 02

  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 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 going to be indicative of what happens to everybody else below them.

• 18:30Robin Rauzi?

  Hmm. 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?

• 18:37Speaker 02

  Yes, I think that that's-

• 18:39Robin Rauzi?

  Or I guess maybe trying to move.

• 18:41Speaker 02

  In a lot of ways, that's a function of interest rates. The interest rates have pushed up mortgage payments, which they're intended to do, and that as a result of that, you know, you either can't afford the mortgage payment because it's higher than rent, or it crowds out other spending. Now, I, you know, not to be like, I don't know, that like jerk economist that's like, excellent, that's not supposed to be, but like, this is one of the reasons why we push up interest rates when inflation gets out of control, 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. And this is, we're essentially all feeling the pain of having to try and conquer inflation. This is one channel of doing it.

• 19:25Speaker 02

  I mean, it is a blunt tool to raise interest rates, and you get all kinds of pain points like this. So that's one reason why the, the supply concern and the need to build, build, build is I think out of step with the reality that the escalation of homeownership affordability and the crisis around it does coincide really well with interest rates climbing.

• 19:45Robin Rauzi?

  Mm hmm.

• 19:47Speaker 02

  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 am convinced that we do not have a housing stock that reflects the accumulated toll of five decades of income inequality.

• 20:05Robin Rauzi?

  Mm hmm.

• 20:06Speaker 02

  And a lot of developers will build for the top of the market and the bottom of the 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.

• 20:19Robin Rauzi?

  Mm hmm. Just to wait, just to wait for houses to get old and, and in need of rehab?

• 20:24Speaker 02

  Yeah, that's actually called NOA, Naturally Occurring Affordable Housing. NOAs.

• 20:30Robin Rauzi?

  Okay, uh huh.

• 20:31Speaker 02

  Yeah. And there, there are people who are like, work in urban areas to try to preserve NOAs 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 and you have all these NOAs 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.

• 20:59Robin Rauzi?

  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 rebuild them on those lots, in part because of engineering.

• 21:24Robin Rauzi?

  Things that they didn't do a lot of a hundred years ago. And so you just, if you want to live in the center of the city, 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.

• 21:41Speaker 02

  Yeah. 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 want to 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 we remunerate workers in our economy. You know, 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. 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 want to jump in the game and say like,

• 22:26Speaker 02

  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. The median weekly earning of a full-time worker in the United States is around 1,200 bucks. 1,200 bucks, a lot lower for women. But 1,200 bucks is the median.

• 22:53Robin Rauzi?

  You say it's a lot lower for women, I'm sorry.

• 22:55Speaker 02

  It's 1,200 bucks, but it's around 1,000 for women and 1,300 for men. So median weekly earnings, 1,200. Median mortgage payment,

• 23:07Robin Rauzi?

  Twenty-two hundred.

• 23:07Speaker 02

  Twenty-two hundred dollars. That comes out to needing 7,500 a month of income in order for that payment to be affordable.

• 23:18Robin Rauzi?

  Sure.

• 23:19Speaker 02

  So you can think of that 7,500 a month of being around 1,700 a week.

• 23:24Robin Rauzi?

  Okay.

• 23:24Speaker 02

  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 an infusion of supply. That is an income and wage problem. And the more we focused on supply, like, supply is not getting you out of this.

• 23:46Robin Rauzi?

  Yeah.

• 23:47Speaker 02

  Supply will only get you out of this if you have the government aggressively building homes that are below market rates.

• 23:54Robin Rauzi?

  Right.

• 23:54Speaker 02

  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.

• 24:05Robin Rauzi?

  Right.

• 24:06Speaker 02

  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 was truly not a house.

• 24:25Robin Rauzi?

  No house to bed. That happened here. And there, in fact, are still literally closet huts that were divided into, like, duplexes that were housing into the 60s, I think, 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'd worked in the ports and such, and in the aerospace industry here.

• 24:48Speaker 02

  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.

• 25:01Robin Rauzi?

  Right.

• 25:01Speaker 02

  And it was not about preferences, and it was not about what they could afford. 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 read will say, like, yeah, because otherwise, people would have, like, outright revolted. Like, they need, like, people were so desperate for housing. They wanted to get out of their parents' house. They didn't want to, 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 houses, especially in areas near production. Well, you know, I think about that, not just because of what we should build, but, like...

• 25:45Speaker 02

  I do this all the time, but like, this is not your grandfather's house in shortage. This is like, people can't afford housing because we've been building too much expensive housing.

• 25:53Robin Rauzi?

  Yeah.

• 25:53Speaker 02

  Not enough affordable housing, 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.

• 26:08Robin Rauzi?

  Mm-hmm.

• 26:09Speaker 02

  And I think there's this kind of idea of like, oh, but more supply would reduce payments. I, I just, you haven't seen it.

• 26:16Robin Rauzi?

  I haven't seen it. I actually read, 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%.

• 26:53Speaker 02

  Yeah, so it's not going to be just one.

• 26:55Robin Rauzi?

  Yeah, it's not going to be just one thing.

• 26:58Speaker 02

  And I, I guess the income side is overlooked here.

• 27:03Robin Rauzi?

  Yeah.

• 27:03Speaker 02

  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. 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 want to keep housing as kind of the privileged good that it is, because they treat it like a piggy bank.

• 27:35Robin Rauzi?

  Mm-hmm.

• 27:36Speaker 02

  I mean, most Americans view their home as an investment, like, they're trying to get equity out of it.

• 27:42Robin Rauzi?

  Yeah, I guess, I mean, I can't speak to everybody, but to have savings out of their house, if not an investment, you know what I mean? Does that distinction make any sense to you? 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, but I was paying so much in rent that I really couldn't afford to save at the rate I wanted to save. So I wound up buying a duplex. And it allowed me to at least use the money that I was putting towards rent to a certain extent that it was also going to build up the principal and the equity in the house. I did not expect that the more that the housing market would do what it did. What year did you buy your house? 1997.

• 28:27Robin Rauzi?

  1997. Now, 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 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.

• 28:50Speaker 02

  I think a lot of people view housing as an investment that, 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. 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 on to it and it just goes up, up, up and up. 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.

• 29:28Robin Rauzi?

  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, because I just feel like people are locked in, kind of 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, you know, it was boomers, but now it's going to be Gen Xers. And, you know, that housing prices shot up so much that you can't afford the property taxes on the place that you would go. And.

• 30:12Robin Rauzi?

  I mean, we live in Los Angeles in part because we are locked into those, to all those things.

• 30:17Speaker 02

  Yeah, 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. The thing about portable mortgages is like, sure, sure. It's basically someone is giving you a, an asset-backed loan.

• 30:42Robin Rauzi?

  Mm-hmm.

• 30:43Speaker 02

  And kind of letting you like-

• 30:44Robin Rauzi?

  You're swapping assets.

• 30:45Speaker 02

  Yeah, you're swapping, like, the little a asset for the big A asset of like, I own a house, but like, 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 out of 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. 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 flood plains. Like, I get it. We shouldn't have regulations.

• 31:30Speaker 02

  And that's the answer to all of our problems. Or, hear me out, fixing all the problems that we have.

• 31:35Robin Rauzi?

  Yeah.

• 31:36Speaker 02

  All right, optimism, optimism.

• 31:38Robin Rauzi?

  Yeah.

• 31:39Speaker 02

  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. Flack.

• 31:51Robin Rauzi?

  We're not gonna get any slack.

• 31:52Speaker 02

  Flack. Why, why do I?

• 31:55Robin Rauzi?

  What's happening here?

• 31:57Speaker 02

  I don't know words.

• 31:59Robin Rauzi?

  I know that people think that I correct you, 'cause like, I'm a [BLEEP], but I really am trying to help.

• 32:03Speaker 02

  You help so much. I, I think we will get flack, because we're two homeowners talking about-

• 32:12Robin Rauzi?

  I'm a landlord, I'm the worst guy to be a homeowner.

• 32:14Speaker 02

  You're a landlord?

• 32:15Robin Rauzi?

  Yeah.

• 32:16Speaker 02

  You're one step away from being a pawnbroker.

• 32:19Robin Rauzi?

  Like, I should just, like, draw a mustache on my face and, like, pour it.

• 32:25Speaker 02

  We just lost production.

• 32:27Robin Rauzi?

  Yeah, just quit.

• 32:29Speaker 02

  But, but I think people-

• 32:32Robin Rauzi?

  In fairness, I have a, I have a rent control, I have a rent-controlled unit.

• 32:35Speaker 02

  Oh, snap. It's okay, they're back, we got production back.

• 32:43Robin Rauzi?

  Derek also listens to the show. He's gonna be like, wait, what?

• 32:49Speaker 02

  I mean, yeah, 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 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? 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 their, our fate is not in their hands. 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. And that is where

• 33:31Speaker 02

  our salvation comes from. And not from whenever some [BLEEP] decides to build a big building and say like, it's mixed use and one of the units are affordable. [BLEEP] 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.

• 33:51Speaker 02

  Sorry, I didn't mean to, um, I didn't mean to rant. So I know I focus on income.

• 33:57Robin Rauzi?

  Sure.

• 33:58Speaker 02

  But think for a minute about, 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 positive growth for the bottom 90%, missing out on so much of the economic growth. 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 inequality?

• 34:41Speaker 02

  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?" Well, yeah, we're going to be mismatched with our housing stock eventually. This is a consequence of long-term income inequality that we now are mismatched to our housing stock. 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, in a watershed or in a national park. It's a bigger problem than that, but it's also that makes that solution seem so, like...

• 35:24Robin Rauzi?

  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.

• 35:45Speaker 02

  The answer to that is not...

• 35:47Robin Rauzi?

  Build more housing, yeah.

• 35:48Speaker 02

  Or maybe the answer to that is not, like, more market-built housing. I think the government building below-market housing is the answer. Americans are terrified of that now.

• 36:01Robin Rauzi?

  Yeah.

• 36:01Speaker 02

  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.

• 36:13Robin Rauzi?

  Yeah.

• 36:14Speaker 02

  Right? We don't have median public housing. We have low, low, low-income public housing. 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.

• 36:42Robin Rauzi?

  We do also act as if, I don't know, 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 interfere in 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?

• 37:02Speaker 02

  It strikes me how often there's like the right kind of intervention and it never applies to like, most of us.

• 37:08Robin Rauzi?

  It seems to apply to JP Morgan Chase more than me. Yeah, I know.

• 37:13Speaker 02

  Yeah, like we have, we have low income housing tax credits to help build very low income housing, but there's not enough. 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. 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. And 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

• 37:56Speaker 02

  solution. And we are more empowered in that process than just build, build, build.

• 38:02Robin Rauzi?

  Yeah.

• 38:03Speaker 02

  So let's become empowered. Let's tell them exactly what we want them to do 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 anyway.

• 38:16Robin Rauzi?

  All right. We're going to take a little break and we will be right back with executive orders.

• 38:21Speaker 02

  And we're back to continue to tell people how to live their lives, how society should be organized, smaller ways, smaller ways.

• 38:33Robin Rauzi?

  Exactly. So I have an executive order. As listeners of the show know, I was in Houston last week visiting Catherine. And her family and I flew back on Delta Airlines and I'm just going to 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 in into this bathroom. I'm waiting for an Americans with Disabilities lawsuit on these. They're criminally small.

• 39:06Speaker 02

  Some listener is going to know how airplanes get around ADA.

• 39:11Robin Rauzi?

  I don't understand.

• 39:12Speaker 02

  And how bathrooms on planes work for people with a disability. I mean, try going in there with a kid.

• 39:17Robin Rauzi?

  Oh, yeah.

• 39:18Speaker 02

  Yes. I endorse this executive order. Make bathrooms on airplanes bigger, all the Amtrak where like you and your eight best friends can go to the bathroom together. Like, everybody on the, let's all go. Why don't we all go? It's a big group. Down to the bathroom on the Amtrak.

• 39:33Robin Rauzi?

  All right. What's your executive order?

• 39:35Speaker 02

  My executive order is very self-serving, but I need to be involved on the remaining casting decisions for the movie that they're making about the 1999 Women's World Cup about the 99ers, the girls of summer. I need to be involved in the rest of casting. They did great with the, I mean, 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.

• 40:09Robin Rauzi?

  Who do you think should play Michelle Akers?

• 40:13Speaker 02

  God. 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.

• 40:20Robin Rauzi?

  You want approval?

• 40:21Speaker 02

  I need producer approval. A lot of actresses are like five foot nothing, 75 pounds. And I'm like, Michelle Akers.

• 40:26Robin Rauzi?

  Stall.

• 40:27Speaker 02

  Is like a force of nature. And you can't just do casting. You can't just do like angles. 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, let's make sure that this.

• 40:42Robin Rauzi?

  You're going to have all those curls.

• 40:43Speaker 02

  I've got so many. Anyway, so me being a producer with like a lot of opinions on the 1999ers movie is my executive order. Benefits no one but me, but I just, I feel like I'm going to install myself there.

• 40:55Robin Rauzi?

  Okay. That sounds good.

• 40:59Robin Rauzi?

  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. Catherine, what's your spiritual sponsor this week?

• 41:09Speaker 02

  Lily Allen's new album, West End Girl.

• 41:12Robin Rauzi?

  I listened to this on your recommendation while I made dinner the other night.

• 41:15Speaker 02

  Oh, what did you think?

• 41:16Robin Rauzi?

  It's great. It's great. I mean, I, it's a reminder, don't break up or screw over a songwriter, man.

• 41:23Speaker 02

  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.

• 41:35Robin Rauzi?

  I felt like I'd been on a, I'd read a novel by the time I finished cooking dinner.

• 41:40Speaker 02

  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 skit. But 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. Like, if I walk up to someone and I'm like, "Love and Light, Love and Light." I'm like, wow, 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?

• 42:20Robin Rauzi?

  My spiritual sponsor this week is actually Japanese Grand Sumo Tournaments. I won't go on and on about it, but here's what I can tell you. The champion sumo wrestler in Japan right now is a guy who's actually a 21-year-old Ukrainian. So everybody's a wrestling name, and his wrestling name is One Shiki. And, you know, it references, because he's Ukrainian, blue as the Ukrainian flag, and then Shiki is the name of the, was his mentor. But anyway, he's, but his real name is Danilo Yavushishian. 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. There's like 20 odd guys and they each wrestle one person

• 43:05Robin Rauzi?

  one day, every day for 15 days. Each wrestling match, I mean, sometimes they last seconds. 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 dojo, which is the ring where they wrestle. 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 day's bouts in about 30 minutes because they're so short and they're on YouTube on NHK, which is the

• 43:46Robin Rauzi?

  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.

• 43:54Speaker 02

  Oh, my God, you do?

• 43:55Robin Rauzi?

  Yeah.

• 43:55Speaker 02

  I've never pieced together what your painting is of because of the window. My, my mind is blown on so many levels.

• 44:09Robin Rauzi?

  That's it for another episode of Optimist Economy.

• 44:11Speaker 02

  Optimist Economy podcast is edited by Sophie Laland. Our video production for social media is by Andy Robinson Video Consulting.

• 44:18Robin Rauzi?

  Thanks to you both.

• 44:19Speaker 02

  Thank you, Andy and Sophie, for making us sound like a podcast.

• 44:23Robin Rauzi?

  Sort of.

• 44:23Speaker 02

  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. We're on TikTok, Instagram, YouTube, and LinkedIn. You can find us on those platforms to share some highlights from the show.

• 44:35Robin Rauzi?

  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 Catherine, we do have bills to pay. So if you have the means to contribute, you can do so at optimist economy dot com, where we will also happily sell you a t-shirt or a hat.

• 44:53Speaker 02

  Or a really good tote bag.

• 44:55Robin Rauzi?

  Or a really good tote bag.

• 44:56Speaker 02

  Okay. Thanks, y'all.

• 44:57Robin Rauzi?

  Thanks.

• 44:58Speaker 02

  Love and light.

• 44:59Robin Rauzi?

  Madeline.

• 45:08Speaker 02

  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 Bozart style.

• 45:26Speaker 02

  It was just, Sophie, I have the opposite experience in Chicago.

• 45:32Speaker 02

  Sorry, Sophie. My Chicago apartment was so cool.