Daryl Fairweather On the Tax That Could Solve the Housing Crisis

Like sometimes I go on the real estate subredbit and it's just like all these people clearly close to like having nervous breakdowns over the travails if either trying to find a home to buy or sometimes even to rent. Yeah, I mean you will have very different sources of stress depending on whether or not you're a homeowner or whether you're trying to become a homeowner and and source and actual house in the current market. But yes, it seems

like an endless struggle in many ways. You know, one thing that I just, um, I just learned about and you know this is maybe naive on my part, but as a new homeowner, can we talk about property taxes? And the fact that if I, if I improve my house, I will pay more. That's crazy. So don't just let it. Just let it deter it, just like let the yes come in, let the foundation crack all that stuff. I mean, that's the incentive that I have now, although well resale value.

But yeah, anyway, there are all these things you discover once once you actually own a property. No, only a property is the worst curse because like you think, it's like, oh, I finally got a house, and all these people are competing and entering bidding wars, and then if you win, you actually kind of lose because then you're like stuck to this thing and you realized like how much houses? But yeah, bottom line is like everything about real estate ups or downs just seems to be a permanent source

of stress. And okay, like mortgage rates go up and maybe that clols buying, but it doesn't feel like anyone has any sort of like it doesn't feel like there's a long term plan to address this. Like yeah, at times, maybe things soften up a bit, but maybe if things are softening up a bit, it's because the economy is down and people are getting laid off, and then it gets harder or impossible to get a mortgage or be in a position to buy a house. Structurally, it's just

it's just it seems like a nightmare. Well, I would say, the other big thing is it feels like no one's decided what role housing is supposed to have in the economies. So yes, I think most people would agree that if you can get on the housing ladder, it's probably a way of building wealth. But at the same time, no one wants house prices to go up so high that everyone starts to get priced out in the market. And so it feels like we have yet to decide exactly

what role housing should play in in the American economy. Certainly, why do we want houses to be this key asset where your your ability to retire, your ability to have some sort of like comfortable economic existence is predicated on buying How's it like? You know, how's inclusions be like a consumption good You're like, buy shelter and the just

the shelter component. But it has become this thing where everyone feels like homeownership is such a key to what we think of as you know, the American dream or whatever, having a comfortable life that you'll like pay a fortune just as you put it, like get even the term the housing ladders, like we all have like climb up, we have to grab a rung. It's also it all

seems so perverse. Well, it also immediately creates that fomo feeling, that sense of missing out, like, oh my gosh, I have to get on the ladder because if I don't get on it as soon as possible, I'm gonna be behind everyone else for the rest of my life. But yes, this is a peculiar model. It is not the model used by everyone in every country, by the way, and Europe in particular is quite different in its approach to homeownership.

So it definitely seems a little more saying all right, lots of very pessimistic intro to this episode, talking about how much stress. But maybe there's a maybe, maybe there's a way out, Maybe there are policy moves that could actually address some of this. But to sort of understand more why how's it going such a source of stress and all of this that we're talking about, we are going to be speaking to Darryl Fairweather. She is the

chief economist at the real estate website redfin. She might have some ideas on how you can alleviate things or at least understand the roots of this tension. So, Daryl, thank you so much for coming on odd lots. Thank you for having me. I'm so happy to be here. We're really psyched to have you here, you know, are we right? So people talk about there being a housing crisis in America ornament of housing shortage? Is there a

housing crisis in the US? Like can we? Is their data that's beyond just all the anecdotes of stress and comments on red it and stuff like that that points to it, like we have a serious like mismatch with the demand to own a home or the demand to have shelter versus what's available. Yes, we are in a housing crisis. It's not just me saying this. Starting MAC has estimated that we're almost formally in housing in its short If you just look at California, it's even higher

than that. I think maybe some of the confusion is that it's much worse in certain parts of the country where housing crisis have really gotten up and up for the last decade, and there are parts of the country that have not seen that. So maybe people just don't see it where they are. But as a whole. We're definitely in a housing crisis. So how did we get here?

Because again, as Joe and I were talking about in the intro, you know, housing kind of looms large over the American psyche, and it's part of the American dream. Everyone wants to become a homeowner at some point, so you would think that there would be a massive industry that is geared towards producing a good that everyone wants and will pay a lot of money for. So it happened we stopped investing so much in housing or really

seeing it as this savior. Before the housing crash, there was this idea that if we just made everyone a homeowner, then everybody could achieve that American dream and build wealth. But making everybody everyone a homeowner came with a lot of consequences. Not something can just magically produce produce that kind of wealth. So there are people who were getting homes that they actually couldn't afford, and there was a financial system that was supporting that as well. That all

came crashing down. So from the crash onwards, we kind of ignored housing, didn't see it as something that we should be promoting. We built fewer homes in the twenty tents in any decade going back all the way in the nineteen sixties, and Millennials the biggest generation. They're entering into home buying age. They need places to live, and we just haven't been building for them, or really trying to grapple with why we don't build enough homes to

meet seemingly this excess of demand. It's interesting we talked about this with commodities all the time, like natural gas and oil and lumber and all these about the twenty tens being this year of under investment, and of course housing is not a commodity strictly speaking, but there's an interesting like parallel of this, likes is sort of like the decade of under investment and everything, and now we're like,

now we're paying the price for it. It was a very destructive recession and we're certainly still paying the price for that. And we also just didn't we didn't do enough, I think, to get out of that recession quickly enough. We may be over corrected in this last recession and did a whole lot, and now we're grappling with the with the flip side, which is inflation. But I think most economists agree that that that that the fallout from the recession was was more harmful than it needed to be.

So I know we're going to get into things that could be done to increase the housing stock, but just on the current trajectory, Like, if everything continued as it currently is, would you expect some sort of supply response from home builders, Like would you expect them to ramp up production enough that it would start to fix some

of the imbalance between supply and demand. I don't think that builders on their own are going to be able to build enough to meet demand because they only really started getting ramped up on production when demand was exceedingly high during the pandemic, and now that interest rates are up, there already starting to see that decline demand and they

want to pull back. Because of the cick locality of housing market, builders, they only really ramp up at the peak, and then right after that they pull back, and then they don't want to ramp up again until there's another peak coming. So I think we do need some kind of government intervention or more policy making to support home

building that actually meets demand. So before we get into that, though, you know, Tracy said something important in the intro, so you know, like Tracy talked about this in the beginning, that you know, not all countries have the same approach to housing where housing is so central to their conception of economic life once per little finances. What is it like?

Where did it come from? In the US? This idea that like housing we placed at the center of this and that it became like the sort of home ownership became core to the American dream. Oh, I think it goes back to the founding of this country if you want to go, if you want to look at the real route, property rights are are really part of how this country was built. I mean the the denial of property rights the Native Americans, uh, and the idea that an individual can own property is part of how this

country was was founded. So I think that that is deeply embedded into this country, the idea that you own a piece of property and it's yours and you can build what you want on it. The government can tax a bit, but I think America resists taxing too much because the idea that you own the property. So why don't we talk about potential fixes or policy solutions, but

what what could be done? Well, one thing that is kind of straightforward at least when you say it, it's a lot less straightforward in practice is to have a land value tax, which means that you essentially pay rent to everybody because you don't own the land. You didn't create the land. Land belongs to everyone in your area, in your country. So having a land value tax corrects for that, and it turns the value of the home really just more into a commodity the actual property that

sits on top of it. You're not getting some excess of wealth just because the land value goes up. That would mostly be taxed. Okay, so how is that difference? So Trace, you mentioned that when after she became a homeowner, she discovered the awful world of property taxes. So can you talk a little bit further, like what is the difference between a property tax and a land value tax? Yes, so your home consists of the land, but it sits on top of it, you own and you can do

what you want with it. And then there's also the property that is a structure, that's it's that's it's on top of that land that can be modified. The land value separates that from the property tax. So a property tax is really a combination. It taxes both the land and the value of the property. But you can think of it as two different parts. The reason for having a land value tax from an economic perspective is that land is immutable. You can't change it. If you tax it,

it's not going to change anyone's behavior. So it's a really efficient tax to impose when just trying to raise tax surpluses. Also, there's there's just the idea that you know, you didn't create the land, so the value should go to everyone. The property tax part, I think is more

motivated by having a progressive tax. That if you have some mansion, you are a wealthy person and you can afford to make that to pay that tax and have it redistributed back to people who can only afford to build a little one bedroom house or bungalow or whatever it is on the property. So I think they have different motivations, but they get lumped together and just the overall property tax. You know, as Tracy put it in

her intro, she gets penalized for improving her property. So she went a house, and if she makes the more valuable that um I would raise her property tax. Whereas inferior land value tax, if it's just the land portion of the ownership, then nothing she does on the property

development side. That's why you say it's an efficient tax because what her what what Tracy does with respect to her house would not necessarily change the underlying vilure of the land and a very simplistic model of the world, that's true, But I actually want to push back on a land value tax being perfectly efficient because land value is affected by everything that's around it, whether it's the quality of the air or you know, what your neighbor's house might look like at the cast of shadow on

the land. There's like a lot of different things that can go into land value, with how the access to jobs for that land. So it's not immutable, but it's less likely that what Tracy does impact the land value. It's it's a little bit more out of our control and it's more determined by all the factors in the community. So it's the idea here that at the moment, we have a property tax, which is basically a tax on the structure on the land that you own, and so

you're basically taxing investment. So if I pour money into you know, my house, and I make it better and bigger or whatever, someone is going to come along and charge me more money for that. So if you started doing all land tax, the ideas that you're taxing land which is in finite supply and kind of exist regardless of whether or not you build on it. But by doing that, you're trying to better align the incentives so that people are going to want to build on the

land rather than just leave it alone. Is that is that how it's supposed to work. Yes, I think that that is how an economists would want to design our tax system. But in in practice our taxes tend to

skew towards equity concerns over efficiency concerns. So at the same reason, we have a capital gains tax, because the kind of people who have a lot of capital gains tend to be very wealthy, and from equity perspective, we may want to distribute some of that wealth down to people who don't have any capital gains to be taxed in the first place. So it works the same for property. If we're trying to just purely promote economic growth, we would not want the structure of the home or improvements

to be taxed. So what does the land value tax theoretically accomplished? Like we talked about, Okay, how is it such a big source of stress if we had when how does that fix the four million housing deficit, or how does that get us towards that that goal of bringing supply and demand into balance. So one is that if you are taxing the value of the land, then people are going to be less likely to stay in their property beyond and like the value that they would

get out of it. So right now we have an issue in the country of people just staying in place,

aging in place. There are you know, baby boomers who don't have children staying in their three bedroom home or four bedroom home when that house may be more a value to somebody who is younger just starting a family, But because the older person in the home is not paying the full value of the land, they they would rather just stay put than to move somewhere else and potentially have to bear more of the cost, or to

rent and bear more of the cost. So there's there's a bit of a problem in terms of allocation of real estate. If you're not taxing the land, there's revenue to be gained from taxing the value of the land. You could put that money towards building more properties. If somebody is being taxed the value of the land, they're going to want to get more out of that land in order to make a profit. So instead of building a single family home, you might build a multifamily home.

Instead of having a land just sit as like a golf course or something, you might try to have that be commercial space will be of more value to the entire community or to the economy. So just on that note, I mean you mentioned the value of the land and

the potential thing that could be built there. How do you actually measure land value for the purposes of a land tax and would you would you incorporate like potential use, So would you look at a site and be like, well, you could build you know, a massive, um multi residential building here, and so it's going to be a lot higher than a different type of land, Like how do you do that exactly? Because that, on the surface would

seem to be quite tricky. Potentially, Yes, it's quite tricky, And I think that is um is lost a bit when we talked about land value tax, because in theory it seems great, like, oh, just do a land value tax and everything will be efficient. But I think actually assessing the land value tax and of itself would have would necessitate au bureaucracy of appraisers who determine what the

value is in any time you're doing an appraisal. I mean, it's basically an algorithm that might determine the value of the land, and there's always algorithmic bias. So one issue with the current property tax current property taxes in America is that black people sometimes are paying more property at tax than white people because white homeowners are more likely to uh to debate what the actual appraisal is, go fight that and try to get appraisal that gets them

a lower tax burden. So there's room for this kind of bias to crop up just in terms of who is pushing back on what the appraisal might be or what the appraiser is saying is a valuable land. They might introduce their own bias if part of that is a human error or algorithmic This interesting. I hadn't realized that about, but it makes total sense about this sort of asymmetry or inequality of who has the resources to

fight their appraisal. Those same issues would they would theoretically arise in either one either a property tax or land value tax, or these issues of subjective human judgment, and or is there a way because you don't have to gauge the actual value of the structure, is there a way to make a land value to act somehow more equitable and less less able to be gained. I think we have to look at look at it on whole.

Having a land value tax in the first place, I think would promote equity because it's it's taxes that would be collected more efficiently and could be distributed back to a community and possibly help people who are lower income or have socioeconomic disadvantages. But it's not going to be perfect in terms of collecting that money. It's not perfectly efficient. So I think you just have to look at it

from both sides and and make it a termination. As to whether it would be good for society as a whole, I think it would be, but I think we would have to really have a lot of transparency and how appraisals are made and make it easy for anybody to to fight an appraisal that they feel like they've been wronged. There are ways, I think, through the court system to make it fair or make it fair as long as we're paying attention. So land taxes do already exist in

other parts of the world. Can you talk more about those existing systems and what impact it's had on house prices, um, And I guess society as a whole. So one example that comes to mind is Israel. It actually they call it a hundred year lease, so you lease land from the government. But it's effectively the same as the land tax because you're paying this money monthly to the government and just you have to pay it regardless of what the size of the property is. You can still do

whatever you want on the property. UM. So it works in in effect the same as the land value tax. I'm not actually I should look a little bit more into housing affordability. In Israel, they have their own land issues because a lot of the country is desert, and there are other land issues there that I won't even

get into, but that is one country that comes to mind. Um. But yeah, it's interesting though, And I think like Singapore also has the has this system where a lot of people don't actually technically own their property, but they're in these like ultra long term leases. But I guess like one of the implications and you sort of hinted at it in the very beginning, which is it. It's sort of muddies our concept of property ownership a little bit.

If you're always paying, whether it's a monthly or a yearly land value tax, then to some extent implicitly like you're always sort of renting your land, and I think you even use the term rent, but it's sort of just introduces this idea that like everyone is kind of a renter or to some extent in this framework. Yeah, I think that's an ideological hurdle when it comes to

land value taxes. And in the book Gone with the Wind, Scarlett O'Hare's dad is always railing about property taxes, and I has always found it really ironic that like this character that owns people is mad that he doesn't pay for this land that he thinks he owns. Is entiled to anyway. I think another side, I think there's like a lot of ideological stuff and whether somebody can actually

own land or not. Yeah, So just on this note, I mean, so two countries that spring to mind for me that have this sort of land tax system or a rental agreement where you're effectively renting the land from the government for long periods of time, Mozambique and China, And I mean, I don't know why those two spring to mind other than I've spent time in those two countries, but like both of those were a legacy of the communist government in the respective countries. So I'm trying to

think how to rephrase this. But what's the likelihood of a land tax getting enacted in a place like the US, where people really associate property rights with freedom and you know, if I buy land, I own it, and I shouldn't have to pay a continuous stream of taxes that looks

a lot like rent to the US government. Well, we already have the land value tax embedded within the property tax, so I think we already have in some of the just I think the question is how high could it go where people still feel like they own their land, like if it was you know, right, Like I think most property taxes are around one to three percent, maybe higher in some places, so that's not a huge amount

you're paying every single every single year. But if that creeps up to say ten percent, maybe people won't feel like they truly are owning the land. And also a cut into the wealth the equity that they gain. One of the reasons that home prices go up so much is because people aren't actually paying for that value of the land. It's to accumulate instead of going back into

the government or back into the public coffer. If you are extracting some of the wealth and putting into the public coffer, then people won't have their house as an asset anymore, and people might not like that. In America, it's interesting, okay, like to this point that the land value tax is to some extent embedded in the existing

property tax. And I'm thinking about like the difference between California and Texas and califor manya, And I forget what the law is, but it seems like really hard to raise property taxes on some people. And what's the effort. What's the the law that like makes it like super like people get like these really cheap property tax assessments in many cases proper thirteen yeah, Whereas in Texas property taxes are really high. In fact, there's no state income taxes.

So the primary revenue generator, or one of the primary revenue generators for cities and uh towns is the property tax. And Texas is having a housing boom right now, and home prices like in Austin, and some cities are sky high. But generally speaking, it seems as though Texas has avoided some of the housing affordability issues that have really become a major crisis in California. Yeah, I think. I think property taxes are working the way they are supposed to

do in Texas. I was in Austin just a couple of months ago, and every single apartment building that was, you know, over two decades old, was being remodeled. And that's what you would do if you have a high property tax. When you see that your property tax bill is about to go up because home values have gone up, you really are motivated to improve the properties you can make up that that loss from the property tax. And

landlords are also passing that on to their renters. Many renters are getting hit with big rent increases that aren't capped and they have to move out, and then that gives a landlord another opportunity to upgrade the property so they can get a higher return, or just to rent

it to somebody who has more money to pay. So I think it is causing a lot of disruption to the people who actually live in Austin, and and I'm sure that it's not easy to get that big rent increase and just be told, well, this is the economy,

pay the market price. But it's it's working as intended in in Austin from what I can tell, do you think I mean, just going back to what Joe and I were sort of discussing in the intro, but do you think the balance or the emphasis that America puts on home ownership would would things be better if if, I guess, people were more accepting of being lifelong renters, because you know, again I don't mean to denigrate the American dream or anything like that, but in other countries,

you know, places like Germany or Austria, people will just live in an apartment for a long period of time, they have more rights as tenants, um, so maybe a greater sense of ownership even though they don't actually own the space. But would that be a solution to the housing crisis, to just not have so much focus placed on ownership versus renting. I mean, I'd like there to be more of a balance for renters to not feel like they are boxed out of creating wealth or that

they're always being displaced by higher and higher prices. But I think that I think there are some advantages to home ownership. I mean, it gives you the ability to improve your property. If you actually own your house, you can be responsible for mowing the lawn and maintaining it, putting a new roof on, making it what you wanted to be, and putting pride into that. So if you're only renting, you might detach people from their homes a

bit more. But I think that there should be more balance, and people shouldn't feel like they're not a cheating success just because they are renting. It might just fit better with their lifestyle and their own personal financial goals. I'm sort of fascinated by this idea that with the land value tax, you would sort of be punished implicitly for

uneconomical uses of your land. So if you just built a single house on a property that could theoretically have a duplex or a condo, you're sort of you're gonna pay more. You're gonna pay a cost for that. Or if you just have a golf course, then you're gonna pay a cost for that, Or if you just want to have a huge property all to yourself, you're gonna pay a cost for that. For not developing. How much do you think that could catalyze just more creation of

the housing stock itself. Oh, I think it would certainly help it was paired with relaxed zoning laws. I mean, part of the housing crisis I think is is single family zoning. And if you had a problem if you had a land value tax and the home was only single family zoning, then the value of that land would be less and if it was multifamily zoning. So maybe that would actually be an incentive for even cities to rethink their zoning if they knew that they could get

more tax revenue with better zoning. Um, So that that

could help in that sense. But yes, I think that a land value tax motivates a homeowner to sell if their home would be more valuable as a duplex or a triplex, or maybe they would be the ones to actually add in those extra units or put a granny flat in or whatever, so they could get revenue to make up for the property tax for the land value tax rather m So, even if a land tax was enacted, you know, let's say tomorrow, it feels like it would take just because housing takes a while to build, it

feels like it would take a while until we got fresh construction and greater supply, So I guess I don't know. It just kind of feels like this particular generation of homeowners or potential homeowners, like millennials, are just screwed. Yeah, Like you know, it just feels like there's we've come up against like a choke point in the system, and

there's no good way of rectifying it quickly. I think from I think from a certain perspective that is true, especially for millennials who grew up in a certain place and always dreamed of owning a home like their parents did in that place. I think that is very difficult. You can't stay in the same socio economic status and still expect to achieve the things that your parents did, just because we didn't build enough homes for everyone to

have that same, that same American dream. But if millennials kind of rethink what the dream means for them, maybe living in a more affordable area, moving to a different part of the country, living in a condo or a multifamily home instead of a single family home, I think that they can still still achieve economic prosperity. It might just not look the way that they thought it would look twenty years ago. Well, are the millennial parents? Are

the boomers ever going to sell their homes? I mean you mentioned people staying in their homes for longer than maybe they need to, even after the kids have moved out.

And it feels like this has come you know, there's come up on prior episode, Like it feels like everyone is waiting for this to happen, this wave of supply that's going to come to the market, But like, is that actually gonna happen or is it always going to be like years out And it's always like this sort of dream that it happens, but it never actually transpires.

And I don't think it's going to happen in the next decade, just because baby boomers aren't that old and life expectancies are going up, and it's hard to predict out farther than a decade because it's so much a policy choice. Like people ask me a lot about like, oh, there's a witness wave millennials, what about gen Z? Because gen Z is slightly smaller than millennials, But gen Z

is a smaller generation because of a policy choice. We had much more immigration that promoted the size of the millennial generation and we kind of cut back on immigration since then. So we would choose to be a country that can grow and can accommodate more people if we had better housing policies. So, but we can also shoot ourselves in the foot and not and not promote immigration or growth and keep in this kind of same state.

So the other thing that we spoke a bit about in the intro was just the stress of the housing market and people, you know, get worried when house prices go up and it affects affordability for potential buyers, and then people get worried when they start going down because if you're a homeowner, you're losing equity and losing wealth.

Um Is is there a way too, you know, especially in the current environment where mortgage rates have gone up and we are starting to see some softness in the market, Like, how should we be looking at house prices in the environment, Because there were plenty of people saying that the past year has past year or two have been problematic because people are getting priced out of where they want to buy.

Um And on the other hand, a lot of people who bought over the past couple of years, myself included, are probably going to be worried one house prices start going down. Yeah, I think you said it well. But if you haven't bought a home, home prices going up is a is a real problem. If you already owned a home, home prices going up isn't so bad, but it can have other perverse effects on the economy that

might impact you. So maybe if you live in uh, let's say a city like Austin and home values have gone up, you're going to be paying more in property tax. As home values go up, You're gonna probably paying more for groceries because people need to make more to work at the grocery store to afford their rent. And you might just see more inflation across the board. Redfen did a study of war inflation was going up the most,

and it's going up faster. And migration destinations the places people are moving to than the places people are leaving, like San Francisco or New York of Los Angeles. Do you think it's possible that we'll see a nationwide price decline like because I think people have been skipping like other things will slow down or will be see an end of bidding wars, But the underlying average price is still going up. Do you think an actual like nominal

home price decline is possible. Redfin is forecasting home price growth to slow to seven percent by the end of the year. That's compared to the previous year UH and by three for annual price growth to slow to about three by spring. So home prices were expecting to stay positive, but to really start to slow down to a very slow pace. One interesting thing we didn't talk about is negative land value taxes UM. So the idea is that a place like Flint, Michigan, for example, their land value

was deteriorated because of the lead in the water. So maybe we should be sending chucks to people who own land there because of the way that the government kind of failed them in terms of the infrastructure. It's interesting

ahead and thought about that. So would then necessitate in theory, though, that any sort of land value tax be sort of done on a national basis or like like it would it be optimal in general to not have this highly patchwork system of property taxes that are idiosyncratic by city and state and to come up with some sort of more national national tax code when it comes to real estate. Possibly,

I mean the government does it for flood insurance. They come up with a property level flood insurance premium that's done at the national level, So they definitely could. And I think the more data you put into the model the better it would be. In theory, models were never perfect,

but the more data the better generally. So one thing I was wondering about was, I guess conservation versus incentivizing people to to build on things, because there there would be some areas, presumably where you wouldn't want people to be incentivized to build a skyscraper or you know, multi story residential housing or whatever is that would that be taking care of by zoning laws or like, how do you reconcile different potential uses of land with the land

tax and the incentives that it creates. I mean, you could put a value on just about anything. You could incorporate the carbon value of land if there is some if they're like, say that carbon is valued at some dollar per ton, and having a bunch of trees on land absorbs that carbon. You could put a dollar value on that value, on the value of having the land remain vacant, and you can give credits to people who who do that kind of activity. So I think the

land value tax. You can get really creative with it and try to incorporate a lot of different kind of values. Like you mentioned, there's value and having a park that goes the public even though you're not actually charging people to use the park. But I'm sure clutter economists could come up with some estimate of the value to be used. So one of the perverse things about right now is like, Okay, how's it up until very recently with the mortgage rade jump,

but how's it has gotten less and less affordable? And so people are stuck in renting. But renting itself has all kinds of problems to For one, rent prices have surge too. You can't lock in a rent price very easily, so not they keep going up year after year. You're like, you're you're not on the housing ladder, but you're also falling behind potentially if your wages don't keep up with your rent What do you see happening on the rental side?

And you know you mentioned that prices or that your forecasts are for prices to cool off, would you expect rental inflation to cool off roughly in line with the cooling off of housing prices or can the two move separately. It really depends on what measure of rentalation we're talking about, because asking rents for the for rentals that are on the market currently, uh, those peaked last month. I think it was eighteen percent up year every year, and now

it's down to like seventeen percent year every year. So we seem to be past the hump in terms of home or apartments that are on the market. But that's going to trickle into all other rentals in terms of what people are paying on their lease each and every year, because if you're in a rental for a long time, then maybe your rent was sent who was actually set a couple of years ago and isn't updated as frequently. Landlords tend to like keeping tenants because it's lower costs

for them than finding a new one. So I don't think it's the end of rental inflation in terms of how much people are actually paying, but at least the fuel is no longer being poured on the fire. It seems so obvious question what is the possibility of a land tax actually getting enacted in the US, And is there anyone out there currently who who's making noises about this or or advocating for it. There's an online community of people who are who are very into land taxes,

the Lincoln Land Institute, I'll shot them out. They do a lot of work in terms of educating at more the municipal level how policymakers should should use their land to tax it or at lease their land as an alternative land taxes. So so there are this is happening at a local level. At a federal level, I'm not sure it's even constitutional for the government to have a federal land tax. I think it violates the Commerce Cloud

or something like that. But perhaps they could could at least set up the infrastructure for it to be easier for municipalities to adopt one. There's definitely a very vocal online community about mixing all of these sort of zoning reforms and changing land taxes. But the gap between actually sort of like, yes, this makes a lot of sense on paper versus Okay, we're gonna have this sort of new framework where your house is not necessarily going to

be your economic nest egg. Still seems like a pretty huge, uh wall to overcome, so to speak. Well, we're starting now. You start calling, call your local politicians. Yeah, everything starts online through tweeting these days, so eventually, eventually, just like it was your tweet Darryl about that's like, oh well, this is why we have to do an odd episode anyway, you start start with tweeting and then the world changes absolutely. All right, Well, Darryl, thank you so much for coming

on ODDS. Thank you. This is great. Yeah. Thanks. So, I thought that was really interesting and this idea that you know, we talked about renting or owning property versus say, renting it very long term from the government. Those seem like really two different things, but they're not necessarily like that different. And some of it is just like slightly reframing how we think of things, or is this attacks or rent what seems like a radical difference, maybe maybe

a bit more subtle. Yeah, yeah, um, but part of me, I mean part of me just thinks whatever someone says we're going to solve this problem with an extra attacks like you will immediately get a knee jerk reaction, certainly in Washington. And I think there's something about homeownership in America in particular that just makes it such an emotional topic that it feels like it's a very difficult system

to change. Oh, it's incredibly difficult to change or the idea like all these zoning requirements and despite all the housing shortages of the frustration because like you want to change one thing, like you'll read about like the herculean efforts that a developer had to go through to be able to like build a duplex somewhere or the like in California, they like try passing a law so that a condo condominium building could be like built within a

few blocks of a train station. All of these things that seem kind of modest just run into incredible blockages politically still though, like thinking about these like all their countries where they might do something like a hundred year lease as opposed to owning the land outright, and you know, Singapore has that, and we don't think of like Singapore is being like you know, I think Singapore is a

reputation for being like a pretty free market economy. So it is interesting that even within the sort of free market economies, there are different ways of conceptualizing homeownership or what it means to occupy a certain piece of land

or property. Yeah, well, I mean I I do agree that there, and I think a lot of real estate developers would would probably say this too, but like there is a perverse incentive that is created by the emphasis on property tax and the idea that if you improve a property or if it goes up in value, you're

going to have to pay more for that. Like that just on its face seems kind of weird, especially when we're talking about housing shortage and the need to create more units and better units, preferably well, and I like that point though, And it seems like a case for the land value tax, which is okay, if you're gonna you know, the property tax or in your case, it might seem like it's penalizing you for improving the property.

But if you also had a penalty for not improving your property because you're essentially paying more for the same thing because the value of the land we're going up, then you might counteract that and you might get this sort of like the greater economic incentive to actually the build out property. So I sort of think it's an interesting idea from sort of basically counteracting the perverse negative effects of the property text alone. Totally. I mean, definitely,

I guess I'm just cynical nowadays, but yeah, I am. Yeah, Okay, shall we leave it that? Leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe wi Isn't Thal. You can follow me on Twitter at The Stalwart. Follow our guest Darryl Fairweather. She's at fair Weather pH D. Follow our producer Carmen Rodriguez

at Carmen Arman. Follow the Bloomberg head of podcast Forcesca Levi at Francesca Today, and check out all of our podcasts at Bloomberg under the handle at podcasts. Thanks for listening to Take Tea. It takes t things. Take to Tea.