Dodd/Frank, NIMBY and Trump—How America forgot how to build houses.

The housing market is strong:

Existing home sales jumped 3.3 percent to a seasonally adjusted annual rate of 5.69 million units last month, the highest level since February 2007, the NAR said.

Economists had forecast sales rising only 1.1 percent to a pace of 5.54 million units in January. Home resales were up 3.8 percent from January 2016.

Though the nation’s housing inventory increased from December, it remained near a record low. As a result, the median house price vaulted 7.1 percent from a year ago to $228,900 in January. That was the biggest increase since January 2016.

But housing construction is at relatively low levels.  It looks like the supply side is being hit by a triple whammy of adverse supply shocks:

Economists say homebuilders are struggling to plug the inventory gap because of difficulties securing funding as well as shortages of land and labor. The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to alleviate the chronic shortage.

Housing starts are running above a rate of 1.2 million units and completions around a pace of 1 million units.

Funding and land are no mystery (Dodd/Frank, NIMBY), but what about labor?

The tight supply in home construction results from a shortage in able construction workers. And, given President Donald Trump’s aggressive ambitions to crack down on undocumented immigrants, homebuilders may have an even tougher time finding workers in the future, according to Yun.

“It’s widely known but less discussed that there are many undocumented workers at construction sites. And with the border being much tighter, it may lead to a greater construction worker shortage unless America can crank out people with the skills in construction, plumbing, lumber framing, and welding,” he said.

The US has approximately 200,000 unfilled construction jobs, which represents an 81% increase over the last two years, according to estimates from the National Association of Homebuilders.

Homebuilders like Lennar (LEN) and Toll Brothers (TOL) have cited a shortage in construction workers as a major reason they’ve had to slow down home construction.

Whether through vocational schools or intensive training programs, the US needs to produce more workers who can start building homes. “Homebuilders keep delaying as to when they can dig the ground,” Yun said. “They’re actively looking for workers, but there just aren’t enough.”

Whenever I post on this issue, commenters tell me it’s “fake news”.  That’s because it doesn’t fit the fashionable narrative that there are no more jobs for blue-collar workers.  If so, it’s an 81% bigger fake problem than 2 years ago.

Of course an immigration crackdown could also hit housing demand:

“If Trump gets the immigration plan he wants, the housing market will get hit harder than any other,” said Alex Nowrasteh, a policy analyst for the libertarian Cato Institute. If “millions of people get deported and more people don’t come in to take their place, then you’ll have downward pressure on home prices, especially in urban areas.”

The immigrant housing market is often underappreciated, in part, because undocumented workers and the companies that cater to them sometimes like to fly below the radar.

Some smaller firms will make loans to the undocumented, with higher interest rates.

If you use Case-Shiller, then real home prices are back up to 2004 levels.  Of course construction was at a very high level in 2004 (nearly 2 million).  The fact that construction is at a low level today, with the same real housing prices, indicates a massive adverse supply shock has hit the home construction industry.  The buyers are there, the prices are good, the inventories are low—it’s just that America “forgot” how to build lots of single family homes.

America’s housing market increasingly reminds me of that old TV commercial:  “Help me, I’ve fallen and I can’t get up.”

PS.  Noah Smith has an excellent post on immigration.  A voice of reason.

PPS.  This is the best article I’ve ever read on Trump supporters.  One theme that comes up over and over again is that it’s counterproductive to ridicule Trump voters.


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51 Responses to “Dodd/Frank, NIMBY and Trump—How America forgot how to build houses.”

  1. Gravatar of dtoh dtoh
    23. February 2017 at 19:19

    Scott, the problem you have is that you think any job that doesn’t require a college degree or a coat and tie is unskilled. Honestly, it’s easier to retrain a lawyer as a doctor than to retrain a machinist as a carpenter.

  2. Gravatar of dtoh dtoh
    23. February 2017 at 19:29

    Scott,

    “This is the best article I’ve ever read on Trump supporters. One theme that comes up over and over again is that This is the best article I’ve ever read on Trump supporters. One theme that comes up over and over again is that it’s counterproductive to ridicule Trump voters.”

    Could you clarify what you mean. I assume you’re saying it to distinguish from other types of voters (otherwise why say it.) I.e. It’s counterproductive to ridicule Trump voters …..but it’s productive to ridicule other voters.

  3. Gravatar of Don Don
    23. February 2017 at 19:34

    If the price jump is a surprise, that indicates builders were not expecting such demand. If demand stays high, builders will respond. But, it could just a blip of folks jumping in before interest rates go up. We will know if the labor supply shortage is real, when the labor price increases. Until then it is just typical employers wishing for abundant labor. I am sure they would like free lumber too.

    The big question is the effects of demographic changes. Will boomers downsize their houses? Who will buy them? Not millennials. Perhaps they will stay with their parents and no downsizing will occur.

  4. Gravatar of dtoh dtoh
    23. February 2017 at 19:36

    Scott,
    Why do you and people like Noah Smith keep conflating anti-immigration and anti-illegal immigration. Does this make you buffoons.

    Also Noah says “my proposal is to implement a skills-based system like Canada’s.” IMHO this is blatantly elitist if not outright racist, and the failed attempt at subtlety makes it much more insidious than anything Trump or his supporters say.

  5. Gravatar of ssumner ssumner
    23. February 2017 at 19:39

    Don, Prices have been strong all year.

    dtoh, You said:

    “Scott, the problem you have is that you think any job that doesn’t require a college degree or a coat and tie is unskilled.”

    Actually I never said that, never implied that, and don’t believe that. Only a buffoon would have thought I was making that claim. :)

    And Smith did not conflate the two immigration issues.

  6. Gravatar of ssumner ssumner
    23. February 2017 at 19:41

    Oh, and my post had this:

    “Whether through vocational schools or intensive training programs, the US needs to produce more workers who can start building homes.”

    Yeah, I had no idea that skills were an issue.

  7. Gravatar of dtoh dtoh
    23. February 2017 at 19:53

    Scott,
    First you cited evidence of a shortage of construction workers. Then you claim “it doesn’t fit the fashionable narrative that there are no more jobs for blue-collar workers.”

    So were you were not implying that a construction job can be filled by any blue collar worker?

    Sorry my bad, I must have misinterpreted your comments.

    Just to be sure…. by your logic, if there is excess demand for robotic neurology surgeons, that would disprove any theory about there being a shortage of jobs for college graduates?

    Do I have that correct?

  8. Gravatar of Steve Steve
    23. February 2017 at 20:42

    Here’s what they actually said:

    Bruce Gross – CFO, Lennar: “These costs were up 3% year-over-year to approximately $54 per square foot and this was driven entirely by the labor side, which was offset just slightly by a small decrease in material costs.”

    Martin P. Connor – Toll Brothers, Inc.: We generally have not been impacted by significant delays due to the tight labor market, and thus, were able to exceed our delivery expectation this quarter. This fact, along with our first quarter end backlog being up 19% in dollars and 21% in units, has led us to increase the midpoint of our guidance range by 100 units for full fiscal year 2017.

  9. Gravatar of E. Harding E. Harding
    23. February 2017 at 20:44

    “Of course an immigration crackdown could also hit housing demand:”

    -Cool.

    “If so, it’s an 81% bigger fake problem than 2 years ago.”

    -181% of hardly anything is…?

    Sumner, as I’ve told you many times, Trump won because he was seen as the best candidate on the economy and the deficit (for no clear good reason). Maybe you should have endorsed a candidate in the primary.

    “But the furor died after a decade, Proposition 187 was mostly blocked by the courts, and eventually even white voters in California veered to the left.”

    -Thanks to Californian cities becoming unlivable, thus resulting in the exodus of over 700,000 non-Hispanic White Californians between 2000 and 2010.

    Fortunately, Trump is trying to repeal Dodd-Frank.

  10. Gravatar of E. Harding E. Harding
    23. February 2017 at 20:59

    Also, if you’re trying to find skilled workers, looking through the Syrian population for them is probably one of the worst ideas you can have:

    http://www.unz.com/isteve/timss-test-scores-would-germany-get-more-talented-workers-from-syria-or-hungary/

    There is, however, a clearly worse idea: looking through the Yemeni population for them.

    The only good reason to search specifically through the Syrian population for skilled workers is if you’re specifically looking for Muslim terrorists able to make bombs. I’m sure there’s an above-average concentration of those within the Syrian population.

    Also, unlike you, Sumner, I’m an immigrant and actually live in Metro Detroit.

  11. Gravatar of rob rob
    23. February 2017 at 23:34

    I remember back in the day I did masonry to pay my way through college. A starting job as a laborer paid over double the minimum wage and the interview, if I recall was “can you lift 100 lbs? can you pass a drug test?”. Still we were always short laborers, they would come from lower paying jobs (enticed by the wages), usually from fast food but in a week or so they would almost all quit because it is exceedingly unpleasant work. We talk about the decline of blue collar jobs but I am not sure if anyone wants to fill them themselves, more likely people like to sit in their office and dream about “the all American man” filling them without having to do it themselves.

  12. Gravatar of msgkings msgkings
    23. February 2017 at 23:45

    rob, exactly right.

  13. Gravatar of Ray Lopez Ray Lopez
    23. February 2017 at 23:54

    I could say something sarcastic like “as usual Sumner gets it wrong” but instead I’ll just paste this:

    Wall Street Journal, 2/22/2017 – Banks Cool on Apartments – Developers look for alternate financing as U.S. supply of units is set to exceed demand – Swelling supplies of apartment units are prompting big banks to pull back from new projects, forcing developers to scramble for capital, in a sign that the U.S. apartment industry is headed for a downturn “Our business has radically changed,” said Toby Bozzuto, president and chief executive of the Bozzuto Group, which owns or manages 59,000 apartments in cities across the U.S. “I haven’t seen anything this seismically different since 2008, when credit dried up … Adding to the risk for developers: Even as loans get more expensive, rent growth is slowing. Last year, average U.S. apartment rents rose 3.8%, a significant drop from the recent high of 5.6% year-over-year growth posted in the third quarter of 2015, ac-cording to MPF. Rents in major cities, such as San Francisco, New York, Houston and San Jose, Calif., all declined about 1% in 2016 from 2015 levels.

  14. Gravatar of foosion foosion
    24. February 2017 at 03:22

    “Funding and land are no mystery (Dodd/Frank, NIMBY)”

    Here’s a chart of commercial lending over the past decade:
    https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iDjSxOOGHakU/v2/800x-1.png

    Doesn’t look like Dodd/Frank is hurting funding.

    The chart is from https://www.bloomberg.com/news/articles/2017-02-04/trump-cites-friends-to-say-banks-aren-t-making-loans-they-are

  15. Gravatar of rayward rayward
    24. February 2017 at 04:34

    Not mentioned by Sumner, but inadequate infrastructure is holding back housing construction, in particular inadequate water and sewer systems, usually government owned. During the great recession local governments cut way back on capital spending, refusing to borrow with interest rates near zero. Now that the demand for housing has picked up, there’s inadequate water and sewer for additional housing units. In my low country community, the government is responding to the demands of developers, adding the lines to connect the new houses, but not addressing the long-standing problem of inadequate capacity, kicking down the road the inevitable crisis. And it is a crisis if you can’t flush, or worse, when sewage backs up in your house.

  16. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. February 2017 at 05:41

    The illegal immigration wave is over until it isn’t. But the takeaway from Noah’s post is that the debate has become dysfunctional. Don’t think only one side of the aisle is guilty there. Nor on only one issue.

    Apparently, over at Econlog, I am not allowed to refer to the President of the United States as “The Donald”. Previously, I was not allowed to talk of “pissing people off”. Never thought of myself as an embodiment of Australian larrikinism, but apparently …
    (Should I feel my culture is being impinged?)

  17. Gravatar of ssumner ssumner
    24. February 2017 at 06:46

    dtoh, No, I’m saying that construction jobs are blue collar jobs. I thought that was obvious.

    Look, pundits have been telling us that there are no longer blue collar jobs out there. If there are lots of blue collar jobs, but workers need training, then pundits should tell us that there are lots of blue collar jobs but workers need training.

    A correct diagnosis of the problem helps, before you try to fix the problem. For instance, what if we try to build lots of infrastructure, but lack workers to do so? I would guess that more skill is required to build an airport or subway than a single family home.

    I would add that factories are also complaining that they can’t find skilled workers. So let’s see, there are no jobs for blue collar workers except construction and manufacturing. And we all know that construction and manufacturing are an utterly trivial share of blue collar work—like robotic surgery. Is that your argument?

    Harding, I was in California last summer. The cities didn’t seem unlivable, indeed it seemed like paradise.

    Steve, Do they indicate what is causing the extremely low level of housing construction? Also keep in mind that Toll Brothers is upper end homes, it may not be representative of the entire market.

    Rob, Great comment. That’s why so many roofers are illegals from Mexico (or at least were during the housing boom.) I’ve also done roofing and drywall and painting and a bit of foundation work. (I cannot do electrical or plumbing and am mediocre at carpentry.) But I’ll say this, if I wanted to do single family home construction, I’d find a way to get qualified.

    Foosion, It’s hard to know how much of the problem is Dodd/Frank and how much is simply banks getting more careful after they were burned by 2008. And they should have become more careful.

    Rayward. Interesting, is that a budget issue of NIMBYism?

  18. Gravatar of XVO XVO
    24. February 2017 at 08:36

    When construction can pay me six figures, I’ll quit my cozy IT job and hang drywall.

    What would it take you to go back into construction Scott? You need to do your part! Did/Would you advise your children to go into construction? Why/Why not?

    Maybe construction needs some innovation, I’m sure we can make a robot hang drywall, and given time, I’m sure we can do it cheaper than with immigrants (without all of the social costs too). Give our poor robotics engineers a chance!

  19. Gravatar of Kevin Erdmann Kevin Erdmann
    24. February 2017 at 08:50

    foosion, considering that there are several easily referenced measures specifically of residential real estate lending, I am left wondering why you would go to the trouble of making a comment using a broader measure of lending that isn’t relevant to the post.

    Federal control of the GSEs probably has as much to do with the collapse in new homeownership as Dodd-Frank does. Bank fears could have been a cause of declining mortgage lending after the bust, but it would be hard to know how much because federal credit policies have been much more pro-cyclical than banks would have been. The average FICO score of declined mortgages at the GSEs and the FHA are higher now than the average FICO score of approved loans had been during the boom. And average FICO scores at the GSEs and FHA during the boom weren’t low.

    Notice that those Quicken mortgage ads you see on TV are part of some private equity group. It would be impossible for a financial intermediary in a visible and regulated firm to engage in reasonable mortgage lending today. It can only be done where your statistics can be kept fairly secretive. I’m sure they are making a killing. I wish I knew how to take a leveraged long position on it.

    http://idiosyncraticwhisk.blogspot.com/2017/02/housing-part-205-first-time-home-buyers.html

  20. Gravatar of JG JG
    24. February 2017 at 09:07

    http://www.skepticaldoctor.com/2017/02/24/the-decline-of-advocacy/

  21. Gravatar of mpowell mpowell
    24. February 2017 at 09:19

    Why the hell would anyone want to go into construction? 10 years ago the fed crushed the home building market and made life miserable for millions of construction workers. Reap what you sow. You’re going to need sky high wages or a lot of forgetting to recover.

  22. Gravatar of Rick G Rick G
    24. February 2017 at 09:30

    If the rise in supply is inadequate, but demand is also falling, doesn’t the problem take care of itself, i.e. a new equilibrium at lower quantity supplied/demanded? As written it sort of sounds like the only difference between the old equilibrium and the new one is that going forward there will be fewer immigrants building houses for themselves (they will instead be doing something else, somewhere else). Maybe you didn’t mean for these to be related, but your point about demand takes at least some of the bite out of your point about supply.

  23. Gravatar of Randomize Randomize
    24. February 2017 at 10:25

    Dr. Sumner,

    I attended an excellent presentation yesterday from Western Washington U’s Econ chair on the recovery in Washington State that shines a lot of light on this subject. He had some particularly good slides showing changing demand for labor by skill level. If you’re interested, let me know.

  24. Gravatar of Jim Glass Jim Glass
    24. February 2017 at 11:17

    One theme that comes up over and over again is that it’s counterproductive to ridicule Trump voters.

    It’s *always* counterproductive to ridicule *any* true believer — be the belief in religion, “vaccines cause autism”, any political ideology, post-modernism, whatever. It always results in the believer doubling down on the belief, compounded and reinforced by the anger from being mocked. This is hardly news, Ben Franklin repeatedly pointed it out in his Autobiography, today’s psychologists have documented it 1000 times over. Plus we have the living example of countless blog comment streams and all the human minds seen being newly opened to reason by being ridiculed therein. Like right here over the last several years. So as to that revealing insight … big “duh”.

    Being that this is such basic human behavior 101, the primary fault in such exchanges is revealed to be in the *ridiculer*, not the ee.

    (When was the last time _you_ responded to being mocked and ridiculed with ‘well, that happily opens my mind to calm consideration of new ideas’?)

    On the other hand, it is extremely effective set up true believers in false beliefs to make themselves look ridiculous.

    As to post-modernism remember the immensely enjoyable Social Text affair…

    https://en.wikipedia.org/wiki/Sokal_affair

    When you can do that you get somewhere.

  25. Gravatar of d d
    24. February 2017 at 12:21

    if low rates dont entice home buyers, then i dont know what will. but I am pretty sure that higher rates will reduce the number of buyers and that will reduce the demand for construction manufacturing workers, and that does seem to be what seem demand to see. now there are some that interest rates might not impact, such as those in NYC in the .001% (my wife happens to work for an electrical contractor there, but only for high end residential, who seem to be constantly updating a 6500 sq feet APARTMENT, and spending on just the electrical part, more than $25,000 up to about $500,000). and they are having issues getting workers. and i doubt any one ever will respond to being mocked or denigrated (deplorables any one? or bat shit crazy) will ever change their minds. one wonders if the end result all of this will be the country splitting in 2 (or 3 or more) and if not why not?

  26. Gravatar of Cooper Cooper
    24. February 2017 at 12:25

    What do we know about the wage elasticity of supply for construction workers?

    Millions of men have left the labor force since the Great Recession. If we boost wages for construction workers, how many of these men will move down to Orlando to start putting up drywall?

    How long does it take to turn an unemployed factory worker into a gainfully employed drywall installer?

  27. Gravatar of Kevin Erdmann Kevin Erdmann
    24. February 2017 at 12:40

    Think of housing market values as having a ceiling (the present value of future rents), which is partially determined by real long term interest rates, and a floor (the cost of new building).

    In places where the price is high, it doesn’t matter how much you’re paying the workers. Supply is deprived through political means, not actual costs. If you lower the cost of building, the cost of getting approval will simply go up to counter it. Cost doesn’t matter.

    In places where the price is low, it doesn’t matter how much you’re paying the workers. Supply is now deprived through credit regulation. If a renter can cut his monthly expense by 30% by buying the house, but the GSEs and the regulated banks can’t give him a mortgage, it doesn’t matter if costs go up and his expenses now would only decline by 15%. That wasn’t the constraint to begin with.

    I have seen several indicators of rising costs for low end housing, and they are all plausible. And, rents have been rising. But, if cost was the constraint to new building, then prices on existing homes would be rising. Instead, if you look at prices by zip code, across the country, low end prices took a nose dive compared to high end zip codes, and then started to trend up along with rent inflation, but never making back up the gap from the collapse.

    We have regulated the low end housing market into a renter’s market through capital repression. Demand has nothing to do with it.

  28. Gravatar of E. Harding E. Harding
    24. February 2017 at 13:46

    “Harding, I was in California last summer. The cities didn’t seem unlivable, indeed it seemed like paradise.”

    -The climate does, and nothing else. Again, the non-Hispanic White population of California declined by over 800 thousand from 2000 in 2010.

  29. Gravatar of Jerry Brown Jerry Brown
    24. February 2017 at 15:32

    You know Mr. Harding, Scott Sumner says he plans to retire in California. Maybe your always mentioned racial statistics don’t matter much to people who aren’t racists. Maybe you will figure that out someday but I’m not hopeful.

    Cooper, anyone who is strong and in fairly good physical shape could learn to do drywall fairly quickly. It is not the most skilled job in construction but it is quite physically demanding especially if you want to earn a decent amount of money doing it. Many sheet-rockers are paid by the sheet installed, and not a lot per sheet, so they have to work quite hard. The taping part (drywall finishing) is a much harder skill to learn to do well.

    In any event, there are already a lot of sheet-rockers and not that much new construction going to absorb all that many unemployed factory workers. And like I said, it is a physically difficult job. Usually performed under really crappy and sometimes dangerous working conditions.

  30. Gravatar of d d
    24. February 2017 at 16:50

    haven been in California recently (just last month mind you), it didnt seem so bad to me either. different yes, definitely (being from Texas), and this being San Jose that I was at. more expensive? yes, but then in is silicon valley, would you expect some thing else where there is a pretty large population who do make money, unlike say in most of Texas (and yes i have lived in Texas for a lot more than 40 years, and have even lived about 7-8 years in California), but is it a terrible place to leave? no, no more than most places are. but then if you are used to cities, its easier to deal with, if you are used to being in say far out in west Texas, it would be a huge (YUGE change as MR T would say it), because there is a few more people around, and they arent all farmers/ranchers, or work on oil rigs say. but not every one wants to be a farmer/rancher (and its getting smaller ever year, so far its around 1% of the population now. and robots will make it even smaller). now if we dont or cant agree to get along, maybe its just time to split up and going our separate ways

  31. Gravatar of Benjamin Cole Benjamin Cole
    24. February 2017 at 17:08

    Good post, but how can we say the price signal will not solve putative labor shortages in any particular industry?

    Surely, complaints about labor shortages are just sniveling. Moreover, tight labor markets should be considered a feature, not a bug, of free enterprise democracies.

    Lorenzo–some kook is in charge of comment censorship at Econlog.

    Everyone: read Kevin Erdmann if you want to understand housing markets.

  32. Gravatar of Scott Freelander Scott Freelander
    24. February 2017 at 19:40

    I grew up in Houston and love Hispanic culture and living in a bilingual city. Quality of life in free-wheeling Houston is great, in my opinion.

    Same is true of southern California, though less free-wheeling in some ways, but climate is even better.

  33. Gravatar of Steve Steve
    24. February 2017 at 19:52

    Scott- The two most common complaints I hear from homebuilders are 1) the high cost of buildable titled lots and 2) tighter credit qualifications for buyers.

    Some homebuilders are actually slowing down lot acquisition because turns are slow and they fear buying at the top just like 2006-07; the biggest business risk is an underwater land portfolio that produces no cash flow.

    I pointed to the Lennar example because labor costs are only up 5-6% yoy, adding about $4500 to the cost of a 3000 sq ft mansion. But CEOs like to bitch about costs. This in markets where sales pricing and real demand are both growing 5-10%!

    I’m actually planning a research project in this area so i don’t want to speculate or quantify much beyond the above comments.

  34. Gravatar of Alex Alex
    24. February 2017 at 20:34

    Scott, regarding the comment on immigration vs illegal immigration, I’d agree with dtoh above that NS conflates the two, literally in the first two sentences of the article. It reminds me of the Aus debate with high population growth (Aus has grown 22% since 03, vs 9% OECD average; US is 11%). Higher population & limited infrastructure investment –> lower quality of life. Certainly either is reasonable to complain about but I’m skeptical that the higher immigration has improved AU standard of living (not least as it tends to flow to Syd and Mel only, leading to high house prices and overcrowding). Maybe not in the US case of course, you do have a few more cities than us, but it’s not something I’ve seen evidence for beyond GDP.

  35. Gravatar of Lorenzo from Oz Lorenzo from Oz
    24. February 2017 at 22:57

    Ben: you may well think so, but I couldn’t possibly comment …

    And what you said about Kevin Erdman.

  36. Gravatar of Bill Ellis Bill Ellis
    25. February 2017 at 06:26

    Scott…You are not taking into account what figures are leading or lagging and the time frames involved…

  37. Gravatar of Dan W. Dan W.
    25. February 2017 at 14:11

    The main cost benefit of undocumented workers is not in the supply / demand curve but in the ability of employers to hire contractors who operate outside the tax and regulatory code, and thus have a much lower cost structure than contractors who pay every tax and meet every labor regulation.

  38. Gravatar of Dan W. Dan W.
    25. February 2017 at 15:44

    Kevin wrote “We have regulated the low end housing market into a renter’s market through capital repression.”

    If only it was so. If government regulations were preventing GSEs from lending why have not private investors stepped in? Rational answer is that lending to the low end house buyer is unprofitable. If not the case then how else to explain the lack of private funding for home loans?

  39. Gravatar of Major-Freedom Major-Freedom
    25. February 2017 at 16:47

    Of course Noah Smith’s article misses the mark. He is not a voice of reason, he is a propagandist of the left.

    He wrote “anti-immigrant sentiment has reached levels not seen in decades in the U.S.”

    No, it is not anti-immigration sentiment. It is anti-ILLEGAL-immigration sentiment. Big difference.

    It’s funny, leftists can distinguish between 46 genders, but not between legal and illegal immigration.

  40. Gravatar of Kevin Erdmann Kevin Erdmann
    25. February 2017 at 19:25

    Dan W.,

    I think the CFPB has the last word on whether you might consider those endeavors profitable.

  41. Gravatar of ssumner ssumner
    26. February 2017 at 06:11

    XVO, I always love comments that are agreeing with me, but think they are disagreeing.

    Rick, I think you missed the point—both factors reduce growth.

    Not sure how people got the idea I’m a post-modernist.

    Harding, Nothing? I can tell you that the roads are far better than in Boston.

    Steve, Thanks for that info. Of course the issue of labor costs is related to labor shortages, but it’s not exactly the same issue, especially if firms are monopsonists in the labor market.

    Alex, The Trump campaign attacked both illegal immigration and immigration more broadly. Many Trump officials (Bannon, Sessions, etc.) are well known opponents of legal immigration.

    Australia has benefited in several ways from immigration.

    1. It helped them avoid the Great Recession.
    2. Their culture is far more diverse and interesting. (Just think of the restaurant scene.)

    Of course immigrants themselves have also benefited. And since they are now Australians, their welfare also counts in any retrospective appraisal.

    Bill Ellis, Yes I am, as they would also have been leading and lagging in 2004.

  42. Gravatar of Rick G Rick G
    26. February 2017 at 19:03

    Scott, yes, both factors reduce absolute growth in the housing stock, but does this matter if the the size of the population in need of housing also grows more slowly for the same reason? If the housing stock per capita were the same in both scenarios, why should we prefer one to the other?

  43. Gravatar of Jeff Jeff
    27. February 2017 at 10:25

    dtoh, MF,

    If you really favor legal immigration but not illegal immigration, I have a proposal for you. Unrestricted legal immigration. That way, every immigrant will be legal.

    Of course, you won’t agree to this, and the reason why is that you want less immigration. Period. Given that most economic studies show that immigrants don’t hurt the economy, and that immigrants commit fewer crimes than natives, I do kind of wonder just why you oppose immigration.

  44. Gravatar of ssumner ssumner
    27. February 2017 at 13:31

    Rick, More people have nice houses?

  45. Gravatar of Alex Alex
    27. February 2017 at 23:50

    Jeff/scott,
    I would be pretty wary of open borders, even if yes the virtuous thing would be to let everyone come (increasing their welfare at my expense; they are lower income after all).

    You’re assuming that there are no costs to immigration, but this is very definitely not the case, and I don’t mean it lowers GDP (which recall is a sum – more input = more output, but supply and use don’t quite make welfare). Infrastructure is the obvious one, with a fixed stock shared between more people. Yes it can be increased, but if this doesn’t happen (and it hasn’t in Aus) then we should assume it won’t in the future, or at least downgrade our estimates.

    The second point is housing, which has been increased in part by high levels of immigration. Yes Scott I believe it helped in the GFC, but high housing is analogous to ‘tech debt’ – it’s a buildup of land prices meaning we need more and more of our income to pay for housing and is fiendishly hard to reverse given that home owners can easily dictate political terms.

    Lastly I think even Krugman has conceded that there are costs to native low skilled workers from increasing low skilled immigration – almost as though markets have supply & demand =/

    So yes there are costs to high immigration, and it’s worrying to me that people want to keep assuming that only ‘stupid racists’ can oppose some level of immigration. I rather wish our left-centre party (Labor) would just come out and oppose our program exactly because it stops out Trump imitators (One Nation).

  46. Gravatar of the original Gordon the original Gordon
    28. February 2017 at 05:58

    Major “Freedom” – would you please post a link to the anarcho-capitalist manifesto on *illegal* immigration?

  47. Gravatar of Matthew Waters Matthew Waters
    28. February 2017 at 08:51

    “The main cost benefit of undocumented workers is not in the supply / demand curve but in the ability of employers to hire contractors who operate outside the tax and regulatory code, and thus have a much lower cost structure than contractors who pay every tax and meet every labor regulation.”

    This is just not true for most contractors, even before eVerify became required by some states. Contractors would have to be very sketchy and fly-by-night to knowingly pay illegals under-the-table in cash. (Trump’s demolition contractor for Trump contractor did exactly this with poles, but I digress).

    Generally, the illegal employees would provide counterfeit documents and pay tax on a non-existent or stolen SSN. Even with eVerify, employees can borrow or steal legitimate identities.

    Employers are still compliant with all tax, workers comp, etc. Employers of any decent size don’t have THAT much of an incentive to completely disregard the law. They don’t get W-2’s and 1099’s to report as expenses and the illegal employees can still sue, like the Poles with Trump Tower.

  48. Gravatar of E. Harding E. Harding
    28. February 2017 at 16:51

    “Nothing? I can tell you that the roads are far better than in Boston.”

    -That’s a function of the climate.

  49. Gravatar of ssumner ssumner
    1. March 2017 at 06:38

    Harding, How come German roads are so much better than Boston roads?

  50. Gravatar of ssumner ssumner
    1. March 2017 at 06:39

    And have you compared the University of California system to the University of Massachusetts system? They have half a dozen branch campuses that are better than the flagship campus of UMass.

  51. Gravatar of The Wake Up Foundation | Housing in Britain and America: The economic cost of NIMBYism The Wake Up Foundation | Housing in Britain and America: The economic cost of NIMBYism
    26. May 2017 at 03:00

    […] Scott Sumner, an economist at George Mason University, argues that although prices have been rising steadily in the US, the supply of new housing has not responded significantly. We can see this by plotting US home prices against rates of new building (See Chart). Average home prices in the US are now close to their pre-crash highs, but home-building rates remain significantly lower than their pre-crash norms. […]

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