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Follow Up to Multiple Binding Constraints Make Housing Analysis Hard

Erdmann Housing Tracker • 358 implied HN points • 09 Mar 26
💼 Business Urban Economics
  1. Long-term construction capacity is constrained by hysteresis, so national production can only rise slowly. That makes local demand often hit a fixed national limit, leaving some metros effectively stuck with inelastic supply.
  2. Both claims — that supply is inelastic and that costs are too high — are true and connected. Fast-growing regions bid up inputs and materials, which raises costs elsewhere and pushes those markets into a more inelastic local supply state.
  3. Local reforms like upzoning can boost housing in a city but won’t instantly increase national capacity and can raise input prices elsewhere, so benefits may be limited or temporary. Policy must distinguish short-run vs long-run effects and target the real binding constraints (inputs, financing, regulations) to enable a lasting recovery.

Multiple Binding Constraints Make Housing Analysis Hard

Erdmann Housing Tracker • 295 implied HN points • 06 Mar 26
💼 Business Urban Economics
  1. Housing supply is highly non-linear: some parts of the curve are nearly vertical (existing homes and permitting caps) while the middle is flat, and national construction capacity is stuck in hysteresis so output can only rise slowly.
  2. Limited capacity and input inflation direct materials to the fastest-growing cities, which pushes up local prices and raises the flat part of their supply curves; that means upzoning or banning big investors may have little effect if a city is on the wrong part of its curve.
  3. Ignoring these multiple binding constraints leads to misleading analysis and bad policy; lowering rents nationally requires raising overall construction capacity and reducing input costs, not just local zoning changes or investor bans.

Economics Links, 2/12/2026

In My Tribe • 273 implied HN points • 12 Feb 26
💼 Business Urban Economics
  1. Modern growth theory introduced formal production functions that made economic progress measurable and showed that, in competitive markets, wages tend to reflect workers' marginal product.
  2. Housing research finds house prices move with average incomes while housing supply usually follows population growth, so price–income correlations don’t prove supply restrictions are the primary cause of high local prices.
  3. New solar-driven processes to make synthetic hydrocarbons promise abundant, low‑cost energy in the future, but real‑world limits like grid integration and total system costs could slow their widespread adoption.

A "Shortage" or "Crisis" versus Regular Scarcity: Part 1

Erdmann Housing Tracker • 358 implied HN points • 16 Feb 26
💼 Business Urban Economics
  1. How much of your income goes to housing mostly depends on your income rank, so the common 30% rule is useful because a rise in the share of households above it signals real stress, not just normal variation.
  2. Over the last few decades housing stopped keeping pace with income growth and new homes got smaller, and political limits plus inflated land values have turned that divergence into a real, widespread shortage that would take millions of homes to fix.
  3. Owning and renting are different economic choices—ownership buys control and has different cash flows—so price/rent patterns vary by income and location, and the crisis shows up as people being forced to trade down or leave places they value because local rules block adequate supply.

Economics Links, 2/3/2026

In My Tribe • 243 implied HN points • 03 Feb 26
💰 Finance Urban Economics
  1. A concentrated productivity shift is underway in finance, insurance, information, and professional/business services: these sectors have kept growing output while employment has flattened, pushing output per worker sharply higher since 2022. This acceleration looks sector-specific rather than a broad private‑sector trend.
  2. There are two contrasting ways to see central banks: one treats them as liquidity providers and dealers of last resort sitting atop a hierarchy of money, focused on keeping payments and credit relationships working, while the other treats them as essentially a government bank whose balance sheet and interest on reserves make central‑bank liabilities behave like short‑term Treasury instruments. The choice between these views changes how you interpret central‑bank tools and their role in stabilizing markets.
  3. Fear of crime, not lack of demand, helps explain why many American cities stay low‑density compared with Europe: people avoid neighborhoods they perceive as unsafe, which reduces urban living despite high rents in safer areas. Making neighborhoods safer would likely raise demand to live in more parts of cities and increase density.
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GIGO from the San Francisco Fed

Erdmann Housing Tracker • 147 implied HN points • 10 Feb 26
💰 Finance Urban Economics
  1. The post-2008 mortgage crackdown and a long-weakened construction sector made housing supply—especially multi-family—largely inelastic across U.S. cities, so migration has been the main way markets equilibrate rather than local building responding to demand.
  2. Metro-area averages hide how shortages disproportionately hit poorer households: a uniform lot premium pushes up low-tier home prices proportionally more, displacing lower-income families and mechanically raising local average incomes, which can be mistaken for voluntary preference sorting.
  3. The finding that incomes correlate with house prices is empirically right but misinterpreted; the deeper story is constrained supply and selection effects, and as building capacity recovers local zoning and demand differences (and related policy choices) will again determine affordability.

“We Are Not as Wealthy as We Thought We Were”: Part 3

Erdmann Housing Tracker • 421 implied HN points • 26 Dec 25
💼 Business Urban Economics
  1. Filtering describes how homes change hands over time, and while houses used to "filter down" to lower-income buyers, since about 2008 many places have seen upward filtering where higher-income families replace lower-income ones and pay more for land rather than better homes.
  2. Upward filtering forces people into hard compromises — renters face steadily rising rents and many families are pushed to move away from schools, jobs, and social networks to avoid being priced out.
  3. The shift toward upward filtering is tied to chronic housing undersupply and restrictive permitting, so much of the apparent rise in household wealth is actually land-value gains captured by owners, not broader improvements in people's living standards.

Random Thoughts on Mortgages, Household Finances, and Supply Conditions

Erdmann Housing Tracker • 105 implied HN points • 29 Jan 26
💰 Finance Urban Economics
  1. Low mortgage rates and wider mortgage access historically did not drive overall inflation; when mortgage access tightened after 2007 homeownership fell and rent inflation sped up.
  2. The country is in a housing shortage, and adding multi-family or even high-end units reduces pressure on low-tier rents through filtering and sales chains, so building more supply (including luxury) helps the worst-off.
  3. Household sizes stopped shrinking decades ago and the recent rise in adults per household reflects people doubling up because of the housing crisis, so claims that homes are bigger and households smaller are outdated and misleading.

“We Are Not as Wealthy as We Thought We Were”: Postscript 2

Erdmann Housing Tracker • 126 implied HN points • 07 Jan 26
💰 Finance Urban Economics
  1. High housing costs in cities like San Francisco and Boston are driven mainly by restricted housing supply, not by unique economic 'superstar' demand; limited new construction makes existing homes much more expensive.
  2. The 2008 shift in federal mortgage access, together with slowing construction, changed price dynamics by reducing low-tier buying power and pushing rents up, as seen in Phoenix where low-end prices and rents diverged.
  3. When formerly fast-growing cities cut housing growth to the low rates of supply-constrained cities, they converge toward higher rents and low vacancy rates; cities that kept building (for example, Austin) have shown more stable vacancies and relatively better affordability.

“We Are Not as Wealthy as We Thought We Were”: Part 5

Erdmann Housing Tracker • 147 implied HN points • 30 Dec 25
💼 Business Urban Economics
  1. Supply constraints can make a city appear richer because poorer families leave, so rising local average incomes often reflect displacement rather than higher productivity.
  2. Aggregate, value-weighted measures hide how much housing costs have risen for the typical household. Equal-weighted measures show much larger increases in price-to-income for average families.
  3. Rent inflation has been higher in poorer neighborhoods than in richer ones, which cuts real incomes for low-income households and is poorly captured by national inflation measures.

“We Are Not as Wealthy as We Thought We Were”: Part 6

Erdmann Housing Tracker • 126 implied HN points • 02 Jan 26
💰 Finance Urban Economics
  1. Rising home prices are mostly coming from rising rents, so higher price/rent ratios often reflect persistent rent inflation rather than just speculative price swings. Because officials treated the problem as a bubble and tightened demand after 2008, they made rent-driven scarcity worse.
  2. Most of the price growth is coming from land rents caused by a shortage of new urban housing, amplified by stricter mortgage access and local land-use restrictions. This scarcity has hit lower-tier neighborhoods hardest, raising housing costs for poorer families.
  3. Viewing expensive housing as mainly a luxury or positional good led to bad policy choices like restricting credit instead of addressing supply and access. Policy should focus on how mortgage access and supply constraints harm households forced to move, not just on high-end buyers or headline wealth numbers.

Why homes are ‘filtering’ up the market from the poor to wealthier buyers

Erdmann Housing Tracker • 168 implied HN points • 15 Dec 25
💼 Business Urban Economics
  1. Average statistics hide big differences: the typical American family looks better off on paper, but many households feel worse and a substantial share have declined year after year.
  2. With too few new homes being built, existing houses are effectively ‘filtering’ up the market from poorer to wealthier buyers, which squeezes lower-income families out of housing options.
  3. The result is a unique, musical‑chairs problem where families compete for a fixed housing stock, and the only durable fix is increasing the supply of new housing so homes can better match families’ needs.

“We Are Not as Wealthy as We Thought We Were”: Part 4

Erdmann Housing Tracker • 126 implied HN points • 29 Dec 25
💰 Finance Urban Economics
  1. Low-tier home prices have risen much faster than high-tier prices, so being poor and housed has become significantly more expensive and the gains in real estate wealth are a regressive transfer to owners of scarce housing.
  2. Most of the aggregate rise in home values comes from an extra, supply-driven premium that filters across markets, meaning inadequate housing supply—especially in upward-filtering cities—has been the primary driver, not agglomeration or just higher incomes.
  3. Common price measures and policy responses obscured the real problem: indexes of existing homes overstate scarcity effects and post-boom credit tightening lowered prices temporarily without fixing undersupply, leaving families paying higher rents, staying put longer, and facing worse housing outcomes.

“We Are Not as Wealthy as We Thought We Were”: Postscript 3

Erdmann Housing Tracker • 63 implied HN points • 08 Jan 26
💰 Finance Urban Economics
  1. A nationwide scarcity premium—people paying extra for limited location/lots rather than for actual housing—explains almost all of the elevated home prices and rents, especially in constrained metro areas. It will only fade as supply rises or closed-access cities reform, otherwise it could persist for decades.
  2. Tighter mortgage access since 2008 raised effective rents and shifted value away from ownership of structures toward land/scarcity, hitting lower-income neighborhoods hardest and increasing gross rental yields. This change also reduced who can buy and altered the kinds of homes that get built.
  3. A rapid correction of the scarcity premium requires a big building boom and a return toward earlier lending norms, which could cut the adjustment to 10–15 years; blocking construction or restricting investors will stretch the correction out over many decades.

Have rents stopped rising?

Erdmann Housing Tracker • 42 implied HN points • 06 Jan 26
💼 Business Urban Economics
  1. Rent inflation has been much higher for lower-income families than for higher-income families, and public statistics don’t capture that difference well.
  2. Rents appear to have flattened since 2022, prompting the question of whether rents have stopped rising or are starting to correct.
  3. New home completions rose by roughly 600,000 a year after COVID, but whether that is enough to stop rent inflation depends on housing supply elasticity; rough estimates suggest about 2.5 million units a year might be needed to neutralize rent pressure.

The Dynamically Priced City

The New Urban Order • 199 implied HN points • 11 Mar 24
💼 Business Urban Economics
  1. Dynamic pricing can help businesses like Amtrak optimize revenue and manage unsold inventory effectively.
  2. Cities are considering implementing dynamic pricing to influence behavior, reduce congestion, and increase revenue for public services like transportation.
  3. Dynamic pricing could be a valuable tool for businesses, nonprofits, and public sectors to adapt to post-pandemic economic challenges and maximize revenue.

Asking Rents Decline Year-over-year

CalculatedRisk Newsletter • 28 implied HN points • 06 Jan 26
💰 Finance Urban Economics
  1. Asking rents are falling nationwide year-over-year and have been declining for many consecutive months according to multiple indexes.
  2. Rising supply and weak demand — driven by slower household formation, a construction surge in multifamily units, and higher vacancies — are keeping downward pressure on rents.
  3. Trends vary by type and place: single-family rents have risen modestly while multifamily and many metros show declines, with immigration policy and seasonal slowdowns also influencing demand.

You got to pay people to work in the suburbs

Klement on Investing • 3 implied HN points • 30 Jan 26
💼 Business Urban Economics
  1. Moving offices to the suburbs often increases most employees' commute times because public transit is built for suburb‑to‑city travel, not suburb‑to‑suburb trips.
  2. Companies pay skilled workers more to compensate for longer commutes—roughly a 10–20% wage uplift per extra hour—which can amount to a large effective payment for travel time.
  3. Relocating work to the suburbs only makes economic sense for low- and medium‑skilled white‑collar roles (like support and admin) and only if rent savings are big enough to offset higher wages for affected staff.