Can I read you guys something from the New York Times? The article is called "High Rents." This is the season of the year when the people of New York break out in loud complaints about the rise of rents, the scarcity of houses, and the impossibility of making both ends meet. This is from 1856. You could kind of just copy and paste that onto the New York Times today and it would read pretty accurately. This is a big crisis and it's been happening for a long time. If I could choose one thing that is driving it that we don't talk about enough, it's income inequality. The fact is that you have some people come to the city and they earn these high salaries and they're competing with everybody else. Housing is a positional good. We're all competing for it.
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Aziz and Kyla, where does this podcast find you?
Oh, I'm in Los Angeles, California right now.
Oh, Kyla, you're on the... I have no right to complain. You're at 6:30 for you as well.
Yes, sure is. Yeah, bright and early.
Are you a morning person?
Um, in theory, yeah. Yeah, but I had a late flight last night, so I'm, you know, a little challenged today with the timing, but that's all good.
How about you, Aziz? Where are you?
Yeah, I'm in Midtown Manhattan in my office. I've got nothing to complain about. It's mid-morning here.
All right, let's bust right into it. Housing prices are at record highs, and that is great news for anyone who already owns a home and terrible news for anyone trying to buy one. Kyla, you wrote in the Times this summer that owners need prices to rise to fund retirement while buyers need them to fall. And Aziz, you wrote last month that the real divide on housing runs between owners and renters more than between Democrats and Republicans. That's interesting. So, some data: the median first-time buyer is now 40. That's an all-time high. The share of first-time home buyers dropped to a record low of just 21%. So, four in five people buying a home have already owned one. So, how would you both assess the current housing market? If owners need prices to rise and buyers need them to fall, whose side should policy be on? Kyla, I'll start with you.
Um, I mean, I think it's sort of the big question because forever, home policy has definitely favored — or, um, policy in general has definitely favored homeowners. And as a renter, it can feel pretty difficult. You know, homeowners are able to write things off on their taxes. And with renting, it feels like you are just throwing money away to a certain extent because you're not building towards equity, you're not building towards ownership. And so, I think it's not necessarily that policy has to favor one over the other. I think just more equal policy would be good. Like giving renters a little bit more space for tax breaks, allowing maybe a rent-to-own type model where people can start building equity earlier on would be super helpful. So I don't think it's like favoring one over the other, just making it a bit more equal.
Yeah, I think it's a tricky problem to solve for politicians because there's kind of a symmetry in housing markets. You have, you know, two-thirds of households owning, and they certainly don't want lower prices. Like Kyla has written about this in the New York Times, for example, that, you know, a home is a nest egg for many people. It's their major source of wealth. And it's very tricky. Like you've heard President Trump say that he doesn't want lower home prices. He wants higher home prices. And this has happened around the world. Politicians, when they're kind of nailed down on this topic — do you want higher or lower home prices? — they kind of panic because there's no good answer. And to be honest, I don't think I have a good answer either. My view is that, look, it's going to take time for people to stop relying on their homes as their main source of wealth. We need to put in place policies that allow them to do that. And in the meantime, we can help folks who need help getting on the property ladder and also the renters. I think renters are really struggling in this country and we can certainly do a lot more for them, too.
I'm surprised that the two of you, given your age, are so balanced. I see this as policy that's done nothing but transfer wealth from your generation to my generation. And that one of the biggest errors we made was taking housing permitting out of the hands of bureaucrats and putting it into homeowners who obviously have a vested interest in seeing supply remain, quite frankly, undersupplied. Permitting costs have gone up and the result is young people can't start, in some ways, this major step to starting their life. They become — they feel bad about America, they start getting angry at everything and everybody. And I think even people who own homes, I would think, see this. And that it's, you know, we have built as much housing or enough housing for, you know, two-thirds of America to own a home, including the 20 million Black Americans that own a home, and then we just stopped doing it for a lot of reasons. But it feels as if this has gotten to a point where it is a real social ill, and that if mom and dad's home goes down by 10%, and also, you know, the homes that would be built would be, you know, kind of on the more modest end, I'm not sure that's going to really have that big an impact on mom and dad's home. And that a lot of this is interest rates, but it's like the perfect storm for young people to not be able to kind of launch, if you will. To me it feels like an enormous failure on the part of our leadership. Instead of drill, baby, drill, it should be build, baby, build — you know, 5 to 7 million homes, tax credits, you know, YIMBY laws. But hasn't my generation at the end of the day just sucked your generation dry of all capital and opportunity? I'm not quite as elegant and balanced as the two of you. This is the easier answer than...
Well, I appreciate being lumped in as a much younger generation. I feel like I might span you guys. I'm born in 1979, so I'm like, you know, technically I'm late Gen X, but I think like psychologically I'm an old millennial, so maybe I'm kind of between you guys. But yeah, I mean, Scott, I think you're right. You know, I come at this partly as like an economist and data nerd. And so I would note that like this is not uncommon, right? Like it's always been the case that older people have more wealth than younger people. It's not totally surprising that that gap is bigger now than historically because, you know, the stock market has gone up a ton, and the problem that we're talking about — home prices. Home prices are the major asset for a lot of households. That's gone up a lot as well. So in a way it kind of reflects some positive things about the country. If we were like in a huge depression, that wealth gap would be much smaller. So I think it's partly a good thing. But yes, I hear you. And I, you know, as a person spanning both generations, I have owned — I'm renting now. The rent is way too high. And I think young people are rightly very frustrated. I would — I think that, you know, the problem, and hopefully we'll get into this, but there are all kinds of problems for young people getting on the property ladder, and it actually starts much earlier. It starts with leaving your parents' home or getting, you know, moving out of a house that you're renting with friends, you know. So it's like a really — it's a deep-seated problem that starts very early in life. It's not even just about ownership. It's about just being able to move into your own household.
Yeah. I mean, I think America does have a really complicated relationship with housing because, you know, Derek Thompson has talked about this before. Housing has to be both a speculative asset and a place to live. And I think for a lot of people, a lot of their wealth is wrapped up in the house. So they're going to push back against anything that they think can threaten that. And increasingly, that's turning towards the stock market. Stock market wealth is becoming more and more of people's total net worth. But I think that for younger folks, like when they look at the refusal to build, and when they look at older folks, you know, just saying like, "No, you can't build near us. Like, we don't want this housing near us." I think it can feel like everything is sort of working against you because what you've been told since you were little is that in order to be a successful person, in order to reach this American dream, you have to buy a house. And you know, I'm 29 and I don't know when I'm going to be able to buy a house. And I know a lot of people in the situation, and more and more people are starting to lean on their parents for financing a home or leaning on some sort of outside help. And I think that's the really hard part, is that housing is the foundation of the economic ladder. And if people feel like they can't climb up it, they're just going to be like, well, you know, maybe it doesn't make sense for me to work really hard at my job, and it doesn't make sense for me to get married, it doesn't make sense for me to build this economic future because I don't feel stable. And I think for older folks, they were able to benefit from the post-World War II boom. You know, there was just so much policy that worked in their favor. And that's why people over the age of 55 have so much wealth in the United States. I think the thing that is going to be challenging — and I'd be curious for Aziz's thoughts on this eventually too — is that, you know, one in five Americans are going to be over the age of 65 by 2030. And so we have — in 1920 it was one in 20. And so if you think about the demographic profile of the United States, it's an aging population. But eventually this population is going to have to pass these homes on to somebody, and then we might have a structural oversupply, and then home prices might have to go way down, and then younger folks who did get into the housing market are going to be screwed that way too. And so it just feels like sort of an impossible push and pull. And policy, I think, could really help with improving zoning regulation, allowing people to build multifamily properties, this missing middle that we often talk about. But yeah, I think that it makes total sense that young people are frustrated. I'm frustrated, and we could do a whole lot more to help people get their foot on this first rung of the ladder so they feel like they have a place within the economy.
Yeah, there's a — you know, a lot of times when I speak to a wealthier older generation about how much wealth they've aggregated relative to young people, and they say, yeah, but the young people are going to get it. You're going to see — I don't know, I've heard everything from 60 to 120 trillion dollars is going to be inherited. I'm convinced these people are never going to die. If you have two people living in a house, the reality is that generational wealth isn't going to pass down to the generation until likely the kids are 60, and then, okay, great. It does feel — I mean, I think it's one of the bigger issues of our time right now. And if you look at my generation, three in four of us felt good about America when we were your age. Now it's one in four. Let's talk a little bit about — Aziz, you wrote last month that the crisis is most acute in desirable cities that attract highly skilled, high-earning people. Your data shows a Detroit household earning $50,000 can keep housing under 30% of income, while in San Francisco it takes more than 100K. Shocked it's that low. How split is the housing market right now? Is this just another example of the K-shaped economy and sort of a bifurcation where there's a small number of super cities that are astronomical? I've always said in New York, we all have that moment — and Kyla, I'm sure you have it in LA — where you look around at 11 on Wednesday and it seems like everyone has enough money to buy a $12 latte and the places are packed, and you think, "What on earth do these people do?" That's the app. What does this person do? Where you can hold up and find out how they're actually affording to live here. Is this the K-shaped economy? Nobody has a birthright to live in LA or New York, but what's going on geographically and regionally here? Aziz.
A lot of people, when they look at — you know, one way of looking at this K-shaped economy is, you know, which homes are selling. Is it more expensive homes? Is it cheaper homes within each market? And it's a little tricky to measure because home prices are going up — or even if they're going up very slowly, they have been going up for many years. And so there's a tendency to think that, you know, as homes are shifting into higher-priced buckets, it looks like everything's shifting towards luxury. So I did this analysis a little while back, and I looked at — I sort of pegged prices at 2019 and kind of set that threshold there for what constitutes luxury, and crept up that threshold in line with local home price appreciation. And that gave me, I think, a much cleaner look at how markets are shifting, which ones are going towards luxury and the opposite. And actually my findings were like pretty contrary to what has been widely reported, in the sense that there's really only a few cities where we see luxury properties taking a larger share of all transactions. So that's Miami. Miami has gotten a ton of wealth recently, partly coming from places like New York City, a lot of finance business moving down to Miami. And San Francisco, unsurprisingly, with the AI boom. New York to some extent is also shifting towards more higher-priced homes changing hands, but most cities are pretty stagnant. And then you have a whole bunch of cities where actually you're seeing more sales at the lower end. So this is like a Pittsburgh, an Atlanta, Cleveland, these kinds of places. So the majority of cities are actually not shifting in either direction, but you can certainly see the kind of wealth gap, the growing wealth gap in this country when you look at like a San Francisco versus, you know, an Atlanta, for example.
Kyla, anything to add to that?
Yeah. I mean, I think that there was a piece called "Negative Yield New York" a couple of years ago that talked about — so this is sort of tangential to the question, but it talks about how there are these like epicenters where people want to move to because it's where a lot of jobs are, it's where a lot of opportunities are. Like for example, I left Kentucky to go to LA because that's where my finance job was when I graduated school. And so like housing in these cities that people, as Aziz pointed out, wanted to move to are more expensive because there's more demand. Like everybody kind of wants to be in these big cities, see if it works out, and then maybe they go back home, right? And there's a lot of opportunities in the smaller cities too, but the big cities are where most of the big businesses are. And so this piece in "Negative Yield New York" was talking about how because housing has gotten so expensive in these big cities, it's harder and harder for people to move there, it's harder and harder for the culture to be established. And so I think that it is pretty painful in big cities, and it sort of creates this reverberation across the economy where people aren't able to take on as much risk, they're not able to take these big swings because the housing is so expensive. And so I think that's definitely one of the complications. Like I remember when I moved to LA in 2019, and on my starter salary it was very, very, very painful. I could barely afford rent. And I was paying like $2,000 a month, and this was 2019, for a 300-square-foot studio. It was so tiny. And so if we think about that, and if we think about the opportunities that people want in these bigger cities just to like take a big swing, be around these bigger businesses, bigger corporations, you know, I think it creates these downstream effects that we don't totally understand quite yet. So again, a little bit of a tangent, but I think it's important that there is affordable housing in the places where people want to move to take these bigger risks.
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I want to try and get to the core of the problem and get your thoughts on where I have it wrong and whatever nuance you want to add. But every market has a demand side and a supply side. Let's talk about the supply side. The US completed about 2.1 million privately owned homes in 1973, when the population was roughly 211 million, so approximately a 1% ratio of houses built to population. In 2024, the US completed about 1.6 million with a population of more than 340 million. If I'm doing my math right, that's about 0.5%. So the ratio of new homes being built to population has been cut in half. Duplexes, triplexes, and fourplexes accounted for 7% of new homes in 1979 versus 1.1% in 2025. And then to make things worse, it feels like the programs are all on the demand side — trying to keep interest rates artificially low or lower than they should be, first-time homebuyer tax credit, low-income housing tax credit, which puts more money in the pockets of buyers. But without an increase in supply, all that does is take prices up. It feels as if there's just a basic misunderstanding of the economics, and then we cosplay concern with programs that ultimately just take prices up. Your thoughts? I'll start with you, Kyla.
Yeah, I mean, I think that's — I interviewed Wally Adeyemo a few years ago now, who is the Deputy Secretary of the Treasury in the Biden administration under Janet Yellen, and that was one thing that he really talked about, is that it's very hard to do much about supply. So all you really can do is the demand side. So the financing side — that's what a lot of it is — it's a little simpler to pass policy on mortgage rates and support for first-time homebuyers than it is to fix zoning laws, for example. And so I think for a lot of big governments in these cities, you know, they're just looking towards the demand side. But of course, if there's not enough supply and then everybody has a little bit more money to spend, home prices are going to go up.
Yeah. So, it's hard to boost supply, as Kyla said. This is not just a US thing. It's hard to boost supply in any big, dense city. The conversation, especially for the past maybe five years or so, has really centered on zoning. The sort of conventional story is that, you know, NIMBYs took over and they captured local governments and they're standing in the way of more home building because they don't want, you know, the value of their homes to fall and they don't want their neighborhoods to change. And there's definitely a ton of truth in that. I think that that is true, and you're seeing moves to shift governance from the local level up to higher levels of government that oversee the broad population and can make decisions that help everybody, not just those in certain neighborhoods that don't want to change. But what I think is kind of lost in that conversation is that there are all kinds of reasons it's hard to build, and it's not just zoning regulation. You know, like in New York City, this is a very, very dense place. We have a lot of regulation. Some of that is because they don't want places to change. I live on the Upper West Side in a big building. The rent's too high. People don't want that neighborhood to change. A lot of it is landmarked. So that's part of the issue, but the other one is that this is just a very, very dense place. And for example, if you look at permitting times — how long does it take to get a permit through to build an apartment building? — it correlates very closely with density, because it's very tough to build in a dense spot. You have to, you know, here in Manhattan, there's almost no vacant land. If you're building a new building, you're knocking down the existing building, which is very expensive. And then you're going to build high, presumably higher than the building you're knocking down. It's very expensive to build high — like a 12-story building costs like 40% more on a price-per-square-foot basis than a three-story building. And then there's the thick set of regulations, some of which are NIMBYism, and some of which are just the regulations that you need in a big, dense place. So yeah, I mean, to your question, Scott, I think supply is where we should be focusing. It's a really tough thing to address, but I think we need to take it on, not just through zoning, but also other measures that can help builders build homes more cheaply.
So Aziz, I was at a housing conference in New Hampshire and I was talking about housing, right? And somebody came up to me and he was a local builder and he was like, "It's the sewage systems. Like, we just don't — if we build more houses, the sewage is going to explode out of the pipes." And so I'm curious how you think about the underlying infrastructure of the cities too. Like, are we even able to support more buildout with the public services?
Yeah, that's a really good point, and I think that's kind of what I'm getting at here with this. You know, when people say, well, like, why is it so hard to build in dense places? Like, you know, you should be able to do it. I think this is part of the reason — there's all this like shared infrastructure, and it's very, very complex to build in these places. That builder may be totally correct that like maybe where they are trying to add density requires more of a public infrastructure upgrade. Like, one of the problems is that behind all of these challenges — and like, you know, environmental review is another example of this — there are like real reasons to do these things. There are like real reasons we've put in place regulations. We need regulations. There are real challenges to building. There are like strains on the infrastructure. People talk about traffic, for example. The problem is that a lot of people who don't want their neighborhoods to change have weaponized these reasons. They're like, "Oh, we can't possibly change because there'll be too much traffic." Actually, you just don't want your neighborhood to change. That's the real reason. So it's like that's really muddied the waters, where there are real concerns around this, but often it's just weaponized by people who don't want change in their neighborhoods.
Sewage, that's a new one. Some of the other ones you hear a lot is these unexploded IEDs called low mortgages that have been taken out where it's literally impossible for someone to move. Weird weirdness like tax policy. I own a home in Florida. I'm really reticent to sell it because if I were to try and buy back in anywhere in Florida, my tax basis — or my basis for the assessment of taxes — would probably double or triple. So there are all these weird exogenous events keeping people in their home. In the UK, something like 40% of homes have two or more spare bedrooms, but people don't want to leave because they're locked in because of interest rates. So let's get to solutions, and I'm curious if there are any sort of non-traditional solutions you can think of. A couple I've heard: manufactured houses, where basically on-premise building is twice as expensive as homes that are manufactured and then assembled, and they're actually quite nice. You hear that and you think, "Oh, it's going to look like a, you know, a Lego box or something." It's not. They're actually quite nice. And also unincorporated areas where you just try and get a mess of young people with, you know, tattoos and skateboards, and all of a sudden you have this cool little area. And young people — a density of young people has a tendency to create an interesting area. And all of these — you've seen one in Florida, a bunch of VCs are talking about one, I don't know if it's actually happened, in the Central Valley, where the reason they create a city is so they don't have to put up with any regulations, they can just build like crazy. Any other non-traditional ideas that you've heard of that you think are interesting we should consider? I'll start with you, Kyla.
