What would make housing affordable?

Look, I think it's fundamentally a supply problem. We've seen most recently in Austin, we saw in Seattle, we've seen in dozens of markets around the country that when we remove barriers to the market, investing in housing to meet growing demand, you slow down cost increases. It's economics 101 Part of our challenge is that we've also made it impossible to build affordably. So part of the challenge was zoning, high fees, all of the things government imposes that block housing from getting built. But we also have a building code that's incredibly cumbersome. I mentioned litigation earlier when it came to high-speed rail. Same thing is true for housing. We're not building condos in California, partly because construction defect liability allows a trial lawyer to come in in year nine of a project.

But I don't think that's the major driver. The major driver is the fact that we just haven't built enough housing of different kinds. If you go through the reasons for that and why it's so expensive, it brings into play these three factors. First of all, it just costs more to build anything in California. The same exact floor plan, house, apartment building, industrial building, whatever it is, costs just two or three times more to build in California than in neighboring states. The first reason is the building codes, the actual requirements for construction, which is way more onerous driven by climate dogma that actually doesn't really provide much climate benefit.

Your upside, the amount of cash flows that you can generate from that asset, meaning the apartment building you're buying, is now limited by the amount that you can increase the rent every year. So that creates a disincentive for capital for investors to buy new buildings or put money into upgrading buildings or put money into building new buildings. At the same time, as we know, the city of Los Angeles, the state of California, and the federal government of the United States, have passed law after law, regulation after regulation, statute after statute has gone into effect. That makes it more expensive, take more time and more difficult to build housing. The increase in regulation combined with the cap in the economic access to free markets, I think has made it increasingly difficult for there to be a free flow of capital to go and build new housing and develop units for people to live in and for sale.

The data from Austin says, once you relax the permitting constraint, you'll get more units built, and for every unit that comes online, it literally drives down the rent. If you want low rent, you need to have more units. If you want more units, you need to permit more aggressively. That's it. It's just a decision. The same political will that it would take Mamdani to pass this law, he could actually pass some permitting reform and it would do a lot more good.

Look, I think it's fundamentally a supply problem. We've seen most recently in Austin, we saw in Seattle, we've seen in dozens of markets around the country that when we remove barriers to the market, investing in housing to meet growing demand, you slow down cost increases. It's economics 101 Part of our challenge is that we've also made it impossible to build affordably. So part of the challenge was zoning, high fees, all of the things government imposes that block housing from getting built. But we also have a building code that's incredibly cumbersome. I mentioned litigation earlier when it came to high-speed rail. Same thing is true for housing. We're not building condos in California, partly because construction defect liability allows a trial lawyer to come in in year nine of a project.

The data from Austin says, once you relax the permitting constraint, you'll get more units built, and for every unit that comes online, it literally drives down the rent. If you want low rent, you need to have more units. If you want more units, you need to permit more aggressively. That's it. It's just a decision. The same political will that it would take Mamdani to pass this law, he could actually pass some permitting reform and it would do a lot more good.