Bloomberg has things back to front.

Bloomberg just called New Zealand one of the world's clearest housing cautionary tales.

In a piece titled The World’s Most Extreme Housing Boom Is Now Roiling an Entire Economy, global business news leader Bloomberg has analysed what’s happening here and what other countries can learn.

The piece said New Zealand was once home to the “world’s biggest housing booms,” but is now in the grip of a prolonged downturn, “exposing how deeply the country’s economy depends on ever-rising home values.”

Well, they're right about that last. But they're wrong about how we should react to the leaking of that housing bubble. Cambridge developer John Kenel makes the counter-argument:

Prices down 16% from the peak. Wellington down 27%. The economy stuck in the mud.They are not wrong about the numbers.
    But I think they have got the story wrong.
    Bloomberg is treating falling house prices as the tragedy. I do not think that is the real tragedy. The real tragedy is what falling house prices revealed.
    We did not just build a country with expensive houses. We built a country where housing became the economy. And councils worked that out pretty quickly.
    Every new house became a chance to clip the ticket. Development contributions. Consent fees. Inspection fees. Infrastructure charges. Rates. More reports. More consultants. More delays.
    Somewhere along the way, councils stopped seeing new housing as something to enable and started treating it like a funding machine. Not just for the direct cost of growth. For everything.
    Then they act shocked that new homes cost too much.
    You cannot load cost after cost after cost onto new housing, and then complain houses are unaffordable.
    That is the bit nobody wants to say out loud.
    And now politicians and commentators want to blame mum and dad investors for the mess. The couple who saved hard, took a risk, and bought 1 or 2 rentals.
    Come on.
    Blaming them for the housing crisis is like blaming punters at the pub for the price of beer.
    They did not write the rules. They responded to the rules the system gave them. Just like everyone else.
    We do not have a housing problem.
    We have a country that decided housing was the economy.

A "country" that decided that? Or politicians who determined that, with planning and building rules restricting supply while central bankers gave us near-zero interest rates and pandemic-era stimulus. 

So house prices have fallen. Good. But fallen only to what they were only a half-dozen years ago.

The fall is not the tragedy. 

The fall is the correction. 

Or (if supply is allowed to increase) perhaps the beginning of one. 

How regulation works

Above a certain size, building new homes in France requires a registered architect.

Take a wild guess: what size do you reckon that is ...

In the same vein, at what number of employees do you reckon French firms are obliged to unionise ...

...and at what level of income do you reckon UK firms are legally obliged to register for VAT...

...and what happened in Georgian Britain when they taxed windows ...

Here are The Beatles ...

One step forwards, three steps back.

"Oops." Luxon-led policy-making takes a tumble

It's a rule in politics. The devils is not always in the details. It's often that the details reveal the real devilry.

If the large print ever giveth, then the small print will surely taketh away.

Let's look at a few examples in an area I know something about: Building.

*** Building Minister Chris Penk seems a jovial character but unfortunately he knows little about his subject area. His first move was to promise faster building consents. Exciting. Encouraging. Mighty work.

Here's hist first step: "requiring councils to submit data for building consent and code compliance certificates every quarter." There are no other steps.

He adds "hope" to the idea of anything being faster. Council inspectors "must" issue building consents in a timely fashion, he insisted.  And yet every council inspector ever employed knows how to legally delay a consent application. In fact, if you fine a council for being legally overtime, they'll just legally delay applications for even longer to give themselves some head room. Which is what they've done.

Score One for the Grey Ones.

*** Another move by Building Minister Penk was "remove barriers to overseas building products." At least, that's what it said in the headline. His idea, sensible enogh on its face, is that if enough similar jurisdictions to ours have passed a product (places like Canada, US, UK, Europe, Australia etc.) then that product would be deemed to pass here too.

Yay? No, not so fast.

First move by the Ministry who oversees these things was to rent several new floors in Wellington.  Because their idea of this (and it is they who are running it) is to set up a committee who will consider, one at a time, every morsel of regulation passed anywhere at any time to decide of we might be so lucky to have it here. 

So far, in the three months since introduction, they'e okayed some taps from Sydney. Next year, they might look at concrete codes in the US. Done properly, with due consideration, this will take most committee members through to retirement.

Score One More for the Grey Ones. 

** And then the Minister for Regulatory Reform (sic) stepped up to announce a new measure to "liberate" builders and designers. For years, some of us have suggested that instead of applying to councils for permission to build (which asks for more knowledge than council employees really have, and puts ratepayers on the hook for the risk should they fail) we instead use insurance companies to take the risk.

You know, like if you build a hot rod or street racer instead of a bog standard car, then you ask the insurance company to take the risk, and they use their acumen to discern the risk, and charge you accordingly.  

This allows for good design, with risk properly underwritten. 

But you see that word above: instead.

Rather than placing the risk and the onus on designers and builders and insurers instead of on councils and ratepayers, the Minister for Regulatory Reform is doing this as well as. So it's no more "liberation day" than were Trump's tariffs: we end up getting the worst of both worlds: councils assessing risk, and insurers granted a monopoly charging like wounded bulls. And the ratepayers? Still on the hook.

So it's Several More there for the Grey Ones.

** It's like education, where a "regulatory review" by the same Minister for Regulatory Reform intends to "clarify" and "simplify" Childhood Education's overwhelmed sector. One imagines a quick fix might be going back to say, 1996, when things were working tolerably well, and just before regulations began piling on and classrooms and centres became over-regulated, under-performing, and wholly unaffordable for parents.

Instead, the "reform" begins by (and I quote) "establishing a new statutory role, the Director of Regulation, with responsibilities for performing key regulatory functions in the Early Childhood Education system." Which means another red carpet rolled out in yet another floor of a new office building in Wellington.

Back of the Net with another great effort by the Grey Ones.

*** It's a bit like the "cap" on rate rises. 

Let's stop rate rises!! Yay!! Well, not so fast. 

We know that the "cap" will be supplemented for weepy boomers with top-ups for water use, for mayors who plead public transport debts, and councillors who claim infrastructure shortfalls. We also know that the minister "responsible" ( I use the world loosely) is happy with "soaring" council debt, just as long as the effects and the headlines are only felt after he's gone.

Not to mention that the "cap" includes a minimum rate rise as well!

Yes, a minimum. By law, councils must increase rates by at least 2% every year.

It a sop, not a cap.

Grey Ones score again.

** And not to mention that the new-fangled means by which councils can "fix" their bloody awful traffic problems—traffic jams being a clash of capitalism (in the form of car production) confronting socialism (in the form of too few roads). The "new" solution is a tax. A new tax to be called "congestion charging," which will of course not replace any other tax but just be added to all those under which we are already burdened.

And if history is any guide, may help finish off Auckland's CBD altogether.

I'm pretty sure that's a total victory for Grey.

 With this government, as with every other in recent times, it's always one step forwards, and three steps back. Too many ministers with too little nous giving too much help to the unproductive to whom too many of us must seek permission before we can do anything.

I look forward to this afternoon with trepidation.

Removing barriers to overseas building products, one subclause at a time [updated]

BUILDING MINISTER CHRIS PENK IS surely mistaken (or misled) if he thinks he is going to see a quick remedy to high
building costs from his announcement, already signalled, that building products from overseas may now be used in New Zealand.

The problem, you see, is that regulations here around our approvals process make it prohibitively expensive to obtain official approval for any materials, local or imported, so that most would-be inexpensive imports just don't happen. (Around 90% of products used in building or building components here already are imported, but they're generally not the primary ones requiring approval by the grey ones.Why pay upwards of $250,000 to have your primary Euro-component approved here, when it's already selling like hotcakes in your Euro markets.) 

So Penk's idea is that materials or systems already approved by the grey ones in similar jurisdictions and standards environments to ours (such as Australia, Canada, UK, US and Western Europe) can be cited in documentation to the grey ones here— and then, with some fingers crossed, be approved for use in buildings here without the otherwise burdensome cost of obtaining formal approval upfront.

Cheaper materials: cheaper houses.

Nice idea. Shame if a bureaucracy somewhere were to ruin it.

The programme will be run by MoBIE. 

I attended a webinar run by MoBIE dicks recently outlining how they intend to run it. They called it 'Removing Barriers to Overseas Building Products.' Try not to laugh as I relate their intentions.

First of all, they've started a committee. And several working groups. Large ones. Large enough, I imagine, to fill at least one floor. It will be these newly-appointed bureaucrats that will decide which standards/regulation of which similar jurisdictions will be considered for approval by these bureaucrats. And this will of course take some time. 

First of all, of course, they have to meet to define regulatory criteria. And to issue new acronyms (things like BPS, BPIR, etc.)

This is how bureaucracies work.

The committee/working groups will then make recommendations to the CEO of MoBie which standards/regulations he may recognise. May. Those deemed unobjectionable are then added to something called Building Product Specifications — a "new regulatory instrument." [UPDATE: The inaugural Building Product Specifications document has just dropped today, but dn't get excited, it's simply a compilation of standards/regulations already cited in the NZ Building Code. Enjoy.]

Following which, MoBIE's dicks will then publish a "Recognition Notice" detailing which new standard/regulations have been recognised. Once a standard/regulation has been so recognised, it will then be added to the Building Product Specifications document.

They hope ("always hoping, hope is vain") to issue their first "Recognition Notice" by year's end. That will be for one regulation/standard from one jurisdiction for one building material or system. For which the Notice will be once piece of "evidence of compliance with the New Zealand Building Code."

Still, once that Notice is published, building importers may then decide to bring in a building material or system; builders and building designers may offer the imported product in plans and specifications based on it being "Recognised" as evidence it complies

Did you follow all that?

Note the process here: it's MoBIE who decides to decide. Not builders, not building designers, not building materials scientists or building materials importers — all of whom have a large interest in the process — and nor is it the building minister. No. It's MoBIE's dicks who decide to initiate the process,  and it's they who will grind slowly through all the world's standards, regulations, codes, guidelines, approval systems, benchmarks and norms, deciding which of them they might like to spend time taking through their process and (eventually) recognise.

So we can see how this is good for bureaucrats employed within MoBIE. 

But how does all this help builders, building materials importers, would-be building owners, and me as a building designer? 

Well, nothing at all will help until at least the start of next year, when the first "Recognition Notice" might (might) have been issued for the Australian Watermark Scheme — so importers et al can start taking advantage of Australian plumbing and drainage products.

And after that, the committee/working group/bunch of overpaid bureaucrats will then begin to meet and consider whether or not  the American Society for Testing and Materials (ASTM International) and the European Committee for Standardisation (CEN) may be considered for recognition.

Don't wait up.

They may be some time.

UPDATE:

Email from MoBIE this afternoon: 

"The newly released Building Product Specifications document lists 130 [already-recognised] product standards, including US, European and other international standards alongside New Zealand equivalents for products like plasterboard, cladding and insulation. ...
    "Soon [sic] other pathways will be in place for the Minister of Building and Construction to endorse overseas standards, and for MBIE to formally recognise certain products certified overseas as complying with the Building Code. Updates about these pathways will be made soon [sic]."

"But how much can you *do* with a 70 square-metre house?!"

THIS IS ONE OF THOSE rare things, a government announcement I can get behind:

“Last year the Government consulted on allowing\granny flats of up to 60 square metres to be built without building or resource consents. The proposal received huge support, and as a result the Government has agreed to go even further by increasing the maximum size to 70 square metres.”

This is great news!

And it does look like it may actually happen — with the announcement yesterday that " Granny flats of up to 70sqm, and papakāinga of up to 10 homes would be allowed without a consent on specific land zones."

Never mind the misnomer "granny flat," When/if this is introduced, any house with a decent sized-section will now give owners the opportunity to add one new minor dwelling. (Let's call it that, shall we, rather than the more popular but slightly derisive 'granny flat'.)  One minor dwelling in all the places that's possible can do amazing things for making dwellings more affordable — helping make up for three decades of cementing in the opposite trend.

"But," I hear you ask, "how much can you do with a 70 square-metre house?!" Answer: a lot. If you do it right, a minor dwelling might even become your major dwelling.

To give you some idea of that size, until recently, the average size of a New Zealand house was 200 square metres. Now that we've been overdosing on bland, cooky-cutter townhouses, it's just under 160 squares. 

So even with that drop, a house of just 70 squares represents a fairly drastic compression of space.

So ... how much can you do with a 70 square-metre house?

Turns out, with a knowledge of good spatial design and a little bit of cunning, an awful lot.

Yes, I know those of you living in homes with kitchens the size of a large double garage won't fit in. But, for the record, I live in a very workable house of just 45 square metres. So to me, 70 square metres looks like a luxurious surplus of useable space!

So let's have a look at what a little bit of ingenuity and exploiting a few legal loopholes can do.

Architect James Schildroth recently designed this artful 2-bedroom 756 square-foot house below (around 70.2 square metres) and will make it available to build. In the States (where the sun is a different way around and building is much cheaper), he reckons it would cost around US$270,000....

Despite the size, it has almost all a home needs. There are several space-saving measures here (smaller bedrooms and closets, minimal kitchen, etc.) and a number of 'tricks' that help space appear larger—most especially carefullly "nesting" spaces, and opening spaces up at the corners. That low roof corner outside the lounge is especially effective, offering privacy from a possible neighbour, while also suggesting to occupants that the edge of the main space is defined by the outside edge of those overhanging eaves, at once both sheltering and opening up.

These psychological "tricks" are important in every home, but especially important in one so small, when every square metre has to justify itself many times over — space that's not just flexible, but hard-working!

Floor plan & diagram overlay for Frank Lloyd Wright's Pope-Leighy House (above) suggests how 'nesting' 

spaces within even a small home can help produce an illusion of larger space by virtue of the shared 

spaces — the particular space experienced depending on the observer's location at any point in time

HERE'S ANOTHER: A 72 SQUARE-METRE home-office by (Organon Architecture) over two levels, the lower of which is just 55 square metres, but with extensive pergolas — and a hill!

And you can do a whole lot with even less, if you're cunning enough.

The key, really is breaking the box. Understanding how to play with the visual field to suggest a larger apparent space.  And to properly 'nest' spaces so that every square metre within works harder, and suggests more.

Prefabricated modules and the like are part of the thing, but not the main thing. It's how modules and spaces are arranged that becomes the main thing.

HERE ARE SEVERAL MORE EXAMPLES. 

Several years ago, when it looked like Auckland Council were about to relax rules around 60-square-metre "minor dwellings," I was commissioned to produce a few floor plans and systems for what, it was anticpated, could have become a modest business. Sadly, the relaxing of rules never happened, and my client instead decided to try for better things in Queensland. But the idea is there in each of these homes: that a modestly-sized home need not feel small if it is well laid out.  

The aim was to build these homes on a precast-prestressed concrete transportable deck — using a container module in order to show the many limitations of container design, and to allow factory-built homes to be fully transported if possible. They featured both "ceiling decks," to help with services and the manipulation of space,  and a "smart slab" in which dimensions were set for the builder and in which all main services were to be run as a "plug-and-play" system.

I did modify one of these designs to be built in a small town in Victoria. (See if you can work out which design...?)

Anyway, take a look. There were around a dozen ...

Like I say, you can do lot with sixty metres. Let alone what you can do with seventy!

And you wonder why building is so expensive! [update]

UPDATE: "It's almost 2018 and we are still building our homes like it's 1918. It's time to fix this. ... why [can] one drive a cheap Hyundai straight into a driving rain at 70 MPH and not get a drop of water inside, yet we have trouble building a house that can stand still in the rain and do the same. ..."

It's said that the two biggest things most people buy in their lives are a car, and a house. To be more correct however: most people will buy the car; not everyone though, these days, can afford to buy the house. Particularly in our major cities.

And it's getting worse. While the price of cars has been generally declining over recent decades (due to innovation, greater competition, increasing productivity, better supply chains etc.) the price of houses — and the price to build a house — has been doing just the opposite. It's not because the quality of cars has been decreasing, either.

Why is that?

You'd think it would be the other way around. Think about how different it is to build a car, and to build a house. Cars require precision engineering, advanced technology, and specialised manufacturing processes. Hundreds of millions go into designing and engineering the chassis, the engine, in designing the looks, the interior, the space inside…and then you have to provide a suspension system, a transmission, miles and miles of wires, electronic systems that control the engine and won’t let you crash, such as ABS and traction control. Then you have to put in the costumer-trap things, like a nice info-tainment system, heated seats, iPod playback, sunroof and so on. Then you have to make all of these reliable, make sure it will keep on going for at least 200000 km? And it has to be safe. So airbags, crashbars, seatbelt and on and on.
Not to mention the whole service programme, and spare parts networks …

Yet with all that complication, car prices have generally been declining. Perhaps because, with cars, cost-saving innovation is generally encouraged. Permitted. Allowed. Even though most people could never build their own car, these complicated machines are becoming ever less expensive, even as they become ever more comfortable, reliable and serviceable. Advances in manufacturing technology and efficiency reduce the cost of producing cars, and manufacturers pass some of these savings onto consumers.

Yet while many people could and have built their own house, this far less complicated thing is taking longer to build, and costing far more than they ever have before. Stu Donovan from Motu explains that 

Research finds that planning policies add significantly to housing costs, especially for smaller and more compact dwellings. Examples include minimum area requirements for dwellings / lots / balconies / landscaping / communal areas along with minimum parking requirements.

And all of those rules are prescriptive. Dictatorial. No room at all for innovation. (And if there are benefits, no robust evidence they are greater than costs.)

With a car, innovation is stimulated and rewarded — not just allowed it is encouraged — and its has resulted in better cars at cheaper prices. By contrast, in local building, the productive must ask permission from the unproductive in order to produce. And the unproductive continually require more before that permission is granted.

Easily six months to a year (or more) for a resource consent, a mountain of paperwork, and many people running around asking and answering questions like "is this more than a minor effect on the amenity value of the area?" Similar time, time-wasting, paperwork and questions for a Building Consent — not to mention the extra mountain of documentation proving that your client's chosen widget complies with four or five different chapters of the Building Code (as recently amended).

Not to mention the even longer and almost interminable process if you're trying to use innovative materials or systems that the regulator hasn't seen before. 

No wonder innovative "widgets" are discouraged.

No wonder builders and developers generally shun innovative technologies and typologies in favour of those they know council are more likely to allow.

No wonder we're still using stick-framing technology from the nineteenth century to build our houses — a technology that pre-dates the car. 

The fact is, innovation in house-building has been stultified by the regulators who require you to believe they know best.

Yet as architect Frank Loyd Wright used to say, ""The building codes of the democracies embody, of course, only what the previous generation knew or thought about building..." (And here we still wouldn't be allowed to build the houses Mr Wright was erecting back in the 1930s!)

Why do we allow this ridiculous state of affairs about something, a house for goodness sake, that is so gosh-damned vital to human existence?

In his book 'Permissionless Innovation' ... Adam Thierer argues that creators of new technology shouldn’t have to seek the blessing of skeptical, out-of-touch regulators before they can develop and offer their innovations to consumers. In fact, it’s because some innovators have had the nerve to start a business without asking for permission that we all benefit now from services like Uber and Lyft, Homejoy, grocery-delivery services like Instacart, last-minute errand-running services like TaskRabbit, restaurant-quality meal-delivery services like SpoonRocket, and more.

We should be glad for these regulation violators, says Veronique de Rugy, who dared to dream that their ideas could find willing consumers to make them rich.

Yet I worry that as consumers, taxpayers, businesspeople, and citizens we have lost the notion that just as innovators shouldn't have to ask for permission from the government before they can bring new products to consumers, people who want to try out new arrangements for living their lives or making their livings shouldn't have to ask for such permission either.
    I understand why people often fear freedom or the consequences of breaking the rules, and thus acquiesce to government restrictions on their freedoms. But I fear that we have gone too far in this timid and cowardly compliance. So long as everyone respects everyone else's rights, we should have permissionless consumption (foreign and domestic), permissionless employment, permissionless entertainment, and permissionless everything and anything that's peaceful.
    A right for consumers to try new things or to buy what they really want should be the default presumption.  That shift would effectively knock down the barriers to progress erected by officious governments and self-serving special interests.

Rights come with responsibilities. Allow consumers, i.e., builders and house-buyers, to take responsibility for choices. And give them the right to choose.

People in the past were right to believe that the future could easily outshine the past. In this guest post, an excerpt from, his new graphic novel 'Build, Baby, Build' Bryan Caplan, asks why shouldn’t we believe the same?

The History of the Future: Build, Baby, Build on Historic Preservation

by Bryan Caplan

One of the most crowd‐​pleasing rationales for preventing development is historic preservation – i.e., preservation of "old" or "character" buildings. [Planners in Wellington and Auckland councils in particular have raised this objection to avoid intensification in those cities.]  Critics often ridicule the rationale’s abuse. New York has an historic parking lot, and so does Washington, DC. Rarely, however, does anyone challenge the principle of historic preservation. My new book Build, Baby, Build: The Science and Ethics of Housing Regulation does precisely that.

I first decided to address historic preservation while reading Triumph of the City by Ed Glaeser, chair of Harvard’s Economics Department. He is unquestionably a hero of Yes In My Backyard (YIMBY). He’s probably the greatest YIMBY hero in academia. But to my ears, Glaeser still praises historic preservation with faint damnation:

In cities and suburban enclaves alike, opposition to change means blocking new development and stopping new infrastructure projects. Residents are in effect saying “not in my backyard.” In older cities like New York, NIMBYism hides under the cover of preservationism, perverting the worthy cause of preserving the most beautiful reminders of our past into an attempt to freeze vast neighborhoods filled with undistinguished architecture.

This passage inspired a Build, Baby, Build scene where I invite Ed for a ride in my time machine. First, I take him back to 1928 and show him the original Waldorf‐​Astoria Hotel. The hotel was undeniably gorgeous.

But in the late 1920s, regulators didn’t try very hard to “preserve the most beautiful reminders of our past.” So about a century ago, developers were able to demolish the hotel.

And then… they built the iconic Empire State Building in its stead! Take a look.

On reflection, there is a widely‐​ignored trade‐​off between preserving past greatness and creating new greatness. Almost every beloved building stands on the footprint of an even older building. If historic preservation had existed throughout history, many more truly ancient structures would still be standing. But everything more recent would, at best, be less conveniently located. Many wouldn’t exist at all! After all, there’s little point in building the Empire State Building anywhere other than a city centre.

Without historic preservation laws, profit‐​maximising developers would still consider historic value. Tenants and buyers like historic stuff, so they’ll pay a premium for it. Developers like good publicity, so they have an added incentive to loudly proclaim their enduring eagerness to keep history alive. Philanthropists may even buy historic buildings and turn them into museums, or partial museums.

I say these free‐​market forces deliver all the historic preservation a reasonable person would ever want. I know, many of my fellow economists will hail the so-called "positive externalities" of doing even more. But we shouldn’t give them the time of day. Much of what mainstream economists credulously call “positive externalities” is just Social Desirability Bias — our all‐​too‐​human tendency to voice pretty lies.

“History is priceless” is a lovely yet absurd slogan. A few architectural historians aside, people barely care about 99 percent of protected buildings. When was the last time you smiled at a random structure built before your birth? What’s your tenth favourite building in Paris, never mind Auckland, Wellington or Tauranga?

But even if you take the positive externalities more seriously than I do, we’re not choosing between positive externalities and nothing. We’re choosing between the positive externalities of the buildings we have, and positive externalities of the buildings we could have instead. 

People in the past were right to believe that the future could easily outshine the past. Why shouldn’t we believe the same?

* * * * 

Bryan Caplan is an American economist and author. Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and former contributor to the Freakonomics blog and EconLog. He has published in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, the Journal of Public Economics, the Southern Economic Journal, Public Choice, and numerous other outlets. His book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007), was published by Princeton University Press and named "the best political book this year" by the New York Times. 

Bryan posts frequently at his blog, Bet on It. His post first appeared at the Cato at Liberty blog.
Buy his comic book at Amazon in both paperback and e-book.

HOUSING: "What regulation has ruined, deregulation can repair."

"Government regulation has raised housing prices far above the physical cost of land and construction.
    "And what regulation has ruined, deregulation can repair.
    "It's tempting to look at America's [and New Zealand's!] most expensive addresses and repeat the top three principles of real estate: 'location, location, location.' But this glosses over the artificiality of today's locational scarcity. Since the dawn of the skyscraper [or even just of the Georgian terrace house or Manhattan brownstone], technology has allowed vast populations to simultaneously enjoy the world's top locations. The government response, in turn, has been to make building skyscrapers [or terrace houses] in desirable places nearly legally impossible.
    "Indeed, U.S. [and New Zealand] regulators view almost all multifamily housing with deep suspicion. That's why they zone a supermajority of residential land for single-family homes. [See Auckland council for example.] But even the single-family supply is heavily restricted, because governments routinely set high minimum lot sizes to force builders to waste most of their land. Physically fitting six mansions on an acre is easy, but legally you're lucky [in some areas] to get a green light for one.
    "Averaging over the whole U.S., a conservative estimate is that regulation has doubled the price of housing. [No reason to think it's any less here — and given the outrageous price of building materials here, is more likely much more!] It's much worse in places like the Bay Area and Manhattan, and a minor issue in the countryside. But as a recent paper by Gyourko and Krimmel shows, regulation raises prices almost everywhere that lots of people actually want to reside.... As a matter of arithmetic, then, halving the price of housing would [at minimum] cut the cost of living by 10%, raising the standard of living by 11%. (As you may recall, 1.0/.9≈1.11).

    "Even better, deregulation will deliver these gains beyond a reasonable doubt. Laissez-faire in housing is not a futurist Libertopia. A hundred years ago, U.S. housing markets were close to laissez-faire [as they were here in NZ before the first Town Planning Act in 1928], and the least-regulated regions of the U.S. are still close to laissez-faire. Furthermore, we don't have to blithely assume vigorous competition will arise, because vigorous competition in the construction industry already exists. The total number of builders is immense, and even in our regulated world, many are champing at the bit to expand.
    "Indeed, the construction industry could revolutionise our lives for the better if it simply were free to deploy the technology of a century ago! Work on the Empire State Building started in 1930, and was complete just 410 days later. [Likewise, work on Auckland's Grafton Bridge, the longest reinforced concrete-arch span in the world at the time, started in 1908 and was completed just over a year later!] Imagine what industry would accomplish if we combined the light regulation of the past with the advanced technology of the present.
    "Almost all political thinkers like to keep up with the news cycle — to talk about the latest, most salacious topics. I've indulged this temptation myself more than once. But if your worldview has merit, you can do so much better than opine on the scandal of the century of the week. Housing deregulation realistically promises to enrich humanity by trillions of dollars. And all government has to do to make this happen is stop preventing it."

~ Bryan Caplan, from his article 'Trillions' — promoting his new 'graphic novel' Build, Baby, Build

Bastiat’s Buildings: "But will unplanned development be *beautiful*?"

Why are housing prices so high? 'Supply and demand' is true but misleading, because draconian regulation drastically constricts housing supply. In his exciting new nonfiction graphic novel, economist Bryan Caplan makes the economic and philosophical case for radical deregulation of the housing industry. Deregulation turns out to be a bona fide panacea: a large rise in housing supply would raise living standards, reduce inequality, increase social mobility, promote economic growth, reduce homelessness, increase birth rates, help the environment, and more. Combining stunning visuals and careful interdisciplinary research, 'Build, Baby, Build' takes readers to a world where people are free to build―and shows us how to get there.

But many NIMBys will still say 'there are beautiful old neighbourhoods we need to protect,' or 'valuable coastlines that we shouldn't pollute with any building.' In this excerpt, Caplan notes that today’s governments strictly regulate skyscrapers — but the beloved skyline of New York City was largely built under near-laissez-faire conditions. And that today’s planners strictly protect historic buildings, but deny us any chance at something new and unthought of (and instead mandate places like Albany and Manukau, while living in the leafy unplanned inner-city suburbs they now write rules to protect ... )

Bastiat’s Buildings: Why I Wrote a Graphic Novel about Housing Regulation

by Bryan Caplan

The Cato Institute has just published my Build, Baby, Build: The Science and Ethics of Housing Regulation. The book is a non‐​fiction graphic novel. Think of it as the comic book equivalent of a documentary. Together with illustrator Ady Branzei, I combine words and pictures to give readers a tour of housing regulation, with a focus on how government restricts the construction industry, and what would happen if the restrictions were lifted.

About fifteen years ago, Larry Gonick’s Cartoon History of the Universe opened my eyes to the high potential of graphic non‐​fiction. Gonick’s books capitalise on the adage that “a picture is worth a thousand words” to teach history quickly. They use beauty and humour to hold readers’ attention. And though they look like comic books, they’re carefully researched.

In Build, Baby, Build, I try to emulate Gonick’s virtues. The book distills a vast empirical literature into a few critical lessons. Lessons like:

• US housing regulation roughly doubles the cost of housing.
• Besides making housing much cheaper, deregulation would increase productivity, equality, social mobility, environmental quality, fertility, and safety.
• The standard arguments in favour of regulation are both overstated and one‐​sided.

But what finally convinced me to make this book a non‐​fiction graphic novel was my realisation that what drives much, perhaps most, support for housing regulation is aesthetics. Economists focus on cost‐​benefit analysis, but normal people are more likely to ask themselves, “Will development be beautiful?” — then confidently answer, “Absolutely not.”

Faced with such attitudes, economists tend to facepalm in frustration. My reaction, though, is remember 19th‐​century French economist Frédéric Bastiat’s classic essay, “What Is Seen and What Is Not Seen.” Writing in 1850, Bastiat explained that people focus on the obvious direct benefits of government, while ignoring the severe yet non‐​obvious harms. When government subsidises universities, for example, people rarely ponder, “What else could have been done with the money?” When government denies permission to build, similarly, we never actually see what would have been built if permission were granted. This makes it easy for critics to visualise the ugliest possible outcomes.

The epiphany that convinced me to write Build, Baby, Build: Instead of trying to argue people out of their aesthetic pessimism, I should use the graphic novel format to fight aesthetics with aesthetics — to show readers the beautiful unseen world that government forbids. And that’s why the fifth chapter of the book resurrects the great Bastiat as a co‐​narrator. After we explore his classic insight on “the seen versus the unseen,” Bastiat joins me on a guided tour through a deregulated world. Which lets me showcase a world that is not merely richer than the status quo, but more aesthetically pleasing as well.

For example, regulators often forbid construction in areas famous for their natural beauty. But why assume that construction would tarnish natural beauty rather than amplify it? Take a look and see for yourself:

To my eyes — and hopefully yours — the bottom panel is more, not less gorgeous than the top panel. And while you can fairly point out that these are fantasy drawings, they are inspired by real life. Who really aesthetically prefers the largely desolate California coastline to the awe‐​inspiring towns of Italy’s Amalfi Coast?

Or the decidedly pleasant but anadorned Bear Run River to the same river with a house by Frank Lloyd Wright showcasing its beauty, and now hosting hundreds of thousands of visitors every year.

The same lesson holds for so many of forms of housing regulation. Today’s governments strictly regulate skyscrapers. But the beloved skyline of New York City was largely built under near‐​laissez‐​faire conditions. Today’s governments strictly protect historic buildings. But construction of these historic buildings often began with the demolition of an earlier beloved building. The original Waldorf‐​Astoria Hotel really was destroyed to make room for the Empire State Building. That’s what I call building “the history of the future.”

Built in 1936

In a critique of my first book, philosophers Jon Elster and Hélène Landemore accuse me of being willing to use almost any rhetorical strategy to get my points across. While they overstate, they’re on to something. Once I’m convinced that my arguments are sound, I strive to sell them. Straightforward logic and evidence are fine, but so are thought experiments, appeals to common sense, humor, and beauty. 

False modesty aside, I think Build, Baby, Build is a beautiful book. If you like the visual samples I’ve shown you, I think you’ll agree.

* * * * 

Bryan Caplan is an American economist and author. Caplan is a professor of economics at George Mason University, research fellow at the Mercatus Center, adjunct scholar at the Cato Institute, and former contributor to the Freakonomics blog and EconLog. He has published in the American Economic Review, the Economic Journal, the Journal of Law and Economics, Social Science Quarterly, the Journal of Public Economics, the Southern Economic Journal, Public Choice, and numerous other outlets. His book, The Myth of the Rational Voter: Why Democracies Choose Bad Policies (2007), was published by Princeton University Press and named "the best political book this year" by the New York Times. Bryan posts frequently at his blog, Bet on It.

His post first appeared at the Cato at Liberty blog.

Buy his comic book at Amazon in both paperback and e-book.