Daryl Fairweather On the Tax That Could Solve the Housing Crisis

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:16)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you know, it's like, when housing is booming, it seems to cause people a lot of stress, like they want to get in on a home.

And then when housing tumbles, that also causes people stress, maybe if you recently bought a home or something like that. But either way, wherever we are in the cycle, it feels like in the US, housing is just this huge source of stress. Like sometimes I go on the real estate subreddit, and it's just like all these people clearly close to having nervous breakdowns over the travails of either trying to find a home to buy or sometimes even to rent.

Tracy Alloway (0:51)

Yeah, I mean, you will have very different sources of stress depending on whether or not you're a homeowner or whether you're trying to become a homeowner and source an actual house in the current market. But yes, it seems like an endless struggle in many ways. You know, one thing that I just learned about and, you know, this is maybe naive on my part, but as a new homeowner, can we talk about property taxes and the fact that if I improve my house, I will pay more.

That's crazy.

Joe Weisenthal (1:24)

So just let it deteriorate. Just like let the house come in, let the foundation crack, all that stuff.

Tracy Alloway (1:31)

I mean, that's the incentive that I have now, although, well, resale value. But yeah, anyway, there are all these things you discover once you actually own a property.

Joe Weisenthal (1:42)

No, owning a property is the worst curse because you think it's like, oh, I finally got a house and all these people are competing and entering bidding wars. And then if you win, you actually kind of lose because then you're stuck to this thing and you realize how much it costs. But yeah, bottom line is everything about real estate, ups or downs, just seems to be a permanent source of stress. And okay, like mortgage rates go up and maybe that cools buying, but it doesn't feel like anyone has any sort of like, it doesn't feel like there's a long term plan to address this. Like, yeah, at times maybe things soften up a bit, but maybe if things are softening up a bit, it's because the economy is down and people are getting laid off and then it gets harder or impossible to get a mortgage or be in a position to buy a house.

Structurally, it's just, it seems like a nightmare.

Tracy Alloway (2:31)

Well, I would say the other big thing is it feels like no one's decided what role housing is supposed to have in the economy. So, yes, I think most people would agree that if you can get on the housing ladder, it's probably a way of building wealth. But at the same time, no one wants house prices to go up so high that everyone starts to get priced out of the market. And so it feels like we have yet to decide exactly what role housing should play in the American economy, certainly.

Joe Weisenthal (3:05)

Why do we want houses to be this key asset where your ability to retire, your ability to have some sort of comfortable economic existence is predicated on buying a house? Housing could just be a consumption good. You buy shelter, and just the shelter component. But it has become this thing where everyone feels like home ownership is such a key to what we think of as...

The American dream or whatever, having a comfortable life, that you'll pay a fortune just to, as you put it, even the term the housing ladder, it's like we all have to climb up, we have to grab a rung. It all seems so perverse.

Tracy Alloway (3:43)

Well, it also immediately creates that FOMO feeling, that sense of missing out. Oh my gosh, I have to get on the ladder, because if I don't get on it as soon as possible, I'm gonna be behind everyone else for the rest of my life. But yes, this is a peculiar model.

It is not the model used by everyone in every country, by the way. And Europe in particular is quite different in its approach to home ownership.

Joe Weisenthal (4:05)

Totally, it definitely seems a little more sane. All right, lots of very pessimistic intro to this episode, talking about how much stress, but maybe there's a way out. Maybe there are policy moves that could actually address some of this. But to sort of understand more why housing is such a source of stress and all of this that we're talking about, we are going to be speaking to Daryl Fairweather. She is the chief economist at the real estate website, Redfin. She might have some ideas on how you can alleviate things or at least understand the roots of this tension. So Daryl, thank you so much for coming on Odd Lots.