The Prof G Pod with Scott Galloway
00:22:46 · Aziz Sunderji
[00:22:46] S3: Yeah. That... That's a really good point, and I think that's that's, like, 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 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. Like, maybe where they are trying to add density requires more of a a public infrastructure upgrade. So, like, the... One of the problems is that behind all of these challenges and, like, 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 is that a lot of a lot of people who don't want their neighborhoods to change have weaponized these 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 it... That's really muddied the waters where there are there are real concerns around this, but often it's just it's just weaponized by by people who don't want change in their neighborhoods.
00:23:52 · Scott Galloway
[00:23:52] S1: 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. 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 for, 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 we can think of. A couple I've heard, manufactured houses that basically on-site 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 gonna 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 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 nontraditional ideas that you've heard of that you you think are interesting we should we should consider? I'll start with you, Kyla.
00:25:38 · Kyla Scanlon
[00:25:38] S2: Yeah. I mean, I... So to the point about, you know, in The UK that there's two spare bedrooms empty, you know, boomers do own most of the three to four bedroom homes in The US. They own about 30% versus millennials with kids own about 15%. I think that's a stat from Redfin. And I think that there could be policies where we help boomers downsize. Like, you know, my... I think a lot of people have a big house that they've held onto. Their kids are out of the nest, and they don't wanna move because it's a family house. They can't afford to move because of the high rates. And so I think there's a way where we could help boomers refinance into a a smaller house and then help people with children move into the... Or whoever it may be into these bigger homes. That's not necessarily a nontraditional policy, but I I think that these people being stuck, these sort of golden handcuffs with housing, is definitely one of the biggest problems. And when you talk to a lot of older folks, like, I wrote this New York Times piece, and a lot of the comments were, like, I can't afford to move. I'd love to move. I hate my house, and I'd love to have a younger person live in it in it. And so I think policies around that, like, how do we help people get out of the house could be really helpful.
00:26:43 · Aziz Sunderji
[00:26:43] S3: Yeah. So I think part of the problem that's overlooked is that the people who build... The companies that build housing need to achieve certain returns. So if you look at Austin, for example, we had like, you know, a boom really across the Sunbelt of apartment building. And so why why did that happen? Does that kind of lead the way forward? Is that a solution for the country? Well, I think these builders were responding to, one, rock bottom interest rates during the pandemic. And then two, the fact that these rents across the Sunbelt were were soaring. So, like, there's a lot of focus on how Sunbelt rents have come down because of all this building, and that's true. But that building was unlocked firstly by zoning. You can't build where it's illegal. But secondly, by these conditions where interest rates were low, but rents were really, really high, and that sucked in all this development. And that led to today, where rents are much lower. So, you know... And again, if you look at what's happening in Austin today, these builders have pulled back now at these lower rents. You know, rents have fallen a ton, like, you know, 2021% in real terms in places like Austin. That's great for renters for now, but it also means that builders are pulling back. Cause they're like, I'm not gonna make any money in this market anymore. And what I'm worried about is that it's gonna take higher rents again in places like Austin for builders to come back to the market. And so it kind of speaks to the problem that builders need to make a return. And I think that we need to find ways to lower that return that they need. That's a major lever on affordability in a lasting way. So for example, Fannie Mae, Freddie Mac, they're huge players in the residential mortgage market. They, you know, they buy up. They securitize residential mortgages. They're not very active in the market for for loans for for constructing apartment buildings. And they very well could be. If they got into that market and provided cheaper financing, the government is able to finance cheaply, much more cheaply than the private sector, you could lower the the rates of return that builders need and you could have building at lower rates of rent growth.
00:28:40 · Scott Galloway, Aziz Sunderji
[00:28:40] S1: But at the end of the day, that's that's a subsidy. It might be the most efficient one, but it's a subsidy to encourage building, right? [00:28:45] S3: It is a subsidy, but it's a relatively good one. You know, all a lot of the measures that we talk about are subsidies. They all have leakages. They all they all they're all bad. They all have downsides in various ways. But this one less bad. The incidence of this subsidy falls in a way that it actually gets better results than many other approaches. [00:29:04] S1: So on the show we talk a lot about young people and relationships. And specifically how hard it's become for them to hit a milestone or the milestones that the parents took for granted. Finding a partner, a home, a family. And housing sort of sits at the middle of that. Eighty percent of married adults own a home versus forty eight percent of never married adults in 2021 data. Among first time buyers, 50% are married couples, 25% single women, 11% unmarried couples, 10% single men. There are now more single women who own homes than single men. How does housing, well, the question I would have, and it's a genuine question, not a comment. What came first? A lack of relationships or formation of relationships or the fact that people can't buy homes, which creates another barrier to forming a long lasting relationship. Any thoughts on the connection between housing and relationships? Aziz, I'll start with you.
00:30:01 · Aziz Sunderji
[00:30:01] S3: Yeah. So I think it goes both ways. If you look at people coupling us less than they did historically or doing that at older ages, if you look at the drop in fertility, that's happening all over the world. It's happening in all kinds of places, even those where home prices have not gone up that much. So there... There's something there that is distinct from housing. But I think in a place like The US, those two issues are are really are really tangled up. As I was saying earlier, I, you know, I did some work trying to trace, you know, where is it going wrong for young people? Like, if you look at how many young people at the age of 30 own their homes versus baby boomers when they were 30, that's like an 18 percentage point gap between the two. And I was trying to try to trace out, like, where does that go wrong? Is it, you know, if you think about the different steps you have to... The hoops you have to jump through to get to owning your own place, you're you're living with your mom and dad or with roommates. You gotta move out, get your own place. You might get married along the way, and then you might buy a home. And the big leakages, that that 18 percentage point gap between boomers and millennials at age 30 in terms of homeownership, a ton of it is coming just from kids not even moving out of their parents' home. So, like, a third of millennials at age 30 live with their parents. The number for boomers was 19%. And then even contingent on moving out, marriage rates are much lower. If you look at the number of, millennials who... There's the share who are in their own home and married, they actually own homes at a rate that's not that much lower than boomers did. But this leakage is happening happening much earlier. And, I think part of it is cultural. People are doing all this stuff later in life. The good news is that by age 40, that gap shrinks. That 18 percentage point gap drops to eight percentage points. So it does get better over time. And part of this is just, you know, you know, delays in life. But also part of it certainly probably is that, you know, culture has changed and housing is more expensive. And so even just getting out of your parents' home, getting out