Usually, the issue of real estate supply is not included in government agendas. The technocracy tends to face the problem from a demand standpoint, leading the US government to subsidize interest rates for buyers (by securing them) or increasing the supply of social housing, which is insufficient considering the scope of the problem. The solution lies within the private sector; by letting it do its job and build new homes. And to do so, it needs space, either to grow vertically through the removal of caps on construction, re-zoning or allowing higher buildings; or through horizontal expansion by freeing up new areas for construction.
Big cities are where young people want to live because that is where the best jobs and opportunities are. The 1980s and 1990s, a time when people wanted to live in the suburbs, are over; the new generations want to live in urban centers and this is where there needs to be a greater supply of housing. The revival of urban centers, congested highways, and the fact that couples have fewer children at a later stage in life leads young people to choose to live in urban centers where there is greater cultural and social activity. If only three cities –New York, San Francisco and San Jose– loosened their building restrictions, the American GDP could rise 4%, according to one study. (29) Globally, the impact could be similar thanks to an increase in the available income of young people and the expansion of business-friendly environments.
Although young people, in general, prefer city centers, in the post-pandemic scenario, two main factors will reinvigorate the suburbs. On one hand, the economy will not be the same, many people who shifted to working from home will never return to their physical offices. We will see a permanent trend toward remote work, which will allow people to live further away from the city centers. Others will take advantage of their online jobs to move further away for fear of a second pandemic. On the other hand, the widespread adoption –and acceptance– of autonomous vehicles (i.e., self-driving cars), which will take place during this decade, will have deep implications for the transformation in mobility and transportation. These vehicles are already a part of our reality, and it is just a matter of regulating them before they start roaming the streets. This will make it easier to live farther from the city center, allowing people to use their commute to do other activities.
The impact of the housing crisis on the economy, society, and politics is significant. Its main effects include: deeper inequality due to lower available income, high levels of mortgage debt, young people living with their parents for more years, and the resulting unhappiness contributing to the election of populist governments. Many analysts believe that what is truly happening in Hong Kong –aside from its citizens’ legitimate claims of the infringement on their rights against the Chinese government– is a profound unhappiness due to the astronomic cost of housing in the city. (30) Other studies speak of a correlation between the rate of homelessness and the increase in housing prices, an issue that strongly affects cities like San Francisco, New York, and Los Angeles. (31)
If a higher supply of properties could allow us to return to a relationship between the cost of housing and income similar to the 1980s, this would unlock a huge mass of income currently spent on mortgages and rent, which would notably increase the available income of the middle classes. Supply, supply, and more supply of real estate! Re-zoning, less regulation, and better transport are the keys to tackling the unhappiness of young people, low economic growth, and excessive family mortgage debt.
THE COST OF HEALTH AND HABITS
In the inaugural address of his second term in office, President Abraham Lincoln told the crowd in front of the Capitol that the government would provide medical care to those wounded in the civil war “to bind up the nation’s wounds; to care for him who shall have borne the battle, and for his widow, and his orphan.” (32) Lincoln passed a bill that established what became known as Freedmen’s Bureau to assist the wounded during the Civil War, their families, and the neglected. The program consisted of 40 hospitals that employed 120 doctors who provided free medical care to more than 1 million former slaves. At the time, it was one of the largest public healthcare programs in the world. (33)
One and a half centuries later, now a much richer country, things are entirely different. In spite of Obama’s 2010 healthcare reform and having some of the best hospitals in the world, it is the only large, developed country without universal healthcare. This is so extreme that 530,000 families declare bankruptcy every year because they cannot pay their medical bills, which represents 66.5% of total bankruptcies, (34) A low-income individual without health coverage who has cancer or needs a transplant may have to face the decision of losing their house and all their assets in order to pay the cost of their treatment.
Michael Flor is a 70-year-old American who was admitted to Seattle’s Swedish Medical Center on March 4, 2020, with coronavirus. When he was discharged two months later, he received a 181-page bill for a total of over $1 million. (35) The country spends 17.5% of its GDP on healthcare, as opposed to 10% spent by most developed countries with universal health coverage. Many factors come into play here: high rates of obesity and related diseases, high cost of medication, an excess of unnecessary tests, lack of competition between healthcare companies, and overmedication.
The average American pays seven times more for medication than the Japanese, and four times more than other developed countries. (36) This difference is absurd when you consider that we are talking about the exact same medication. Many diabetics who live close to the Canadian border cross over to buy insulin because it costs 10 times less. (37) Laboratories argue that their high prices are due to the high cost of research and development (R&D) but the main companies have quarterly earnings twice what they spend on R&D. (38) The government is the main culprit behind the consolidation of these high prices, given that programs like Medicare and Medicaid (state healthcare coverage for adults and children) are responsible for 40% of total spending on prescription medication. (39) Granting universal healthcare coverage to all Americans would cost $2.8 trillion annually, which would put the government in a complex fiscal situation. First, they must tackle the issue of costs through a medium-term plan before expanding the system to all citizens. (40)
Experts recommend greater price transparency, more competition between healthcare providers from different states, reduction of administrative costs, improved preventative care, lowering the malpractice litigation culture, taxing sugary products, healthy diet and exercise campaigns, and reducing the cost of medication. On the other hand, we will later see how this sector is protected by powerful lobbyists who work the technocratic apparatus of states and legislators to ensure bills that would help reduce costs aren’t passed.
The cost of healthcare plays a central role in the issue of inequality in the United States. In the following graphic, we see the percentage of income that Americans spend on taxes. When you include the health insurance payments made by workers to their employers, the tax rate of middle-class Americans is practically twice that of the 400 people with the country’s highest incomes. (41)
TOTAL TAX RATES
The issue of healthcare has a strong cultural component. A significant part of the increase in healthcare spending is associated with chronic diseases, many of which are related to obesity such as type 2 diabetes and high blood pressure. (42) Obesity grew from 30% in 2000 to 42% in 2018, (43) affecting African Americans and Hispanics in a higher proportion.
Many families, especially those with fewer resources, have a high consumption of high-sugar products, soda, fast food, processed food, sodium-rich products, and diets without any fruits or vegetables. On top of that, they do very little exercise and in many cases consume excessive amounts of tobacco