How Measurement Choices Shape the Housing Debate—and the Charts in the President’s Economic Report

By Norbert J. Michel and Jerome Famularo of Cato. Excerpts:

"The Council of Economic Advisers’ 2026 Economic Report of the President tells a familiar story: The American dream of homeownership is slipping away. Chapter 6, in particular, leans heavily on a series of charts meant to show that housing has become less affordable, less attainable, and more distorted by regulation.

While it is true that regulation adds unnecessary costs and distortions to the housing market, much of this “unaffordability” narrative depends on how the data are presented. Change the framing, even slightly, and the story starts to look very different.

Take the report’s central claim that housing has become dramatically less affordable because home prices have outpaced income. That conclusion rests on a simple comparison of real house prices to real median income. Among other problems, this comparison ignores the fact that homes being built in recent years are not the same as those built in years past: They have more standard features and, most notably, are larger in size on average."

"A similar framing issue shows up in the report’s treatment of homeownership rates. By comparing 2000 to 2023, the report suggests a worrying decline, especially for younger Americans. But 2000 was not just any year—it had higher than average homeownership rates relative to other years.

Zoom out, and the trend looks much less alarming. For instance, the homeownership rate for Americans under age 35 is roughly in line with where it was throughout much of the 1990s. The overall rate shows a similar pattern. You can make the numbers look bad by picking convenient endpoints, but that doesn’t tell you much about the underlying trend (Figure 2)." 

 

"More broadly, federal policymakers are overly concerned with so-called housing shortages. 

In reality, as communities grow and people earn higher incomes, higher demand for housing can put upward pressure on prices. (Even if that demand comes mainly from “rich” people, it can put upward pressure on average housing prices.) Viewing this kind of price increase as a shortage or market failure is counterproductive. Over time, this demand tends to be met, keeping up with the needs of a growing population.

Either way, the supply of housing is not the sole determinant of house prices. Ignoring this lesson and implementing policies that merely focus on boosting supply (especially through federal subsidies, grants, tax credits, etc.) can lead to depressed home values and oversupply, just as implementing demand-boosting policies can distort markets. The best thing for the federal government to do is to stop interfering with the market.

Of course, certain policies make it more difficult and expensive for builders to meet new demand, and state and local officials should implement the best policies for their local growth conditions. To be clear, supply constraints and regulations matter. Zoning rules, permitting delays, and other restrictions make housing more costly. However, if rising housing costs partly reflect larger homes and higher incomes, then policies aimed at forcing down prices (such as mass deportations and bans on institutional investors) could have unintended consequences. 

Sure enough, recent research from the San Francisco Fed suggests that faster income growth, not supply constraints, explains much of the differences in house price trajectories across metro areas. This finding makes sense because, for the past few decades, Americans have been earning higher incomes. All else equal, this fact should help explain higher housing prices.

Ultimately, policymakers should be wary of solutions built on a misleading diagnosis. In housing, as in economics more broadly, how you measure the problem often determines how poorly you solve it."

ICE has not improved U.S. labor markets

From Tyler Cowen.

"We provide the first causal, national empirical analysis of the labor market impacts of heightened immigration enforcement during the second Trump administration. Enforcement increased everywhere, but, we take advantage of the fact that the increases have been uneven across geographic areas to classify areas as treated or control and then implement an event study and difference-in-differences design. Areas that experienced particularly large increases in the number of arrests also experienced a decrease in work among likely undocumented immigrants who remain in the U.S., compared to areas with smaller increases in arrests. We find no evidence of positive spillover effects to U.S.-born workers and U.S.-born workers who work in immigrant-heavy sectors are harmed.

That is from a new NBER working paper by Elizabeth Cox & Chloe N. East."

The "Great Awokening" Had a Strong Upper-Class Accent

From Marco M. Aviña.

Abstract 

"Recent scholarship hails rising racial liberalism among white liberals as a racial reckoning and even a “Great Awokening.” I find that affluent white liberals led these changes. I develop a status-signaling account in which members of this group, embedded in dense, politically homogeneous social environments, face competing reputational and gatekeeping incentives to express alignment with racial equality in principle but not in policy. I leverage the murder of George Floyd and the ensuing Black Lives Matter protests as a focusing event when anti-racist norms surged. Using regression-discontinuity-in-time and event-study designs on national public opinion surveys and local public meeting transcripts, I show that post-Floyd movement was concentrated among high-income white liberals, centered on symbolic engagement rather than material policy commitments—whether universalistic or group-targeted—and short-lived. Finally, I provide evidence consistent with this account: post-Floyd, an income gap emerges in implicit bias testing, a form of self-monitoring, but not in implicit bias scores, which are less amenable to impression management. These findings complicate narratives of racial progress and recast the “Great Awokening” as recognitional politics without commensurate redistribution, consistent with concerns about elite capture in identity politics."

Capitalism does a far better job than socialism of feeding people.

A tweet from Chris Freiman. 

 

Lessons for Anna Paulina Luna (on farm policy)

Why would a Florida Republican stand up for an overbearing California farm rule?

By Kimberley A. Strassel. Excerpt:

"Where to start unpacking? Several GOP offices tried to do just that in the forum. One office began by (politely) setting Ms. Luna’s office straight on basic facts: Under this fix, California can still regulate its own agricultural practices. Also, the Supreme Court in its Proposition 12 decision said several times that Congress has “considerable power to regulate interstate commerce and preempt contrary state laws.”

That office then patiently provided a refresher in Federalism 101, explaining why California’s initiative is the opposite of states’ rights, since it doesn’t concern itself with only California. It imposes its mandate on 49 other states, none of whose citizens had any vote, or any recourse, through California’s process. They might have added that California has been using this trick—flexing its markets to impose national rule, under the perversion of “states’ rights”—with increasing boldness for decades. Republicans are supposed to understand such basic stuff.

The same office also tried to impart basic economics. It noted that the producers most able to swallow California’s mandate costs are giant concerns, like “Chinese-owned Smithfield.” Those hardest hit are U.S. farms and ranches, which are being pushed out of the market. It provided Ms. Luna’s office with U.S. Department of Agriculture data, estimating that the cost for pork producers of complying is about $3,500 to $4,500 a sow, one reason 12% of small pork operations have exited since Proposition 12. It further noted the demonstrated rise in consumer prices (especially in California) since the initiative’s passage.

Ms. Luna’s staffer said he “appreciated” the “viewpoints”—before banging on anew about “state authority.” California voters have a right to decide what “consumer” products are sold in their state. They should have “choice.” Another catchy word, if again totally backward, since California eliminated everyone’s “choice”—and unnecessarily. As one GOP office noted, there is an easier, freer, less costly answer. California consumers can exercise choice via what they buy. Under Congress’s new fix, morally superior Californians are free to choose to buy only costly, grass-fed California-produced chops, leaving on the shelves all the cheaper, yummier pork for the hoi polloi."

Charges of a Covid Coverup

The Morens indictment reveals an effort to hide facts about the U.S. role

WSJ editorial. Excerpts:

"the facts in the indictment, which say he [David Morens] intentionally sought to obfuscate the NIH role in funding the nonprofit EcoHealth Alliance, which may have contributed to the virus leaking from a Chinese lab."

"The NIH last decade provided some $8 million in grants to EcoHealth, some of which funded the Wuhan Institute of Virology’s gain-of-function virus experiments."

"Between February and March 2020, Dr. Morens and a co-conspirator—whom press reports say is Mr. Daszak—co-authored articles arguing that the virus most likely emerged from the wild."

"On June 17, 2021, the indictment says, he warned Mr. Daszak and “others” that he had received a document production request by five Senators investigating the virus’s origins. Dr. Morens assured his correspondents that he had “retained very few documents on these matters.” Public officials are required by federal law and instructed to retain all such documents." 

You Can’t Trust ‘Climate Economics’

Governments, banks and other institutions have based policies on models unconnected to reality

By Roger Pielke Jr. Excerpts:

"Nature in December retracted one of the most influential climate economics papers of the past decade. The paper, by Maximilian Kotz, Anders Levermann and Leonie Wenz, claimed that unmitigated climate change would cost the global economy $38 trillion a year (in 2005 international dollars) by midcentury." 

"The authors acknowledged that its errors were “too substantial” for a correction."

"The retraction, however, isn’t a one-off. It revealed a crack that runs much deeper into the foundation of climate research."

"Can researchers actually measure how climate affects the economy from the historical record?"

"no"

"Federal agencies . . . estimate the “social cost of carbon” when assessing the costs and benefits of proposed environmental policies. This framework has shaped regulations governing appliance standards, pipeline permitting and vehicle emissions."

"the method underlying this subfield of economics can’t do what researchers claim it can. The problem . . . is that the statistical procedure strips out nearly everything that would allow researchers to identify a climate signal, then mistakes the residual noise for that signal. Lumping together countries with similar average temperatures but entirely different institutions, histories and natural resources and then calculating a single damage relationship for all of them doesn’t work; it describes the average but fails to describe a single real place on earth accurately."

"there’s no way out of this methodological predicament; the future effects of climate change are irreducibly uncertain"

"researchers built many of their climate projections on the back of a hypothetical standardized scenario called Representative Concentration Pathway 8.5—a vision of the future which required coal consumption to quintuple by 2100 based on assumptions about future energy use. Those assumptions have already diverged sharply from actual energy trends, and we know today that the scenario is implausibly extreme."

"many scientists continue to emphasize RCP8.5 in climate research"

"Projections of flood damage, heat mortality, agricultural disruption and wildfire risk have rested on an implausible baseline that describes an imaginary, modeled future."

"An insurance company modified a hurricane loss data set by starting from my team’s carefully collected data. Many of those modifications have no documentation and no basis in research."

"papers that have used the corrupted data set remain in the literature today."