Alex Tabarrok draws an interesting analogy between home vacancies and unemployment, pointing out that vacant homes are just unemployed resources. He also provides this chart:
Unlike human unemployment, this is a problem with a really easy fix. It’s actually a fix that doesn’t require government spending, includes a bit of non-government Keynesian spending, and will help with our debt as well as lower global poverty. Right now, there are millions and millions of people who want to “employ” our “unemployed” housing stock: immigrants. Simply let more of them in and they will buy, rent, and live in these empty homes.
Can you imagine if a such a simple solution existed for any other resource underutilization problem that was having a huge negative impact on the wider economy, and not only were politicians not discussing it, but people aren’t demanding it. What is going on here?
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Thursday ~ July 29th, 2010 at 1:42 pm
dWj
This is true in almost exactly the way in which immigrants take the jobs of those already here; over time scales where the market is efficient, it does no such thing, insofar as the increase in demand or supply may change prices and increases quantities, but won’t affect surpluses or shortages. In the very short term, the partial equilibrium thinking is likely to work better; that blip up from 9% seems likely to be a short-term, frictional phenomenon that could be ameliorated by immigration. The secular move from 6% to almost 9% looks like a change in the “natural rate” of unemployment of houses, and I’d be curious to know why that’s increased, but I doubt it can be reduced by increasing the number of people demanding houses.
Thursday ~ July 29th, 2010 at 1:55 pm
jazzbumpa
That would be fine if “unemployed” housing existed in a vacuum.
But with U6 at 16%, I think you’re missing something else that’s rather important.
Not to mention that the houses are vacant because the former mortgage holders defaulted because they don’t have jobs.
An don’t go all “lump of labor” on me. There are five applicants for every opening.
(Shaking head, mumbling)
JzB
Thursday ~ July 29th, 2010 at 2:00 pm
jazzbumpa
Even more importantly, your reasoning is exactly backwards.
Vacant housing is an effect not a cause.
(sigh)
JzB
Friday ~ July 30th, 2010 at 1:25 pm
jazzbumpa
Upon further review, there are other fundamental errors.
Artificially increasing demand, as you propose, would make sense if there were an oversupply. If that is a component at all, it is minor.
The real root cause is a market breakdown. A) potential buyers (or recent mortgage holders) cannot afford the current price structure – which means price stickiness is not allowing supply and demand to equate.
http://patrick.net/housing/crash.html
B) the housing market relies on banks as financial intermediaries. But, as John Makin of the AEI recently pointed out:
In fact, banks have virtually ceased to function as financial intermediaries since 2008, preferring to use the zero cost of money provided by the Fed to finance purchases of Treasury securities instead of supplying loans to households and small businesses.
http://www.aei.org/outlook/100971
So your hypothetical immigrants wouldn’t be able to afford the houses, either. Meanwhile, there are plenty of formerly home-resident Americans either on the street, or living in mom’s spare room. And, currently, some immigrants live a dozen or more to a single dwelling.
Not to mention that a solution based on a huge influx of new workers, while U6 is over 16% is absurd on its face.
Please say you’re japing us again.
And, if I can indulge in a bit of ex post here, the big increases in vacancies came came during Reagan and Bush II. Rather like the poverty rate, which coincidentally also decreased under Clinton.
http://www.mindfully.org/Reform/2005/37-Million-US-Poverty1oct05.htm
Cheers!
JzB
Friday ~ July 30th, 2010 at 9:12 pm
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