Weekend reading links

1. Mouth-watering prospects for Wall Street in 2026.

SpaceX is hoping to be valued at $800bn in its latest private share sale, while Anthropic is targeting $350bn. OpenAI’s most recent share sale was at $500bn. Given that anyone investing now would be hoping for another big lift before IPO day, the eventual numbers, if all goes to plan, would be much larger still. Any one of these would put the previous record for a tech IPO — the valuation of more than $230bn Alibaba achieved in its 2014 debut — in the shade.

2. Barring Tesla, at PE multiples of 20-30, the stocks leading the AI bubble do not look comparable to their peers in earlier bubbles. 

3. As the tech bros pursue self-governing enclaves, Prospera in Honduras offers a cautionary tale. 

Arguably the most evolved experiment in alternative governance is Próspera, a gated private community on a Honduran island run by a Delaware-based company, where close to 1,000 residents can enjoy co-working spaces, a beach resort and a golf course. As a for-profit semi-autonomous zone, Próspera has low taxes, its own labour rules and an arbitration system run by retired Arizona judges who hear its cases online. Bitcoin is one of the currencies of choice. Its founder, Venezuelan-born wealth fund manager Erick Brimen, describes his work as “an evolved way to drive socio-economic development” through public-private partnerships... Próspera’s hands-off approach to medical regulation has made it a mecca for people seeking experimental treatments as the field of longevity — or trying to live forever — becomes more popular in Silicon Valley circles...

Critics argue that the special economic zones legislation that allowed for Próspera to be established was championed by a corrupt former government whose leader, Juan Orlando Hernández Alvarado, has just been released from prison, where he was serving a sentence for narco-trafficking and weapons crimes, following a pardon from Trump. The government at time of writing (an election took place on November 30) since tried to repeal its charter on the grounds that, as ruled by the country’s supreme court, self-governing special economic zones are unconstitutional. Próspera is now suing the government for $11bn — just under a third of the country’s GDP — for lost future profits, through an international arbitration process... Cornell University historian Raymond Craib, author of Adventure Capitalism: A History of Libertarian Exit, from the Era of Decolonization to the Digital Age, says it offers a warning to elected politicians about the dangers of carving out semi-autonomous zones: “Precisely what Próspera is doing [suing Honduras] is precisely the argument governments are going to make about why you should not be editing your constitution to allow for this.”

4. John Burn-Murdoch has a great post arguing that the rising cost of services in developed economies may not mean that household consumption expenditures and living standards are declining. 

Add together the increased portion of incomes accounted for by healthcare (up by 3 percentage points over recent decades), childcare (up 2 points), housing (up 4 points) and food (up 1 point in recent years), and total spending on these unavoidable costs has climbed from just over a third of middle class disposable income to half of the total. But this squeeze from essentials has not led to an increase in the share of income American households spend in total across all categories, which is broadly in line with the historical average — even slightly down on where it was when all of these things were cheaper in real terms. This has been made possible primarily by dramatic falls in the price of clothes, electronics, household appliances and other mass-produced tradeable goods, which have more than offset the rise in essential services...

Rather than the increasing burden of essential costs suggesting living standards are being eroded, if we take a step back, it’s an indication that people across society are becoming more prosperous... William Baumol’s 1967 famous observation, as countries develop economically, the same productivity growth that drives down the cost of tradeable goods causes the cost of in-person services to balloon. Wages in sectors like healthcare and education that require intensive face-to-face labour, and have slow (if any) productivity growth, are forced upwards in order to attract workers who would otherwise opt for high-paying work in more productive sectors. The result is that even if people keep consuming the exact same basket of goods and services, as living standards in their country increase they will find more and more of their spending is going on essential services.

5.  Water metro facts.

A 75km elevated metro network could cost ₹15,000 crore. But a water metro of the same length would cost roughly ₹1,500 crore... Rail metros require continuous elevated corridors, viaducts, stations, land acquisition and traffic diversions through dense urban areas. Water metros, by contrast, rely on existing waterways, building only terminals, pontoons, control systems and a fleet of electric boats.

On Kochi metro

In Kochi, the water metro is priced to encourage regular use, with single-journey fares typically between ₹20 and ₹40 depending on distance, and monthly passes at ₹600. What makes it especially convenient is that passengers can use the same Kochi1 smart card, issued by KMRL, to access both boats and trains seamlessly... Kochi needs 53 water metro boats for its complete network but currently has only 20 operational vessels. Manufacturing electric-hybrid boats is a specialized, time-consuming process with limited global suppliers... With only 20 boats operating across six of the planned 15 routes, demand is concentrated on tourist-facing corridors... More than 80% of commuters are tourists... The shortfall in boats, and the resulting partial network, means many daily-use routes for local residents are still not operational.

Mumbai is seeking to emulate Kochi to develop a water metro system.

Amchi Mumbai Water Metro, covering nearly 200 nautical miles with more than 30 routes, represents a very different ambition. The planned routes are along the city’s western waterfront and eastern creeks, linking places such as Versova, Bandra, Wadala, Vashi, Airoli, Kalyan and even the upcoming Navi Mumbai airport.

6. For all the 200-plus PE multiples of Tesla riding on robotaxi prospects, the Chinese autonomous driving industry has a reality check. 

The recent listings of Pony.ai and WeRide in Hong Kong... shares in both have fallen since their November debuts, even as they pledged to use the funds towards scaling their fleets and advancing Level 4 autonomous driving — technology capable of operating without human monitoring or intervention... That is surprising given the businesses are already showing signs of viability. They have deployed more than 2,000 autonomous vehicles across 10 cities in China and have recorded millions of paid user rides. Many cities now allow fully driverless service. One explanation is that for Chinese investors, autonomous driving is still seen as a more costly hardware race than a software breakthrough.

7. Ed Luce sums up Trump's engagement with China.

On the grounds of never interrupting your enemy while he is making a mistake, Xi Jinping is 2025’s winner. The year’s hinge moment was Donald Trump’s cave-in to Xi in South Korea in late October. Trump’s trade war climbdown marked a new epoch. After mulling decoupling for years, talk of US-China divorce was suspended. Even so-called de-risking is now in question. Trump awarded their meeting a 12 out of 10. China took 10 of those points. Xi has profited simply by waiting for strategic gifts to come his way. Rarely has the inverted motto, “don’t just do something, stand there,” been more apt. Last week, Trump added to Xi’s windfall by approving Nvidia’s sale of H200 chips, albeit with a 25 per cent export tariff... Trump just handed China his biggest freebie so far. Advanced semiconductors are the one key area where China is still lagging behind the US. Trump is helping to close that gap.

8. Very good article by Ananth Narayan on India's currency management challenge. 

From FY2017-18 to FY2021-22, average annualised daily volatility was 5.5 per cent, close to the 6 per cent annualised daily volatility of the DXY index (which tracks the US dollar against a basket of six major currencies). During this period, net investment capital flows into India averaged 1.7 per cent of GDP. In contrast, between FY2022-23 and FY2024-25, annualised USD/INR volatility dropped to 3.3 per cent, even as DXY volatility rose to 7.4 per cent. USD/INR became significantly less volatile than other major currency pairs. Media reports attributed this to active RBI intervention that prevented INR depreciation, while dousing volatility. Notably, capital flows dropped to 0.6 per cent of GDP during this three-year period, pointing to the possible impact and constraint of the trilemma.

9. French President Emmanuel Macron makes the clearest signal towards a nuanced trade and financial market protectionism.

We should not be ashamed of a “European preference” as long as it means supporting strategic production — in automotive, energy, healthcare and tech — within our own borders. Protection against unfair competition is the foundation of resilience. We must not be naive: a credible protection strategy requires that we have the means to defend ourselves against those who break the rules. That is why we have a range of trade protection tools, including tariffs and anti-coercion measures. No one should be in any doubt about our willingness to use them. Second, in order to finance the investment we need, Europe must leverage its pool of around €30tn in savings. Each year €300bn is invested abroad. It is time we Europeans took the risk of investing in our own companies. Regulation simplification, securitisation and unified supervision will free much needed capital. Implementing the Savings and Investments Union will ensure European savings circulate freely to finance innovation and growth. Europe should also seek to reinforce the international role of the euro through the development of euro stablecoins and the introduction of a digital euro, as well as the creation of safe and liquid assets to finance defence and technologies.

He also invites Chinese investments into Europe but at certain terms.

China has long benefited from European FDI and co-operation, including on technology. The EU has invested close to €240bn in China while China has invested less than €65bn in the EU. Today, it leads in energy transition and clean mobility technologies, while Europe continues to lead in many service sectors. An optimal framework for our two regions is a co-operative one. The EU must stay open for China to invest in the sectors where it is a leader, provided the Chinese help generate employment and innovation and share technology.

This is a clear direction for engagement between Europe and China.

During my last trip to China, I made it clear that either we rebalance economic relations co-operatively — engaging China, the US and the EU in a genuine partnership — or Europe will have no choice but to adopt more protectionist measures. I much prefer co-operation, but will argue for using the latter if need be.

10. India FDI facts

Our assessment shows that the average risk-adjusted return on FDI investment in India remains quite attractive. We have estimated returns on inward FDI as the ratio of FDI equity income receipts to the total inward FDI stock, with a time lag (inspired by OECD and Eurostat methodologies). The risk-adjusted return has been calculated as the ratio of the 10-year average return to its standard deviation. Our assessment indicates that the average risk-adjusted return on FDI investment in India over the past 10 years is around 7.3 per cent, ranking second only to Indonesia (10.6 per cent). The risk-adjusted returns for other emerging economies are 6.6 per cent for Mexico, 4.5 per cent for South Africa, and 4.3 per cent for the Philippines, according to our assessment.

11. Good story in The Ken about how southern states are embracing a decentralised model of promoting ICT investments. 

Among the anchor cities in the four states, Visakhapatnam has a major competitive advantage. 

12. Western multinationals are finding ways to exit their China operations.

Global companies are seeking private equity partners in China to take on their local operations as they grapple with an increasingly competitive local market, a sluggish economy and volatile US-China relations. The owners of sports retailer Decathlon, ice cream brand Häagen-Dazs, coffee houses Peet’s and Costa, convenience store operator Lawson and GE HealthCare are all weighing options for their China operations, including selling parts or all of their businesses, said people familiar with their thinking. The rush to rethink China comes amid whiplashing relations with the US, the slowing of the world’s second-largest economy and the rise of fast-moving and better-adapted local rivals across a swath of industries.

13. Ruchir Sharma points to a deadly combination of over-valuation, over-ownership, over-investment, and over-leverage threatening the US economy. 

Households hold a record 52 per cent of their wealth in stocks, which is higher than the peak in 2000 and far above levels in the EU (30 per cent), Japan (20 per cent) and the UK (15 per cent). A closely related signal is overtrading. Over the past five years, the number of shares traded each day in the US has risen by 60 per cent to around 18bn. The retail share of short-dated stock options has grown from a third to more than half... Counting just the Magnificent Seven, AI spending has more than doubled since 2023 to $380bn this year and is on track to exceed $660bn by 2030. The potential returns are far from clear... the Magnificent Seven are not the cash machines they were even a year ago. Amazon, Meta and Microsoft are now net debtors, up from one in 2023. Their profits continue to rise but with so much flowing into AI, only Google and Nvidia still generate piles of cash.

Weekend reading links

1. Crony capitalism in America.

The Saudi Crown Prince Mohammed bin Salman, for example, is engaging in sensitive national security conversations with President Donald Trump, even as the Trump family real estate business is in talks with the Saudis about a big construction project. Trump’s artificial intelligence and crypto tsar, David Sacks, has hundreds of tech investments poised to benefit from policies Trump is pushing... While the Trump family’s tentacles have worked their way into many industries, from finance and technology to real estate and defence, digital assets are perhaps the most obvious place to look for conflicts of interest that could infect the larger economy. Consider one complicated example involving the stablecoin of the Trump family crypto venture World Liberty Financial, which was used by Abu Dhabi’s MGX in a $2bn transaction linked to Binance. That company was co-founded by Changpeng Zhao, who received a presidential pardon in late October, after previously pleading guilty to a criminal charge relating to lax money laundering controls. Then there are Trump supporters like the Winklevoss brothers, whose Gemini platform was charged with the unregistered sale of assets during the Biden administration, only to settle with the Securities and Exchange Commission this year. The Winklevoss twins are big Republican donors (they’ve even chipped in for the construction of a new White House ballroom) and, not surprisingly, their platform is embedding itself deeper and more quickly into the US crypto infrastructure than many competitors. This autumn, Gemini announced a Nasdaq partnership.

2. As President Trump fights a weak economy, the largest share of Americans in more than 50 years is saying that the government is mishandling the economy. 

The signature economic achievement of Trump 2.0, the One Big Beautiful Bill, is contributing to the emerging K-shaped economic growth trends. 

3. America's K-shaped economy in a graph showing the divergence between the S&P 500 and the University of Michigan Consumer Survey trends. (HT: Adam Tooze)

A K shaped economy describes a post-crisis recovery where different parts of the economy and society are performing at sharply diverging rates, forming the two arms of the letter “K.”:

• The upper arm (going up): Sectors, companies, assets, and people that benefit from the recovery and, in many cases, are wealthier than before the pandemic. This includes investors in technology stocks, big tech companies, the luxury sectors, high-income professionals, and asset owners.
• The lower arm (going down): Sectors, small businesses, and people that continue to decline or stagnate even as the overall economy appears to improve. Examples include: the hospitality and travel industries, many lower-priced retail outlets, low-wage service workers, small businesses, and many middle-class and lower-income households.

4. China's trade surplus hits $1 trillion in just 11 months.

 

5. Important point about the Indigo fiasco.

In operational terms, the new flight duty time limitation (FDTL) rules were the most consequential development for any domestic airline heading into 2025. Yet, as The Indian Express has reported, the airline’s Annual Reports for 2023-24 and 2024-25 did not mention the new rules at all, nor did they figure in the airline’s Risk Management Report. This implies that the airline’s management did not anticipate operational challenges arising from these new rules and did not prepare for them adequately, which raises questions about its basic executive capabilities.

6. Indian equity market facts

India has been the worst-performing major equity market in the world. Flat in US dollar (USD) terms, we have been left behind by global emerging-market (EM) indices, which are up 29 per cent in USD as of end-November 2025. This is the worst relative performance for India since 1993. India has now dropped to third place in terms of EM weighting and is just about half the weight of China... India has also been shunned by foreigners, with foreign portfolio investors (FPIs) selling over $18 billion in 2025 year-to-date, marking five years of zero flows. The saving grace has been domestic flows, which continue to power ahead, with $80 billion invested by domestic institutional investors to date and the number of investors crossing 135 million... Despite 15 months of no returns, mutual fund retail flows continue to track about $3 billion per month.

7. Mexico imposes tariffs of up to 50% on about 1400 goods imported from China and other Asian countries with which Mexico has no trade deal. Chinese cars will be the hardest hit. Mexican imports from China have ballooned by 75% since 2020 to $130 bn in 2024. 

8. Oren Cass writes that the Trump administration's greatest challenge is Trump himself.

Is China an adversary or a partner? Sometimes, US policy prohibits the sale of AI chips to China and pushes allies to keep China out of their markets. Other times, Trump promotes the sale of more powerful chips, or muses about Chinese firms setting up shop stateside. Are cheap foreign workers good for the US economy or bad? Sometimes the administration is forcing them out, other times trying to bring more in. Trump’s repeated suggestion to admit 600,000 Chinese students to the same US higher education system he has attacked is a particular head-scratcher. Is industrial policy to rebuild critical domestic production capacity wise? Sometimes the president trashes the Chips Act, other times he celebrates its results and goes even further in his market interventions.

This graphic shows how all the bluster on China, its exports are now on similar tariff lines compared with those from other countries (HT: Adam Tooze). 

9. Striking graphic that is a pointer to why the US leads globally in innovation (HT: Adam Tooze)

10. Important example of how preemptive anti-trust actions have valuable innovation effects.

When Nvidia attempted to acquire Arm in 2020 — a deal that would have locked down the fundamental architecture of chips used for AI — the FTC sued to block it and the deal was abandoned. Because Arm remained independent, Google is now able to compete with Nvidia in the production of AI chips, using Arm’s technology to build its own processors.

11. Electrification in South Asia is a true development success to be celebrated, just as its failure in Africa is one to be deeply disturbed. 

12. Sobering tale of how BP and Shell terribly misread their industry trajectory and ended up betting prematurely on renewables. Both owed their positions to leadership, Bernard Looney and Ben Van Burden. The article charts how the former, assisted by McKinsey, forced through changes at BP.

The green revolution at BP began on February 12 2020, in Bernard Looney’s second week as chief executive. Looney, a charismatic BP lifer who had run the company’s oil and gas operations, embraced the energy transition with the zeal of a convert... Two former executives claim Looney had been working with consultants from McKinsey for months but had not shared the plan with the other 11 members of BP’s executive team before unveiling it. “It was a big bang approach,” one of them says... 

To consolidate control and prepare BP for disruption, Looney and McKinsey dismantled the company’s traditional “upstream” and “downstream” divisions, which explored and produced oil and gas and then refined, traded and sold it. Instead, there were 11 new business units, some of which left staff baffled. One new team was called “Cities and Regions” and its job was to imagine how urbanisation would change energy use and consult with cities on what opportunities there might be for BP to play a role. “It looked like a consulting job on a piece of paper rather than something that was really going to fly,” admits one former BP executive. Last year, BP reorganised again to get rid of the Cities and Regions unit and “reduce duplication”.

“You could see the mis-steps happening live. The degrees of change were just too fast,” says another. “Changing the CEO is one degree of change. Then the CEO changes the strategy overnight. Then he decimates anybody in divisions that he didn’t think were important.” Later in 2020, Looney set out more details. BP went beyond Shell, and any other oil company, in pledging to actually reduce the oil and gas it produced, with an initial target of a 40 per cent cut by 2030. “No other company followed, so either you are a prophet and others did not get it, or you are the lonely guy on top of a mountain,” observes the second executive. With McKinsey teams embedded across the organisation to offer rebuttals, and amid the chaos of the reorganisation, insiders say it was hard to speak out against the plan. “You could not have a dialogue about this being the wrong thing. If the numbers did not work, you would fit them,” the executive adds.

This is the reversal

Both companies increased their spending on green technology rapidly, to a peak in 2022 of nearly a third of overall investment, or $4.9bn, for BP, and nearly a fifth, or $4.3bn, for Shell. BP promised to spend a further $55bn to $65bn between 2023 and 2030... Today, Shell and BP have retreated to be more in line with their US rivals, though still with targets to have net zero emissions by 2050. The grand narrative of transformation has been discarded for renewed focus on shareholder returns. While the world continues to electrify, and to grow the share of solar and wind power generation, the two companies are now focusing on other parts of the transition, such as moving from heavy fuels with high emissions to gas and eventually biofuels and hydrogen. In the first nine months of this year, BP cut its spending on clean energy by 80 per cent compared with last year, to just $332mn. Shell says it is now “focused on disciplined capital allocation in our areas of competitive strength while driving improved returns”.

Graphical summary of China's rising trade surplus

1. Notwithstanding all the trade restrictions, China’s trade surplus continues to surge unabated, topping $ 1 trillion in just 11 months. It reached $1.08 trillion by November, with exports surpassing another record of $3.41 trillion. 

2. This is part of a post-pandemic trend of rising exports and declining imports, which has accelerated since 2023.

3. The prices of Chinese exports have declined since the beginning of 2023, driven by excess capacity accumulated and price wars, thereby driving export competitiveness and boosting exports. Stagnant domestic demand has further redirected production towards exports while also keeping imports down. 

4. Another signature of the export focus comes from the trends in sectors with under-performing domestic sales. In these sectors, exports have surged manifold since the pandemic. 

The ECB report from which the above graphics are taken writes, 

Excess capacity has led firms into price wars. This has eroded profit margins and discouraged spending in a deflationary environment with significant labour slack – prompting firms to redirect sales toward foreign markets. This shift reflects the “vent-for-surplus” theory of international trade, which posits that a demand-driven decline in domestic sales generates excess capacity that can be redirected abroad… To expand abroad, firms must gain competitiveness in foreign markets. They typically do so by reducing short-run marginal costs and prices, or by accepting narrower profit margins, and in some cases even losses. The “vent-for-surplus” theory helps explain recent trade patterns…

Since 2022 export volumes in sectors such as motor vehicles and steel have risen by about 75%, suggesting that firms have increasingly shifted sales to foreign markets. Domestic absorption of excess capacity through lower prices has been constrained by weak demand, as the housing downturn continues to weigh on consumer confidence. By contrast, in sectors with outperforming domestic sales growth, mainly related to technology goods, export volumes have largely moved in line with domestic sales, rising by about 30% since 2022. 

5. In general, the Chinese economy has been in a deflationary environment, with producer prices falling for 38 months now. 

6. While exports to the US have been declining, those to the rest of the world (RoW) have been rising. 

7. The Trump 2.0 restrictions appear to be especially effective across the board.

8. The decline in exports to the US has been more than offset by the rise in exports to RoW. 

It is most likely that there’s some re-routing of exports to the US through third countries, as evidenced by, for example, the surge in exports to Vietnam and Hong Kong. The extent of such rerouting remains to be seen. Further, in September, Thailand’s exports to the United States rose by 33 percent, Taiwan’s grew by 51 percent, and Singapore’s by 13 percent.

9. EVs, batteries, and solar panels are the major items where there has been a surge in Chinese exports between July and September this year compared with the same period last year, as reported in the China Customs data. 

10. The Chinese dominance is not limited to these frontier industries. It covers lower-value-added sectors, where other countries might be considered to have a comparative advantage. 

This surge in Chinese exports in these industries is likely to erode the fledgling manufacturing bases in these countries. It would also deprive them of any potential manufacturing opportunities arising from China's move up the value chain and vacating lower-value-added industries.

11. More evidence of the rerouting of exports to the US comes from trends in exports to Southeast Asia. The surplus with the region rose from $191 bn in all of 2024 to $245 bn in the first 11 months of 2025, pointing to likely trans-shipment. Similarly, China’s 11-month surplus with Africa is up $27bn over the full-year 2024 figures. 

12. Nothing symbolises the surge in Chinese exports in recent years more than cars, where China’s dominance of EV manufacturing has driven a $64 bn trade surplus in the first 10 months. 

The summary. Thanks to generous economy-wide subsidies, aggressive industrial policy, and intense competition between local governments, China has built up excessive domestic manufacturing capacities across sectors, which, coupled with weak domestic demand and the absence of meaningful domestic demand stimulation, leaves firms with no outlet other than exports. And the intense competition among firms has led to price wars and dumping in external markets. The result is a rise in geopolitical tensions and intensification of trade wars, and destruction of manufacturing bases in developing countries. 

Thoughts on affordable housing XIII

This is the latest in the series on affordable housing. Affordable housing supply is arguably one of the top policy challenges facing cities across the world. 

This graphic by John Burn-Murdoch is a good illustration. 

Here’s more evidence.

Home prices have risen more than 50 percent since the pandemic. About a third of Americans households now spend more than 30 percent of their income on housing. In 2014, the median age of a first-time home buyer was 31. In 2025, it was 40 — the highest on record.

Burn-Murdoch also points to research that links some of the commonly observed GenZ behaviours (like not making an effort or splurging on luxuries) to the housing affordability problem. 

In a pioneering study published last week, economists at the University of Chicago and Northwestern University used detailed data on the card transactions, wealth and attitudes of Americans to demonstrate that reduced work effort, increased leisure spending and investment in risky financial assets (including crypto) are all disproportionately common among young adults who face little to no realistic prospect of being able to afford a house. By contrast, Seung Hyeong Lee and Younggeun Yoo’s research finds that those for whom home ownership is a more realistic possibility in the medium term, or who have already attained it, take fewer risks and strive harder at work. 

I have extended their analysis to the UK and find a similar picture. Young British renters who have little hope of cobbling together a deposit are much more likely to take financial risks — with online betting, for example — than their contemporaries who are on or within reach of the housing ladder… Lee and Yoo use time series data and local house prices to show that the link between unaffordable housing and economic behaviour appears to be causal. Recent upticks in financial risk-taking, leisure spending and reduction in work effort respond to changing economic incentives. As housing affordability deteriorates, those who come to believe they are locked out of home ownership resort to a mixture of high-risk bets and what US economic commentator Demetri Kofinas calls “financial nihilism” — why strive and save when it won’t be enough to make it anyway? — while their better-placed counterparts tighten their belts.

Fundamentally, as Ezra Klein points out with this graphic, the housing affordability problem is a housing supply problem. 

In 2025, America built fewer homes per 100,000 people than it did in 2005, 1995, 1985 or 1975.

Housing supply in the US has slipped into the negative territory since 2017. 

Governments in cities across the world have been exploring various approaches to address the housing affordability crisis. I have blogged about several of them in my earlier posts on the issue. 

The report by the Centre for American Progress, linked in the above article, offers a three-pronged plan: take down barriers that make it harder to build homes; build more affordable homes at a lower cost; and protect consumers and lower other housing costs. It seeks to address the problem of opposition to house-building in high-cost/rent areas by paying people living in such areas if their areas build more housing. Klein writes,

Places with a housing shortage — and that’s a lot of them — get a choice. Build the housing and the federal government will give all the renters in the city up to $1,000 off their rent — or don’t build the housing and lose access to certain federal grants. The Searchlight Institute, a new Democratic think tank, recently proposed a similar idea. In that version, cities and other places that hit ambitious housing targets would qualify for a federal rebate that would give every household — so both homeowners and renters — a check equal to the average increase in rent over the last year. In other words, build enough housing and the federal government will give the people who live near that housing money…

The other proposal is to lower housing construction cost

Between 1950 and 2020, productivity in the manufacturing sector — how much you could produce with the same number of workers — rose by more than 900 percent. That’s a big part of why everything from tables to televisions are cheaper today than they were decades ago. But over the same period, productivity in the construction sector has fallen… But you can manufacture housing — constructing homes in an off-site factory much the way we construct cars and then shipping them for final assembly. This is technology pioneered in the United States when George Romney, Mitt Romney’s father, served as secretary of housing and urban development during the Nixon administration. But the United States never figured out the rules nor the financing to make an industry out of it. Instead, it’s taken hold elsewhere. In Sweden, for example, more than 40 percent of new homes — and more than 80 percent of single-family homes — are fabricated off-site.

The Center for American Progress’s plan proposes a slew of projects to take this industry America invented and make it one where America is a leader. They want the government to seed a major research program to fund innovation in housing construction. They want to have the federal government leverage its purchasing power to become an initial buyer for modular housing — one idea here would be to have the Department of Defense upgrade its military base housing using modular construction. They want to modernize building codes to make modular easier — removing, for instance, an outdated federal requirement to attach a permanent steel chassis to all modular construction — and updating federal insurance and financing rules to make sure modular production qualifies.

A longstanding problem with urban planning in the US and the UK is the discretion allowed to local communities and planners in planning decisions. This has spawned NIBYism trends in the guise of conditions spanning environmental protection, preservation of historical areas, energy efficiency considerations, etc. Sample this illustration from the UK by Sam Dumitriu. 

A fourteen-flat development in Walthamstow, less than 10 minutes walk from the Victoria Line, required a 1,250 page planning application. Its developers produced more than 70 separate documents and still have waited over a year for a decision from the local authority. This isn’t just a Walthamstow problem either. One SME housebuilder recently revealed that Croydon required them to produce over forty separate validation documents to get planning permission. In the PM’s backyard, Camden, a major brownfield development was delayed because planners were not satisfied that the project was ‘exemplary’ in terms of ‘the circular economy and whole life carbon impacts’. In Cambridge, one of the most unaffordable parts of Britain, all new developments (10 units or more) must spend at least 1 per cent of their capital costs on public art.

The UK, under the Labour government, has been exploring various policy proposals to ease zoning regulations and promote densification to increase housing supply. The Chancellor Rachel Reeves has announced the Brownfield Passport, which would make “yes” the default answer for new denser housing on previously developed land. However, its success would depend on the details of implementation. Dumitriu writes that the Levelling Up and Regeneration Act (LURA) contains the power to create National Development Management Policies (NDMPs), which could declare basic standards for embedded carbon, flood protection, access to light, etc., to supersede any local planning policies. However, its effectiveness could be blunted by the non-binding nature of NDMPs. Another proposal by the Labour Government is the New Towns policy to develop new greenfield towns. 

California has been experiencing a serious housing affordability crisis, largely due to restrictive housing development norms like this.

Land is expensive, labor is expensive and NIMBYism — the not-in-my-backyard sentiment that exists everywhere — is particularly strong. The city’s zoning rules discourage projects that are tall and bulky and that might anger the owners of single-family houses nearby. Five stories is the tallest allowable height for a multifamily residential building — and those are permitted on only a few blocks of the city.

In early October, California took a major step to address this problem when the state legislature approved Senate Bill 79 (SB79) that overrides local zoning laws to promote transit-oriented development through higher-density housing. It allows developers to build up to nine storeys high within a half-mile of major public transit stops. The law would be phased in gradually, taking full effect by the start of 2030. 

In brief, the law would prevent local communities from blocking new mid-rise housing in well-connected locations under the cover of community review, environmental safeguards, etc. It expedites approvals by imposing strict timelines and penalties on the cities for non-compliance with its provisions. This is a good primer. 

California is emulating reforms that have been undertaken far away in New Zealand. The country has emerged as a pioneer in urban planning reform. In 2016, the city of Auckland upzoned three-quarters of its residential land through the Auckland Unitary Plan to allow dense development near transport by-right, which kept rents 30% lower than the counterfactual. The reform was rolled out nationwide, and New Zealand has seen a construction boom. The new Housing Minister, Chris Bishop, is taking the policy even further and removing anti-supply red tape.