The U.S. is short approximately 4 million homes. Wharton professor Ben Keys traces the beginning of the housing crisis to the 2008 financial meltdown — and says climate change is making things worse. Also, Justin Chang reviews the Iranian film The Seed of the Sacred Film.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
Chapter 1: What is the current state of housing affordability?
This is Fresh Air. I'm Tanya Mosley. As we head into 2025, housing is still one of the most important issues on the minds of millions of Americans. The dream of owning or even renting a place is in peril. People are paying a million dollars for starter homes, new construction is moving at a snail's pace, and the latest data shows that in 2023, home sales were the slowest in three decades.
Many homeowners aren't selling or upgrading because the market for getting into another house is just too high. Renters aren't catching a break either. On average, they're spending 30% of their income on housing. And that stat includes people who live in places that had the reputation of being more affordable, like the Midwest and the South.
changes to our climate are also redrawing real estate maps, impacting where people can live and what they can afford. President-elect Donald Trump says some of his plans to tackle the crisis include regulations on construction, opening up federal land for housing, and mass deportation. How feasible are these ideas? And why is this such a dire moment in the housing crisis?
Chapter 2: How did the 2008 financial crisis impact housing?
Well, our guest today to talk about all of this has been Keyes. He's the Rowan Family Foundation Professor of Real Estate and Finance at the University of Pennsylvania's Wharton School. He is also a research associate at the National Bureau of Economic Research. And Ben Keyes, welcome to Fresh Air.
Thanks so much for having me.
You know, Ben, one of the more frustrating issues right now is that there just isn't enough affordable housing. And from my understanding, like so much of this current housing crisis, this can be traced back to the financial crisis of 2008. It's like a snowball effect.
That's right. I mean, I think we can characterize the current state of the housing market as being deeply unaffordable. That's a very expensive market right now. High home prices and high interest rates making entering the housing market or moving up the property ladder very challenging. And I think you can trace back
some of these issues back to the financial crisis of 2008, where we saw a collapse in construction. And so we just stopped building houses. We stopped building apartments for a few years there. And an even longer, I would say, structural change in our ability to build and our willingness to build. And so those two factors have really driven a shortage of housing. And now we're seeing estimates of
as much as 4 million houses that were short, if you think about where we need to be as a growing population and growing household formation.
Can you delve a little bit deeper into that? Because why 17 years later, if demand is high, people are working, they're looking for places to live, what are some of the factors that continue to keep home builders from just building more housing?
It is a bit of a puzzle, right? I think we can separate out the factors into three main areas. One is the high cost of materials and labor. And we've seen an inflationary episode where we have a very high cost of building materials. We are also in a very tight labor market. So there are not a lot of you know, laborers who are available to build. So that's one category.
Another category is related to financing. It is very challenging to finance many of these large building projects. And it's not always as easy as it might seem to obtain financing, especially multifamily financing. So building apartment buildings, the financing there is quite challenging.
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Chapter 3: What factors are driving the housing shortage?
And then the third is related to zoning and land use restrictions and other policies that create a lot of hoops to jump through and make it challenging for developers who would like to build, you know, build at the scale where they would like to build.
And so each of those three factors, financing, construction, and zoning are all putting downward pressure on the ability to create more houses and more housing units where people would like to live.
You know, President-elect Trump, he's been talking about some of the ways he plans to help remedy this crisis. And one of them is proposing tariffs on imports, which include construction materials. How could that impact housing costs as it relates, I guess, to the price of building materials?
Yeah, well, I think this ties back to one of the fundamental misunderstandings of how tariffs work. But basically, if we're going to raise the costs of construction materials, that's going to raise the cost of building a home. Now, a lot of the materials that are used for construction are domestic.
So we do have a lot of those in the U.S., but we also import a number of construction materials like lumber for things that would be covered under NAFTA from Canada. But the simple math is that if we are going to impose additional tariffs on building materials, it's going to be more expensive to build rather than less expensive to build.
So that's going to only make the affordability problem worse.
Ben, one of the more controversial ideas that Trump has spoken about is how he plans to deport 11 million or so undocumented immigrants and how that will free up housing. Is there a link between the undocumented and housing affordability besides it being a numbers game?
Well, first, I think the impact of a policy like that would have impacts that are so devastating to many communities in the country that the effects on housing affordability feels second order or even third order. But I don't think that there is a strong connection between this idea of removing immigrants from our country and making housing more affordable.
And there's a couple of reasons for this. One is... that immigrants and undocumented immigrants make up a large fraction of the construction workforce. So it's been estimated by Pew that 14% of the construction workforce are undocumented immigrants. And so it is going to make labor costs more expensive to build, and that's going to drive up the cost of housing.
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Chapter 4: How does climate change affect housing costs?
Chapter 5: What role do tariffs play in housing affordability?
So I think there's two pieces where we might see some headway. One is related to federal land that's in urban areas. That's already where the jobs are and where we already have high demand. So one example of this is an assessment that the Biden administration did with the U.S. Postal Service and looking at the location of post offices, whether there's additional space available.
for redeveloping some of those spaces, right? Why have a one-story post office when you could have a five-story post office with four stories of apartment units up above? And so that's been an initiative that's going on. There is federal land in cities. There are a number of federal buildings. And the USPS is one that has quite a large footprint.
When we're thinking about this federal land out west, I'm pretty skeptical that we're going to see cities spring up out of whole cloth. That just takes an enormous amount of coordination and effort, and it would need a significant amount of private buy-in to locate firms there. You could potentially see those having some uses for energy generation, so solar farms, wind farms,
other kinds of things that do require that space and where there may be more desirability out west. And so thinking about ways to encourage our energy transition on that federal land seems promising. But as a solution to our affordability crisis, I just don't see it.
Well, that's so interesting about the post office, the post office idea.
Yeah, it's a fun one. And I think the nice thing about that is When you start walking around cities, when you put on your housing hat and you think about where could more people live, you start to see opportunities everywhere. You see buildings that are small for their space. You see areas with big side yards. You see old office buildings that could be converted to residential.
And so when you put those glasses on of how do we reach housing abundance, in these places where the jobs are located, you start to see opportunities everywhere.
I know. I now can't unsee it. As you were talking about the post office, I started going through my neighborhood and thinking about all of the other areas where there could be housing.
Yeah, there's a neat example of this. It's not housing necessarily, but in West Philly near Penn's campus, there's a McDonald's on the corner. And they basically tore down the McDonald's. That was a one-story traditional McDonald's with the usual McDonald's roof and everything. Difficult to put apartments or additional use up above that. Well, they tore that McDonald's down.
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Chapter 6: Can federal land help solve the housing crisis?
I think there's a very direct line to be drawn between rising climate risks and the costs of homeownership in the form of property insurance. And property insurance to me is the most direct way where we're seeing the effects of climate change on Americans' pocketbooks. And in just the last three years, 2020 to 2023, my research with Phil Mulder has shown that
That property insurance has gone up by over 33% on average in the U.S. and over 50% in the areas of the country most exposed to climate risk. And so property insurance, over 50% in the riskiest zip codes.
And that's, you know, the places that might come to mind are places like Florida and the Gulf Coast, wildfire zones in California, but also some surprises like parts of Oklahoma where they're hit with a lot of hailstorms and tornadoes. And there we've seen big run-ups in property insurance costs.
And so what this has done is it's made the sort of predictability of homeownership a little bit less predictable. Yeah. And usually when you think of buying a house, you say, well, I'm kind of locking in my costs. I'm taking on a fixed rate mortgage and I have a predictable path of my expenses. And what's happening in property insurance markets is unraveling that.
And we're seeing these big increases. And I worry a lot for homeowners who had bought on a fixed income or were sort of constrained in how much they could afford. And now they're seeing their insurance costs rise sharply. And so this is a reflection of climate change and our changing climate, which is inducing more frequent and more severe disasters.
But it's also a function of mobility patterns and where we've moved in this country over the last really 50 years. We've been moving into the danger zones. We've been moving into harm's way. The population of Florida has quadrupled since 1970. And when you look at the reports of
The insurers and then the reinsurers, which is the industry that insures the insurance companies, they point especially to the larger concentration of residents in risky areas as being the main contributor to rising insurance premiums.
What could municipalities and states do to offset that? I mean, I'm just thinking about zoning issues and things like that that could help stave off that increase in people moving into places that are these danger zones.
Yeah, I think this is one of the challenges where the incentives are especially misaligned. Local governments generally want to have more of a tax base. They want to see more properties in their municipality. And that means that they're willing to allow development on swamps and marshes and rivers. and other sorts of risky areas. You see the development into the wildfire risky areas.
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Chapter 7: What measures are being taken to address homelessness?
Ben Keyes, thank you so much for this conversation.
Well, thanks so much for having me.
Ben Keyes is a professor of real estate and finance at the University of Pennsylvania's Wharton School. Coming up, film critic Justin Chang reviews The Seed of the Sacred Fig, the latest drama from Iranian filmmaker Mohamed Rasoulof, which premiered this year at the Cannes Film Festival, where it won the Special Jury Prize. This is Fresh Air.
Earlier this year, Iranian descendant filmmaker Mohammad Rasouloff fled his country to escape an eight-year prison sentence. He made it to the Cannes Film Festival just in time for the premiere of his latest drama, The Seed of the Sacred Fig, which was filmed secretly in Iran.
The movie won a special jury prize at the festival and was submitted for the Oscar for Best International Feature by Germany, where Rasulov now resides. Our film critic Justin Chang has this review.
In the nearly 20 years that I've been attending the Cannes Film Festival, I've rarely witnessed anything as emotional as I did last May, when the Iranian director Mohammad Rasulov arrived for the world premiere screening of his new movie, The Seed of the Sacred Fig.
As he walked up the red-carpeted steps and entered the theater to thunderous applause, Razulov didn't look like a man who had been on the run just two weeks earlier. He fled his country after receiving an eight-year prison sentence, hardly the first time he's run afoul of the government, which since 2010 has frequently arrested him, jailed him, and banned him from filmmaking.
Like some of his other movies, The Seat of the Sacred Fig was shot entirely in secret. That can't have been easy to pull off, though in some ways it makes a certain sense for a drama that's all about the corrosive nature of secrets and lies. Misog Zare'e plays a lawyer named Iman, who's just been promoted to investigating judge, a job so dangerous that he's been issued a gun for his protection.
His wife, Najmeh, played by Sohelaw Golestani, is excited about the news. With Iman's higher salary, they can at last afford a bigger home. But they warn their two daughters, 21-year-old Rezvan and teenage Sanaa, that they must be irreproachable in their behavior so as not to harm their father's reputation.
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Chapter 8: How is Minneapolis addressing zoning and housing issues?
And after the slow-simmering suspense of the first half, Razulov pushes the drama into full-blown action movie territory. There's a high-speed car chase, an on-camera interrogation, and finally a tense climax that suggests a showdown out of a classic western.
It's a bold stroke, and while not everyone will make the leap, I appreciate Razulov's willingness to flex his genre muscles in service of a larger point. The family in this story isn't just a family. It's a kind of microcosm of middle-class Iranian society, with deep rifts between people across genders and generations.
Meaningful change may be possible, Razulov seems to be saying, but it will be inevitably painful and violent. It's a bleak conclusion, but it's also suffused with a deep sense of mourning. Mohammad Razulov may have left Iran, but not once during this stunning movie is his love for his country ever in doubt.
Justin Chang is a film critic for The New Yorker. He reviewed The Seed of the Sacred Fig. Tomorrow on Fresh Air, Stephen Colbert and Evie McGee Colbert. They're partners in marriage and in their production company, and she makes regular appearances on his late-night show. They've written a new cookbook together called Does This Taste Funny?
They'll talk about food, coming close to death mid-show, meeting the Pope, and more. I hope you'll join us. To keep up with what's on the show and get highlights of our interviews, follow us on Instagram at NPR Fresh Air. Fresh Air's executive producer is Danny Miller. Our technical director and engineer is Audrey Bentham.
Our interviews and reviews are produced and edited by Phyllis Myers, Anne-Marie Baldonado, Sam Brigger, Lauren Krenzel, Teresa Madden, Monique Nazareth, Thea Chaloner, Susan Yakundi, and Anna Bauman. Our digital media producer is Molly C.V. Nesper. Roberta Shorrock directs the show. With Terry Gross, I'm Tanya Mosley.
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