A weekend topic starting with the Star Press in Indiana. "In its general form, Gresham’s Law tells us 'the bad crowds out the good.' Whether it’s in currency, politics or in the realm of ideas, this modest proposition warns us be diligent in promoting the good over the bad. This column is mindful of that caution. In 2016 the City of Muncie sought to build some new apartment buildings they termed 'executive housing.' The challenge to that effort is that Muncie is losing population and awash in a shocking oversupply of housing. According to the U.S. Census, there are enough vacant homes in the city to comfortably house a third of its residents."

"Now, many of those extra Muncie homes could be bought for perhaps $25,000, while the same house would sell for more than $500,000 if located in Chicago. Housing is disastrously cheap in Muncie. After adjusting for inflation, homes in Muncie sell for maybe two-thirds the cost of building them."

"But, subsidizing 'executive housing'" is rightfully unpopular, especially in a city then facing an imminent school takeover and where potholes are the most common form of road markings. So, to get around these political inconveniences, city officials decided to mislead taxpayers. The easiest way to do this was to find a consulting firm that would manufacture fake population projections so as to justify new housing. So, the city hired a firm, named Zanola, who did just that."

"In a better world, the City of Muncie would’ve thanked us for revealing this malfeasance and attempted to recover money wasted on these consultants. Instead, the City of Muncie, Zanola, Fallon and Ferris all threatened to sue Ball State, me and my staff for revealing their fictional data and imaginary Census projections."

"Since this saga began, another 1,500 folks departed Muncie, leaving behind their homes and vacant apartments. The schools continued to bleed students, and potholes grew more capacious. And yes, of course, the apartment project went ahead with taxpayer subsidies."

"It should be obvious that this project is the absolute antithesis of economic and community development. Any high school AP economics student can explain that increasing the supply of apartments when apartments are already oversupplied will further depress prices. This project will do nothing to stem population loss, while placing even harsher financial strain on the City and Muncie Community Schools. It will of course provide pretty, new 'executive housing' in Muncie. The benefits are well beneath the costs, which is why taxpayers were misled from the very beginning."

From Bloomberg. "I hope to put a big yellow 'Slow' sign on home-buying in a pandemic. The housing market may be soaring because of bad information and short-term thinking. You don’t know whether bosses will make work-from-home permanent or who will be targeted for downsizing. You may come to rue buying at a time when inventory is so low and prices so high."

"Regret is already in the air. LendEDU, a financial information website, surveyed 1,000 mortgage holders in August and found that most people who bought houses after March 2020 already regretted taking out a mortgage. The survey is not scientific, but the results make sense. Record low mortgage rates enticed new buyers, while urban hotspots for the virus drove people out of cities. In July, there was a 56% drop in Manhattan property sales and a 44% increase in the city’s neighboring suburbs. Home prices in nearby New Jersey counties increased over 11% while New York City prices fell 13% compared to last summer."

"Conventional financial advice suggests if a home costs more than 20 times the annual rent the home could fetch, the house is probably overvalued — a $400,000 home should rent for $1,667 per month or more. In times of low mortgage rates, the breakeven ratio can be a bit higher. But in this K-shaped recovery, rents are falling, occupancy rates are down, and your house might remain overpriced."

"Because homeownership has always been messaged as a mandatory part of the American Dream and subsidized by the federal government, homeownership is always a bit overrated. A pay cut or job loss might even lead homeowners to sell assets in their retirement accounts — sometimes at their lowest values — to pay the mortgage. This is a terrible financial setback; some of the worst-hit families in the Great Recession were those who lost their jobs and were stuck in their homes."

The Globe and Mail in Canada. "If you follow the housing debates in Toronto and Vancouver, you’ll have undoubtedly heard the claim that the affordability challenges facing both cities are the result of supply problems. Common complaints include a lack of new housing, burdensome regulation and flawed zoning. This 'supply narrative' has been endlessly repeated. There’s only one problem: there’s no good evidence for it."

"Rather than weak supply, then, the issue has been intense demand pressures, including cheap credit, foreign ownership, speculation and high rental demand emanating from a previously strong labour market."

"There are several peer-reviewed articles that document the connection between demand-side factors and housing prices in Toronto and Vancouver, particularly the role of foreign ownership and speculation. Yet that peer-reviewed research is dismissed or ignored by advocates of the supply narrative. In fact, the case for the supply narrative is so weak that, after several years of research in this field, I have yet to encounter a single academic peer-reviewed article which documents a substantial causal link between supply-side factors and housing unaffordability in Canada."

"So why is the debate so evidence-averse? Because the narrative is useful to powerful people. The supply narrative does two things. It helps stymie action on the demand-side, which might actually bring prices and rents down, while giving cover to governments who want to pretend to care about affordability for the middle class. And it is a useful weapon for developers seeking to gain various policy concessions, including rezonings from municipal governments, which deliver windfall land appreciation."

"The vested interests behind the narrative are relentless, since there are billions in profit to be had. Why let pesky facts get in the way? Such interests, and their noisy Twitter allies, are trying to win the debate through sheer repetition."

"However, housing affordability will suffer to the extent that policy makers either buy into the misdirection, or use the narrative to deflect public pressure to take substantive action. Sometimes, then, it’s helpful to point out that the emperor has no clothes."

From Global News in Canada. "Federal officials are ironing out the details of a program to help cities buy properties left vacant due to the coronavirus pandemic so they can quickly create affordable housing. The government has considered the property acquisition program for months as it looks to keep people from falling into homelessness heading into the winter with temporary shelter measures set to expire."

"The municipal leaders say they could use the money quickly to buy buildings set to be sold soon, rather than have to wait months or years for the construction of new affordable units. 'We think this is a no-brainer,' said Edmonton Mayor Don Iveson. Iveson, who heads FCM’s group of big-city mayors, said the purchasing program could help local housing providers nab distressed properties at reduced prices."