Welcome back to Home Economics, a newsletter about the American housing market. This week I am sending you something a bit different: a video of a conversation I had with Australian economist Cameron Murray. Cameron was interviewing me for his audience at Fresh Economic Thinking, but our conversation was as much me interviewing him for my audience.

Who is Cameron Murray?

Cameron Murray is not your average housing economist. The economic mainstream advocates for converting the swathes of our cities currently zoned for single family homes into places for multifamily housing. In theory, this “upzoning” would unlock a bottleneck to building, leading to more housing being built—and lower prices—in the center of cities, where costs are steepest.

Murray rejects this narrative. He believes:

• If we are in a housing crisis today, then we’ve been in one for 200 years. Median home costs to income ratios have been stable, close to 20-25%, around the world and over time. Murray’s favorite quote is from someone talking about “the number of large houses just finished & others building is truly surprising; nevertheless every one complains of the high rents & difficulty in procuring a house”—It’s Charles Darwin, observing Sydney home prices in 1836.

• In any case, upzoning is not the solution. Murray argues that builders drip developments into the market at a pace such that prices remain high and builder profits are maximized. He thinks the profit motive is the bottleneck on housing supply, not zoning rules.

• Housing is not a competitive industry, it’s a monopoly. The property titles/land deed system is what creates the monopoly dynamics, since you can’t build a home without first buying the right from someone who already has the right to that location.

• More supply can only temporarily reduce home prices. Homes are financial assets: they provide owners (landlords) with a stream of cash flows (rents). Prices adjust such that rental yields (rent divided by price) are, risk-adjusted, comparable to other financial assets like stocks and bonds.

• If home prices fall, consumers will just buy more of it, driving prices back up. Murray compares this dynamic to building more highways: it doesn’t relieve traffic, it merely induces more driving.

I don’t agree with all of Cameron Murray’s model, but I find parts of it compelling. Compelling enough that I wanted to bring his point of view to my audience. I expect a healthy comments section on this one, folks…

Whether you agree with Cameron’s views or not, his newsletter Fresh Economic Thinking is not misnamed—I highly recommend it, as well as his book, The Great Housing Hijack.