The Morning Dispatch: Why Your Rent Is Up

Happy Thursday! If you are in the market for [Bluetooth headphones] made by a [home appliances company] that have a [magnetic face visor] and double as a [portable air purifier], Dyson has the product for you! How’s that for a morning Mad Libs?

Quick Hits: Today’s Top Stories

• Maine Republican Sen. Susan Collins announced Wednesday she will support Judge Ketanji Brown Jackson’s nomination to the Supreme Court, making her the first (and potentially only) Republican who will vote to confirm Jackson next month. “In my view, the role the Constitution clearly assigns to the Senate is to examine the experience, qualifications, and integrity of the nominee,” Collins said. “It is not to assess whether a nominee reflects the ideology of an individual Senator or would rule exactly as an individual Senator would want.”

• The United Nations reported Wednesday more than 4 million people—nearly 10 percent of the country—have now fled Ukraine as refugees since Russia’s invasion began last month. Kremlin spokesman Dmitry Peskov contradicted earlier positive statements on Wednesday, saying Tuesday’s peace talks with Ukrainian officials didn’t make any headway. Pentagon spokesman John Kirby confirmed Russia has continued airstrikes on Kyiv.

• Germany’s Federal Ministry of Economic Affairs announced Wednesday it was triggering an emergency plan in preparation for a potential cut-off in Russian gas supply after the Kremlin demanded all payments be made in rubles. “There are no supply bottlenecks at present,” said Economic Minister Robert Habeck. “Nevertheless, we need to step up our preventive measures in order to be ready to cope with any escalation by Russia.” Polish Prime Minister Mateusz Morawiecki, meanwhile, announced Poland plans to stop importing Russian coal within the next few weeks, and Russian oil and gas by the end of the year.

• An updated report from the Bureau of Economic Analysis published Wednesday found U.S. gross domestic product (GDP) growth—adjusted for inflation—hit an annual rate of 6.9 percent in the fourth quarter of 2021, a tick down from the agency’s previous estimate of 7 percent.

• The trial of Australian journalist Cheng Lei is scheduled to begin in China today, Australia’s foreign ministry confirmed. Detained in China since 2020, the television broadcaster faces charges of providing state secrets to foreigners, which could result in a life sentence.

Why The Rent Is Too Damn High

If you’re a homeowner right now, congratulations. If you’re a renter, condolences. And if you’re looking to buy a house, well, that’s rough, buddy. Housing prices have skyrocketed in recent years thanks to pandemic-related supply chain disruptions and inflation, plus pre-existing pressures like zoning restrictions and population density. Federal Reserve interest rate hikes will likely cool the market eventually, but for the moment, cost growth shows no signs of slowing.

According to this week’s numbers from the pithily named S&P CoreLogic Case-Shiller National Home Price Index, housing prices nationwide were 19.2 percent higher in January 2022 than January 2021. Monthly mortgage payments rose by 3.4 percent from December to January, according to the National Association of Realtors. The exact increases vary from market to market, but to put that average 19.2 percent figure in perspective, a house that sold for $600,000 a year ago would typically go for about $715,000 now.

Incomes have not kept pace, rising an average of 5.5 percent over the same time period. And with more and more people priced out of home ownership, demand for apartments has increased as well. Per real estate company Redfin, rent prices jumped a record 15 percent year over year in January. 

The pandemic—and how policymakers responded to it—played a large role in the cost hikes. Dropping interest rates near zero to stimulate economic activity meant better mortgage deals, which drove demand higher. People suddenly working from home decided to spend stimulus money and canceled vacation savings on a condo or house of their own. On the other side of the ledger, worker shortages and supply chain disruptions drove up costs and delayed construction, limiting supply.

Then inflation arrived, further increasing the price of both labor and building materials. And increasing home prices help drive inflation themselves, according to Ed Pinto, who directs the American Enterprise Institute’s Housing Center. As home values rise, Pinto said, some homeowners feel richer and spend a little more freely, or borrow more against their homes’ rising equity and spend that cash, too.

The pandemic isn’t the only culprit. The 2008 housing market crash put many builders out of business and drove construction workers to other professions, creating a years-long depression in housing stock and making it harder to ramp up for increased demand. Mortgage company Freddie Mac estimated a housing supply deficit of 3.8 million homes at the end of 2020, up 52 percent from 2018. And pandemic or no, increased demand was inevitable as the population continues to grow and Millennials age into their peak home-buying years. “People are expecting there to be some kind of bubble burst, but there really isn’t a bubble,” Daryl Fairweather, chief economist at Redfin, told The Dispatch. “We fundamentally just don’t have enough homes.”

To stop the price skyrocket, Pinto argued the Federal Reserve should move briskly to raise interest rates. “The first thing is, when you’re in a hole—which we are in a deepening inflation hole—stop digging,” Pinto said. “The Fed hasn’t stopped yet. It’s continuing to inflate housing prices. And the only solution is to put mortgage rates up high enough so that it tamps down demand.” The Federal Reserve raised interest rates a quarter of a percentage point in mid-March—and has plans for many more hikes in the months ahead—but real interest rates, which account for inflation, remain negative. Mortgage rates have risen to their highest levels since 2018, according to a national Bankrate survey of lenders, but not necessarily high enough to outpace inflation.

“When you have an economy where you can get more for your money today than you can if you put it aside—or where you can borrow money at lower cost than you’re going to have to pay back when the bond comes due—that’s an economy that’s going to encourage spending today,” former Treasury Secretary Larry Summers said on Ezra Klein’s podcast this week. “And it’s going to encourage spending today at a substantial rate.”

Monetary policy will adjust to the inflationary reality sooner or later, but that won’t address the housing supply deficit. “The government is not in the business of building houses,” National Association of Home Builders Vice President Danushka Nanayakkara-Skillington told The Dispatch. “But they can help with some of the cost.” 

She recommended state and local governments cut the regulatory fees and restrictive zoning that drive up costs and limit housing density. To redistribute demand away from taxed housing markets, Fairweather suggested states make it easier for people to relocate by, for instance, streamlining the re-licensing process for a hairstylist moving from New York to New Jersey. There are signs of progress in updating regulations: California, not exactly known as a beacon of affordable housing, made it easier to add housing units to previously single-unit lots. Predictably, though, not everyone wants housing added to their neighborhoods.

Pinto praised California’s progress but cautioned that the nation’s housing market will likely stay hot for a while. “We got into this problem over decades and decades of restricting supply through zoning and land use and making it more expensive to add supply,” he said. “It’s going to take years and years and years to solve.”

FDA Authorizes Second COVID Booster

We are now squarely in the thick of the choose-your-own-adventure portion of the pandemic. After two years of restrictions and mandates, even federal public health agencies are now throwing their hands in the air and telling Americans to do what they want.

With little fanfare on Tuesday, the Food and Drug Administration amended the emergency use authorizations for the Pfizer and Moderna COVID-19 vaccines to authorize a second booster dose—administered at least four months after the first one—for certain immunocompromised individuals and everyone 50 years of age and older. People who meet those specifications are now eligible to receive the second booster, which for most people would be their fourth dose in total.

Centers for Disease Control Director Dr. Rochelle Walensky formally recommended the move hours after the FDA’s announcement, but her comments lacked the zeal that we’ve come to expect. “People over the age of 50 can now get an additional booster 4 months after their prior dose to increase their protection further,” she said. Back in November, as the Omicron wave was in its infancy, a similar procedural statement [emphasis ours] from Walensky read, “Everyone ages 18 and older should get a booster shot either when they are 6 months after their initial Pfizer or Moderna series or 2 months after their initial J&J vaccine.”

It’s a subtle distinction, but one that tracks with both the current state of the virus and the underlying science justifying the additional dose. Although the even more transmissible Omicron BA.2 subvariant is now the dominant strain of COVID-19 in the United States, we’re currently logging the fewest number of new cases since last July, and deaths attributed to the virus are at their lowest point since early August. That doesn’t mean there won’t be another surge—we all remember what happened after that late-summer lull, and cases are currently rising again in parts of Europe—but the need to administer more shots is nowhere near as acute as it’s been at earlier points in the pandemic.

It’s also far from clear how much additional protection a four-dose regimen actually provides over a three-dose one. In justifying the move, FDA officials relied heavily on data out of Israel, which has been offering a fourth dose to residents for a few months. One non-peer-reviewed study published last month found a fourth dose at least temporarily restores antibody titers to third-dose levels, but doing so provides “low efficacy in preventing mild or asymptomatic Omicron infections.” A more recent preprint study featuring 563,465 Israeli individuals over the age of 60, meanwhile, found that 92 of the 328,597 people who received a second booster died from COVID-19, compared to 232 of the 234,868 who received just one booster.

But that latter report relies on some assumptions that Dr. Paul Offit—director of the Children’s Hospital of Philadelphia’s vaccine education program and member of the FDA’s Vaccines and Related Biological Products Advisory Committee—isn’t sure will hold up. “The way those studies are done is that Israel offers a fourth dose, and then some people get the fourth dose and some people don’t,” he told The Dispatch. “You have to hope that those two groups are the same, meaning that someone who chooses to get a fourth dose is not someone who is more attentive to their health, less likely to have comorbidities, more likely to exercise, less likely to smoke. That’s a big assumption given that they’re the ones who just made the decision to get another dose.”

Uptake on a second booster is likely to be limited—only about a third of eligible Americans have gotten their first one—but those who do choose to receive it will probably simply conclude that there’s no reason not to. And in one sense, that’s true: Israel has distributed a fourth dose to hundreds of thousands of people in recent months and no new safety concerns have cropped up. A separate FDA study came to the same conclusion.

But the second booster may not be entirely risk-free—and we’re not talking about those pesky side effects that can knock you out of commission for up to 24 hours. Due to a phenomenon known as “original antigenic sin,” the body’s immune response to a given pathogen tends to lock in after it first encounters a virus—or vaccine imitating a virus. Any future variant-specific vaccine will have to overcome this hurdle.

And the more boosters we administer, the harder that may become. “The more you lock into an immune response to the ancestral strand—which is what these vaccines are all designed to protect against—the less likely you may be able to respond to a variant when it arises that, despite being vaccinated, you’re still at risk of serious disease,” Offit said, noting we’re luckily not there yet. But Dr. Peter Marks—director of the FDA’s Center for Biologics Evaluation and Research—warned Tuesday we “may need to shift over to a different variant coverage” in the fall. An FDA advisory committee is meeting next week to discuss what that may look like.

“I think the public doesn’t get what it is we’re trying to do here, or at least what we should be trying to do here, which is prevent serious illness,” Offit continued. “[We should] be reassured that, for the most part, even if you’ve got two doses as a less-than-50 year old, if you’re not immunocompromised and you’re relatively healthy, you don’t need that other dose. I mean, I’m over 65 years old and I’m not getting a fourth dose.”

Another over-65-year-old—President Joe Biden—made a different decision, receiving his second booster on Wednesday afternoon following remarks on entering a “new moment” in the pandemic. “I’m not sure why I’m doing it on stage,” Biden mused as the nurse prepared the needle. “Just to prove I’m getting it, I guess.”

Worth Your Time

• This remarkably thorough Washington Post report from Matt Viser, Tom Hamburger, and Craig Timberg on Hunter Biden’s ties to China was months in the making. “Over the course of 14 months, the Chinese energy conglomerate and its executives paid $4.8 million to entities controlled by Hunter Biden and his uncle, according to government records, court documents and newly disclosed bank statements, as well as emails contained on a copy of a laptop hard drive that purportedly once belonged to Hunter Biden,” it reads. “Biden aides and some former U.S. intelligence officials have voiced concern that the device may have been manipulated by Russia to interfere in the campaign. On Capitol Hill, Democrats have dismissed earlier reports about Hunter Biden’s work in China as lacking credibility or being part of a Russian disinformation campaign. The Post analysis included forensic work by two outside experts who assessed the authenticity of numerous emails related to the CEFC matter. In addition, The Post found that financial documents on the copy of Hunter Biden’s purported laptop match documents and information found in other records, including newly disclosed bank documents obtained by Sen. Charles E. Grassley of Iowa, a senior Republican on the Senate Finance and Judiciary committees.”

• For an example of how well-intentioned regulations can have unintended consequences, check out this study from researchers at University of Georgia’s Warnell School of Forestry and Natural Resources on plastic bag bans. “Grocery bags are viewed as single-use items, but they often get a (brief) second lease on life as liners for small trash cans. Without the shopping bags available, people look for alternatives—which the researchers suggest means they buy small plastic garbage bags,” a TechCrunch writeup of the study notes. “The study found California communities with bag policies saw sales of four-gallon trash bags increase by 55%, to 75%, and sales of eight-gallon trash bags increase 87%, to 110%. These results echo earlier studies that also showed increases in sales of smaller plastic trash bags.”

Presented Without Comment

Also Presented Without Comment

Also Also Presented Without Comment

Toeing the Company Line

• On the site today, Reuel Gerecht takes a long look at what U.S. foreign policy will need to look like if and when Iran is in possession of a nuclear weapon, and Harvest offers an overview of the GOP Senate primary in Ohio.

• Scott really brings the charts in this week’s Capitolism (🔒), part one of a two part series on the state of globalization in a post-pandemic world. “Commentators have been wrongly predicting globalization’s imminent demise for years,” he writes. “The evidence we have—so far, at least—shows less that ‘globalization’ is dying and more that it’s constantly evolving in response to various economic and geopolitical trends.”

• If you enjoyed Tuesday’s TMD on Florida’s new education bill, be sure to check out yesterday’s Dispatch Podcast. Gabriel Malor and Eugene Volokh joined Declan to discuss their differing perspectives on the legislation, and what the law says about our current political moment.

• You had to have known Jonah couldn’t let the latest Madison Cawthorn news cycle pass by without sharing his two cents. “While I’m sure there have been orgies in D.C., the idea that they are commonplace gatherings among 60-and-70-year-old leading conservatives strikes me as … implausible,” he writes in Wednesday’s G-File (🔒). “I mean, the mental images alone, many too terrible to contemplate, of this crowd going full Caligula should arouse (“Word choice! Word choice!”—editor) skepticism. Occam’s razor could be a spoon, and you’d still reach that conclusion.”

Let Us Know

How likely are you to take the FDA up on its offer of an additional booster dose? If not now, what would you need to see in the future to change your mind?