Housing’s Supply-Side Revolution

Posted on May 30, 2019 by matt ohern
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IndieDwell converts shipping containers into affordable housing. The Idaho-based business has taken an idea championed locally by entrepreneurs Sheila and Sidney Gunst (see “Thinking Outside the Container“) and turned it into a growing business enterprise.

The company now sells 640-square-foot dwellings, including the cost of delivery and installation, for $78,000. Add $11,500 to build a foundation (IndieDwell’s estimate), plus utility hookups if applicable, plus, say, $10,000 for a tiny lot, and it should be possible to create a new unit of affordable housing in Virginia for less than $100,000 — roughly half the price of what it costs public housing authorities in Virginia today.

IndieDwell was just one of the businesses presenting fresh perspectives on affordable housing at a Virginia Housing and Development Authority (VDHA) event on May 22 organized to exploring new approaches to affordable housing. Other speakers addressed the phenomenal productivity gains in the manufactured housing industry and explored new concepts in modular housing. It was evident that a supply-side revolution in the housing industry is gathering momentum that holds out the potential to slash the construction cost of workforce and lower-income housing.

Traditional housing policy in Virginia, as in the rest of the United States, has focused on government-driven solutions. Government either builds public housing projects itself or subsidizes private developers to do so. What little innovation that occurs has focused on mobilizing resources from government, credit markets, or the nonprofit sector to bring down the cost. But compared to more dynamic sectors of the economy, the housing industry has seen few productivity gains. For the most part, housing is built the same way it was after World War II — on-site. Innovation has focused almost entirely on the introduction of new designs, appliances and features — not on the cost of construction. The biggest breakthrough in stick-built construction arguably was the invention of the nail gun!

Deb Sheehan, executive director of the Chicago-based CannonDesign firm, told the audience that the housing industry has seen less than a 5% gain in productivity over the past 20 years. The industry, which she variously described as archaic, outdated, low-tech and wasteful, is “grounded in old paradigms of delivery.” But the potential exists, she added, to embrace neural network thinking, Artifical Intelligence and big data to integrate project delivery, drive down costs and get product to market faster.

Standardization is another route for squeezing out costs, suggested Ted Benson, CEO of New Hampshire-based Bensonwood Homes, a manufactured housing company. Benson made an analogy between the bicycle industry and the housing industry. The bicycle industry has agreed upon certain standards for how the key elements of a bicycle — frame, wheels, pedals, gears, handlebars, etc. — should interconnect. That standardization allows bicycle makers to manufacture bicycles incredibly inexpensively or to create near-infinite customization at higher prices. While specific parts of the housing industry are standardized — interior doors, kitchen cabinets, plumbing fixtures, electric fixtures, appliances — the structure of the house is not. Benson argued that standardizing elements such as wall panels, floor panels, stair systems, roof panels, and decks could drive tremendous gains in productivity and cost.

Building housing in modular units is another productivity- and cost-enhancing strategy. Brian Gaudio, CEO of Pittsburgh-based Module, outlined his company’s vision for transforming how houses are designed and built in the U.S. The last disruptive innovation in housing, he said, was the invention of the autocentric suburban subdivision in Levittown right after World War II. Since then, consumer preferences have changed, the Internet has created a channel to connect consumers and home builders and bypass the middleman, and skilled labor shortages have created a housing construction bottleneck. Module’s model for a 21st century home builder contains three elements:

  • Design dwellings that can be constructed in modules and easily added onto as a family’s needs and income changes.
  • Create an online platform where customers can customize elements of their own modular house.
  • Outsource as much construction as possible to off-site manufactured housing companies. Much construction work can be performed in-factory at lower cost and with better quality control than on-site. Panels and modules can be delivered to the building site for finishing work.

Gaudio’s vision is for new families to build small starter homes that can readily accommodate new modules as new family members — whether children, elderly parents, or other — are added. The idea, he said, is to “grow into” a house rather than “move up and out.”

Module’s business model right now is geared to infill development — building on vacant urban lots. (Pittsburgh has 27,000 of them.) In time, he said, the company could expand into other market niches.

Bacon’s bottom line: The VDHA event also addressed innovations in housing finance, digital mortgages, and manufactured housing. Unfortunately, unable to attend the afternoon sessions, I missed much that is undoubtedly worthy of sharing with readers. But the big-picture takeaway is that Virginia policy makers should, in the words of VDHA director Susan Dewey, make an effort to identify new ideas. VHDA has formed an “emergent thinking group” to do precisely that.

As more than one speaker observed, the definition of insanity is doing the same thing over and over and expecting a different result. Well, Virginia has approached affordable housing the same way for decades now with the same dismal result — housing consumes an ever-increasing share of household income. Dwellings that lower-income households can afford are in desperately short supply. Evictions and homelessness are an increasing problem. The VHDA conference represents a huge step toward addressing these problems at the source — the cost of building a home.

Just one word of caution: There is a wide and increasing gap between the cost of fabricating new houses and the market price of housing. Because of the endemic shortage of new places to build, developers and and home-builders, not low-income households, are capturing the delta between cost and market price. Until Virginia localities adopt land use policies and build supporting infrastructure (primarily transportation) that allow the housing supply to increase, supply and demand will remain out of whack and costs will remain unaffordable.

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Why Farm Bureau Likes EPA’s Revised Water Policies

Posted on May 30, 2019 by matt ohern
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The American Farm Bureau Federation (AFBF) submitted WOTUS comments to the U.S. EPA on April 15, 2019. The 25-page document is worth reading. 
The AFBF comments are on a subject dear to the hearts of all who own land in the United States. The comments are submitted regarding the revised definition of EPA’s Waters of the United States (WOTUS). The comments are signed by a huge number of farm groups ranging from the Alabama Pork Producers, America Agri-Women, to the Texas Association of Dairymen, The Illinois Fertilizer and Chemical Association, the Virginia Poultry Federation and the Washington State Dairy Federation.  The Virginia Farm Bureau offered separate comments in support. 
All the agricultural organizations “…are very supportive of the [EPA] Proposed Rule, and we believe the proposed definitions will go a long way to providing much needed clarity and certainty for farmers and ranchers.” 
The agricultural organizations applauded EPA and the U.S. Corps of Engineers for conducting an honest and transparent rulemaking process. As you may recall, EPA under an earlier administration was accused of not telling agriculture the truth about its desires. The comments submitted to EPA  reviews’ legal policy considerations, but more importantly it provides specific recommendations on defining, navigable waters, interstate waters, tributaries, ditches, lakes and ponds, impoundments, adjacent wetlands, prior converted cropland, groundwater, ephemeral features and diffuse runoff, artificially irrigated areas, artificial lakes and ponds, and stormwater control features.

Here’s an overview

In subsequent reviews one or more of these issues will be examined but for this week, I will merely provide an overview of AFBF’s effort on behalf of agriculture. For example, AFBF complimented EPA and the Corps “…for proposing a revised definition that goes a long way towards providing clarity and certainty through clear definitions.” As all landowners know, EPA and the Corps for the last 40 years have sought to expand regulatory authority using the Clean Water Act (CWA) over agriculture, timber and ranching.
 AFBF said to EPA and the Corps that the new “…Proposed Rule will bring an end to the decades-long regulatory creep by appropriately giving effect to the statutory text and Congress’s intent…” 
The language in the comments, which all in agriculture and ranching should cheer, is that AFBF and other supporters declare “…the Agencies have [finally] properly recognized that the CWA is not a license for the Agencies to regulate every water body in the United States.”

What candidate Trump said

Candidate Trump and now President Trump made it clear during his campaign he would rein in “out of control agencies” harming agriculture, timber and ranching. This proposed rule is a clear example of fulfilling that promise.
Even with significant improvement, agricultural groups suggested tweaks in the two agencies’ proposed rule. For example, AFBF and others suggested the only waters to be covered by WOTUS should be those used “to transport interstate commerce” and not waters used “in interstate commerce.”
Another suggestion to EPA regarded defining the term “intermittent.” The farm organizations suggested waters should flow for at least 90 days during the year to be determined intermittent. 
AFBF’s comments suggested eliminating “ditches” as a standalone category. Another new category not needed is “impoundments.” It is believed the Agencies’ definition of “impoundment” is not clear.
The term “wetlands” could also be improved according to the comments, by requiring three specific delineation criteria. I would say even this is insufficient. Wetlands must be defined as those on a farm as being covered with water for seven continuous days and the ground fully saturated for 14 days.
EPA and the Corps can easily get around the three delineation criteria.
And finally, AFBF’s comments appropriately raise the issue of “comparable sites.” This is another area where EPA and the Corps abuse landowners. I have seen cases where ‘comparable sites’ found by the bureaucrats are 40 miles or more away. The comparable site issue is fraught with danger and needs to be worked on even more than what is suggested by the agricultural organizations’ comment letter. Notwithstanding these criticisms, AFBF’s and the agricultural organizations supporting it have taken a major step in implementing President Trump’s promise to eliminate burdensome regulation on agriculture.   
This commentary originally appeared in the May 15 edition of Farm Futures. 
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Meet the GOP Carbon Tax Advocate Bob Inglis

Posted on May 30, 2019 by matt ohern
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There is a hotbed of carbon tax advocacy at George Mason University, led by a former GOP congressman sent packing by South Carolina voters because he’s ready to tax them into embracing solar and wind.

Robert Inglis was part of the carbon regulation panel discussion May 17 at the National Regulatory Conference in Williamsburg, talking about the version of a national carbon tax he’s advocating through the Energy and Enterprise Initiative, identified as an affiliate of GMU where he teaches.  The main website is here.

That proposal is quite different than the Regional Greenhouse Gas Initiative currently on the front burner in Virginia.  This carbon tax would be nationwide, across more sectors of the economy than just power generation, and “border adjustable.”  That means it would also be imposed on imports unless the exporting country had a similar system.

Another key difference:  He wants a tax cut for families somewhere else to compensate for the cost increases due to the carbon tax, or some other way to return the money.  That is also missing from the RGGI proposal, since its advocates are still claiming it won’t cost ratepayers anything.

Inglis’ presentation opened with an old clip of Professor Milton Friedman talking about how a tax would work to reduce just about any form of pollution.  The Energy and Enterprise proposal uses different language, but there isn’t much daylight between it and the CEO Climate Dialogue principles being released that same day.

Coincidence?  Sure, you can think so.  It is a fairly common thing for the business community to spot a parade and seek to take the front and lead it to a preferred outcome.  Their outcome is less hostile to the use of natural gas than more strict environmentalist goals.

The conference he attended, sponsored by the State Corporation Commission and the associations of lawyers who work energy issues, had a number of topics over two days.  All of them wound their way back to issues of greenhouse gases and climate change, leading to an impression environmentalists have won by setting the terms of debate.

After voting against many carbon limiting proposals, Inglis took trips as a congressman on an energy panel to Antarctica and Australia’s Great Barrier Reef, where he was persuaded climate change was human-caused and an existential threat.   He put in the Raise Wages, Cut Carbon Act of 2009 and didn’t sit in Congress two years later.  Another Republican took him out.

Now he takes solace in these recent developments:  A Florida Republican in an ocean side district introducing the Green Real Deal Act, and Senator Bob Cornyn of Texas attending that CEO climate event and merely uttering the words climate change.  He cites at least in part simple political calculation, response to changing public attitudes.  Say what you will about the details, “Green New Deal” is an effective political slogan, Inglis said.

Inglis quoted the late Senator Ernest “Fritz” Hollings saying, “there is not much education in the second kick of a mule.”  He thinks that first kick came in the 2018 Democratic takeover of the House, bringing some Republicans into the climate change camp.  He admitted that many Republicans remain skeptical on one key point unrelated to the science: deep distrust that government will keep its word on returning carbon tax dollars in some form or spending them effectively.

If you go to his website, and he used much of it in his presentation at the conference, you find the Usual Rhetoric in support of climate change fears.  Worst to find in an academic context is the Appeal to Authority, an ancient and shaky debating ploy.  It means absolutely nothing that somebody polled scientists on climate change or toothpaste preferences.  During the years many Americans were first addicted to cigarettes, doctors appeared in the ads.  (Using the Friedman clip was another appeal to authority.)

Then there is a cherry-picked CO2-over-the-millennia chart that carefully avoids earlier geologic periods of high CO2 on Earth and posits all the change now is due to us.  “As a species, we have never seen this before…”  Well, on this planet we’re the newbies and plenty of other species saw and survived higher CO2 at points before that chart he uses, none of which was due to us.

Inglis has a fair point that the cost of energy needs to “internalize the external costs,” or include the cost of prevention or remediation of environmental harm, such as the cost of coal ash cleanup or nuclear fuel disposal.  How does one calculate the costs he is talking about?

The first question always is, does it really matter if we (meaning the world) reduce CO2 and/or other known greenhouse gases?  If your answer is yes, of if your answer is merely a strong maybe, then it’s fair to go back to Friedman and his economic genius for ideas on diminishing emissions of the gas or gases.

A carbon tax or greenhouse gas tax can work to lower emissions and alter consumer behavior, but it must be 1) nationwide, 2) economy-wide, not aimed at one sector and 3) structured to put pressure on the rest of the world.  A cap and trade system is a useful mechanism to get from A to B.  These economic processes work and their impact is more even across the board.  The downside is more limited than with many other approaches being advocated.

Moral authority and virtue signaling are just for show, and a very expensive show at that when done solo. They may work when saving your immortal soul but moving the needle on a world’s atmospheric chemistry is a different endeavor. To quote Inglis again, perhaps in a context he’d reject: “Smart is hard, dumb is easy.”

A version of this commentary first appeared in the May 23, 2019 edition of the online Bacon’s Rebellion.


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Is the Goal Cutting CO2 or Imposing a Tax?

Posted on May 14, 2019 by matt ohern
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While it would have been a popular step with his political base, and one he was expected to take, Governor Ralph Northam may have been smart to pass on seeking to veto state budget language preventing Virginia membership in the Regional Greenhouse Gas Initiative.
Nothing in the budget language prevents the Air Pollution Control Board from moving forward with caps on carbon dioxide emissions from Virginia’s larger electrical generating plants. It will just have to be a Virginia-only program, one possibly less flexible (and less politically rewarding) than membership in that northeastern regional compact. There will be no opportunity to buy credits from Rhode Island to exceed your emission goals.  
And the budget now contains language elsewhere making it crystal clear that if some future General Assembly does join RGGI, the revenues generated thereby will be a tax and the future General Assembly will be free to spend it at will. When RGGI membership was first proposed by Governor Terry McAuliffe, we were promised that any revenues related to the carbon credits would flow back to ratepayers to keep the cost impacts negligible. 
Thanks to this new language (here, see paragraph E at the end), that option is out the window.  On that point, the Republicans may have been too clever by half. I never thought Northam would veto that.
McAuliffe’s comic opera run for President is over, and that may have played a role, given he wanted to campaign on this. Sadly, its too late to stop the McAuliffe Memorial gold-plated wind turbines we will all get to overpay for, “testing” well-proven technology that makes no sense at that small scale.
A governor’s authority to veto budget language has a long and contentious history, and had he vetoed either of these a high-risk trip to court was likely. There is no clear line-item veto in our system. But wouldn’t it be nice to think that the Governor took to heart the warnings of the State Corporation Commission staff that the cost impacts could run into the billions, with the tax on CO2 a major component of those costs?
During the debate over the RGGI regulation, supporters responded to that charge by saying the SCC was considering costs that would accrue anyway. Dominion is already running its coal plants less often, possibly moving more quickly toward retiring them. Exactly! Thank you! Joining RGGI is unnecessary to meeting the goal of diminishing coal use and related CO2 emissions. That trend line started long ago and is being driven by (ahem) market forces – customers who demand non-fossil fuel generation, and the dropping cost of alternative forms of generation.
Coal is on the way out. It needs to be a deliberate process and rushing the plant retirements in Virginia is environmentally meaningless even if you believe every carbon atom is a devilish poison. What the environmentalists don’t want to accept is that natural gas is far preferable to coal, needs to be expanded, and a gas-nuclear-renewable mix is the best future for the state. And nuclear is on a knife edge over cost.
The environmental movement is predictably angry with the Governor’s decision, as reported in the Richmond Times-Dispatch. The Twitterverse lit up. But they will likely get much of the carbon reduction they seek and have only lost the other thing they sought – the hundreds of millions of dollars in annual revenue to be extracted from you and me by the carbon auction fees. That gives the movement a huge pile of money to play with in other states, and they had their spending plans in Virginia ready to go. 
The disputed and certainly debatable SCC staff white paper noted correctly that Virginia’s integrated utilities have little in common with the power companies in the other RGGI states, which do not own generation that ratepayers are required to pay off in full. They participate in vigorous regional markets for power from independent generators, a future that is not sought by Dominion Energy Virginia. Wouldn’t it be nice to think the Governor considered that incompatibility, as well?
Taking a step as important a joining such a regional compact, and the related one proposed on transportation, both with huge customer cost impacts, should not be a unilateral gubernatorial act. The General Assembly bills that required super majority votes for approval went too far, but Virginia should join or not by legislative action, signed or not by a governor.
The Governor has also guaranteed that RGGI membership will be yet another issue to put before the voters in dozens of legislative races in November, and that process has already started. Fine. That’s as it should be. The election will be decided long before any court case over these vetoes would have been, and we all know what’s coming if the Democrats prevail.
A version of this commentary originally appeared in the May 3 issue of the online Bacon’s Rebellion.

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More Background on the “Killer Corn” Study

Posted on May 14, 2019 by matt ohern
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In the last issue, I wrote about a new study published in Nature Sustainability, and the blog was entitled “Growing Corn Kills People”. After some difficulty I was able to obtain a copy of the maize study listed above, which I did not have on April 11.

The conclusion that growing corn (maize) kills people is developed by some well-educated individuals with your tax dollars.

Who are the professors behind the study?

In addition to Dr. Jason Hill at the University of Minnesota, Andrew Goodkind works at the University of New Mexico Department of Economics. Dr. Christopher Tessum is a research scientist at the University of Washington Department of Civil and Environmental Engineering. Dr. David Tilman gives his affiliation as Department of Ecology, Evolution, and Behavior University of Minnesota. He also lists as being associated with the Bren School of Environmental Science and Management, University of California, Santa Barbara.

Another author, Dr. Michael Clark, is associated with Department of Bioproducts and Biosystems Engineering, University of Minnesota, as well as its Department of Ecology and Evolution and the Oxford Martin Programme on the Future of Food, University of Oxford.

These brilliant people claim their focus is on the contribution of maize production to increased atmospheric concentrations of PM2.5 (fine particulate matter) – “a major cause of premature mortality in the United States and globally.”

In the earlier blog it was noted that air pollution from corn production in the United States will cause 4,300 cases annually of premature mortality (death). It is interesting to evaluate how these experts develop their human mortality (death) numbers. The actual study employed what is known as the Intervention Model for Air Pollution (InMAP) to conduct dispersion air quality modeling. The experts also used this InMAP model “…to estimate the premature mortality [death] in the United States attributable to maize production.”

Farmers will love the fact that the experts used “…the concentration-response estimates from a major epidemiological cohort study that INFERRED [emphasis supplied] the health effects of PM2.5 from the average annual outdoor PM2.5 concentrations at the place of residence of study participants in the United States.”

This is how the experts spend taxpayer money, supplied by the U.S. Environmental Protection Agency, to help you.

In addition to EPA’s assistance in developing this study, grant money also came from the U.S. Department of Energy, USDA, and from the University of Minnesota’s Grant Challenges initiative.

All of the authors claim no competing interests’ and all participated in writing the paper according to this study.

Readers will also be pleased to know “The maize production damage costs considered here are only part of the air pollution damages and the full environmental health costs of maize.”

As thousands of farmers sit and wait to start planting of 90-million plus acres of corn, know that EPA and the Departments of Agriculture and Energy have financed a study which claims your efforts to plant corn “…contribute to morbidity-related [quality of being unhealthful] life medical costs and reduce quality of life.”

Happy planting season. If you want to comment to these professors, the email for Dr. Jason Hill is hill0408@umn.edu.

A version of this commentary originally appeared in the May 7 issue of Farm Futures.

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