6 October 2021. Housing (pt 2) | Data
Housing and inequality; We can track you wholesale
Welcome to Just Two Things, which I try to publish daily, five days a week. (For the next few weeks this might be four days a week while I do a course: we’ll see how it goes). Some links may also appear on my blog from time to time. Links to the main articles are in cross-heads as well as the story.
#1: Housing and inequality
Guest post by Peter Curry (part 2 of 2)
Yesterday I explored the thesis of Sam Bowman, John Myers and Ben Southwood, who argue in their report ‘The Housing Theory of Everything’ that housing shortages are at least partly to blame for many of the major problems afflicting western societies. And further—that a lot of the reasons why we had housing shortages was to do with economic policy, and especially financial policy. One of the immediate effects is to increase wages for the high skilled, and flatten them for the less skilled. (If you missed yesterday’s post, you can catch up here).
Housing causes other problems. For instance, if people live closer together, innovation is much higher, and the effects fall off very quickly:
US evidence from over 600,000 patents filed from 2000–2010 suggests that low-density places can sustain specialised clusters, but that unconventional breakthroughs benefit from high-density urban environments. For idea-focused industries like software, localisation benefits dissipate within 10 miles; for extremely idea-focused industries like advertising, they dissipate within half a mile. Inventors who move from a smaller cluster to a bigger cluster tend to see large increases in their patenting productivity.
With regard to inequality, as Henry George pointed out in the early 20th century, landlords and landowners capture any improvements in the quality of an area. This is part of the reason that there is conflict over gentrification—because residents in poorer areas fear that any improvements in their local area will lead to them being priced out of it.
The economist Thomas Piketty famously demonstrated that an increase in the share of national income that flows to owners of capital, rather than to labour. But what was less widely acknowledged was that, at least in the US, it was really an increase in the share of income going to landowners, driven by increases in the cost of housing, and that this effect was particularly strong in states that have highly restrictive rules against building more homes.
The rising inequality Piketty demonstrated appears to have been largely driven by housing shortages turning, in one economist’s words, ‘houses into gold’. And this is the case across the Western world: housing inequality, not income inequality, primarily determines how much wealth inequality there is in most Western countries.
Meanwhile housing wreaks havoc elsewhere. Lower density cities mean that people walk less and drive more, which has a twofold impact—worsening climate change and air pollution within cities, and increasing obesity.
One of the most striking papers that the authors touch on is the idea, as proposed by Scott Sumner and Kevin Erdmann, that the 2008 housing bubble might not in fact have been a housing bubble.
House prices were rising rationally because too few houses were being built in places people most wanted to move to, not because of irrational speculation. The ensuing crisis was caused by a misdiagnosis of this problem, as the Fed hiked interest rates in a misguided attempt to ‘burst the bubble’. In support of this view, prices are now back above their ‘bubble’ peak, with no imminent sign of falling.
What is to be done? Enabling more housing construction is a critical factor (there are others), and Bowman, Myers and Southwood suggest allowing local populations to choose their local housing density, as per the argument for ‘Strong Suburbs’ a Policy Exchange paper from one of the three authors, Ben Southwood. Part of the argument is that communities need to be able to share in the wealth generated by building housing. The quote is from ‘The Housing Theory of Everything’:
No construction would happen anywhere that a majority did not opt for it, but streets that did would become extremely valuable, so there would be a big incentive for homeowners in high-demand areas to vote for greater density. voted for more density.
In the wake of the pandemic, it seems likely that suburbs will become more significant again. This particular proposal looks to have some collective action problems, as market based solutions often do. But we do need to find a way to make suburbs denser and more liveable.
#2: We can track you wholesale
The Markup has been running stories on the location data industry—the frankly shady group of firms who take location data when users decide to share it, and then sell it on. Mostly these are companies you have never heard of, although Oracle, Amazon, and Axciom are in the list of 47 businesses identified by The Markup.
(Created by Joel Eastwood and Gabe Hongsdusit. Source: The Markup. (See their data, including extended company responses, here.)
Of course, this whole business starts from the moment that an app asks for permission to access your location:
Serge Egelman, a researcher at UC Berkeley’s International Computer Science Institute and CTO of AppCensus, who has researched sensitive data permissions on mobile apps, said it’s hard to tell which apps on your phone simply use the data for their own functional purposes and which ones release your data into the economic ether.
“When the app asks for location, in the moment, because maybe you click the button to find stuff near you and you get a permission dialog, you might reasonably infer that ‘Oh, that’s to service that request to provide that functionality,’ but there’s no guarantee of that,” Egelman said. “And there’s certainly usually never a disclosure that says that the data is going to be limited to that purpose.”
Once an app does have permission to use some location data and sell it on (and it’s hard as a user to know when you’re giving this permission and when you’re not), the data joins a location data marketplace where
it can be sold over and over again, from the data providers to an aggregator that resells data from multiple sources. It could end up in the hands of a “location intelligence” firm that uses the raw data to analyze foot traffic for retail shopping areas and the demographics associated with its visitors. Or with a hedge fund that wants insights on how many people are going to a certain store.
Some applications combine location data with ad targeting software: there’s a whole subset of the ad industry that only does this.
US law is looser than EU law on all of this. In the US, there are almost no constraints on who can buy or sell location data. Even in the EU, trying to prevent use of your location data is ineffective, and as analysts observe, expecting consumers to do this work is unrealistic:
Ashkan Soltani, a privacy expert and former chief technologist for the Federal Trade Commission, said it’s unrealistic to expect customers to hunt down companies and insist they delete their personal data. “We know in practice that consumers don’t take action,” he said. “It’s incredibly taxing to opt out of hundreds of data brokers you’ve never even heard of.”
Based on their behaviour, consumers seem not to want to be tracked. Opt-in rates to location requests are typically 20% or less. But if we want to do something meaningful about this, we either need to put pressure on Google and Apple, which is where almost all of this data originates, or we need to get the law changed. Both companies have recently banned apps from their stores that share location data with particular data companies.
Democratic Senator Ron Wyden, who is concerned about data privacy, says they need to do more:
“This is the right move by Google, but they and Apple need to do more than play whack-a-mole with apps that sell Americans’ location information. These companies need a real plan to protect users’ privacy and safety from these malicious apps,” Wyden said in an email.
The location companies clearly see regulation as a business risk. According to a separate analysis by The Markdown, data broking businesses spent $29 million lobbying Congress in 2020. (Facebook spent $19 million, and Amazon $18 million, by way of a yardstick.)
If all of this doesn’t spook you enough, let me recommnd Vienna Teng’s ‘Hymn of Axciom’ as a tonic:
Notes from readers: Following yesterday’s piece on gendered fiction writing, Richard Sandford recommends the Twitter feed @manwhohasitall:
j2t#181
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