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National

Capital

Axios Capital

America's housing market is broken, but the deep and structural problems can't be fixed with technology.

Why it matters: The U.S. is in desperate need of more high-quality rental housing. Homeownership works for many — and doesn't work at all for many others, who might not be ready to settle down or might not have the financial means.

The big picture: Venture capitalist Marc Andreessen has invested $350 million, his largest check ever, into Adam Neumann's new company, Flow. 

Andreessen's blog post lays out his investment thesis, that renting a home is "a soulless experience." 

The details of how Flow will work are still vague, but they're likely to include amenitization — bells and whistles for apartment renters — as well as some kind of financial upside.

What they're saying: "Someone who is bought in to where he lives cares more about where he lives," writes Andreessen. "Without this, apartments don’t generate any bond between person and place and without community, no bond between person to person."

In New York, I've lived in both owned and rented apartments, and the community in my rental building was just as vibrant and tight-knit as anywhere I've owned.

Neighborhoods characterized by very low home-ownership rates — think Harlem, in New York, or Hialeah, in Miami — often boast deep and lasting communities stretching across generations and decades. 

Reality check: "Ownership per se doesn’t make you more invested in your community," Sam Chandan, the director of the NYU Stern Center for Real Estate Finance Research, tells Axios. "It makes you more invested in decisions in the community that impact the value of your asset."

Andreessen, for instance, opposed multifamily development in his home town of Atherton, California, on the grounds that such development "will MASSIVELY decrease our home values."

Between the lines: As a VC, Andreessen believes that technology and entrepreneurship can solve the problems of the rental market. (Naturally, this being Andreessen Horowitz, blockchain seems to be involved, somehow.)

Where rental housing is most successful, however — Germany is Exhibit A — it's not because renters "receive the benefits of owners," in Andreessen's formulation. Rather, it's because they have housing security and affordability.

German renters build strong community bonds the way we all do — just by getting to know our neighbors. They — we — don't need whiz-bang amenities like those offered by your local WeWork. 

Where it stands: Private-sector solutions like Flow, by their nature, cannot address the deepest obstacles to successful rental housing. 

It's entirely possible that Neumann will be successful at marketing buzzy properties to upwardly-mobile renters in fast-growing cities like Nashville. 

But that's not going to make a dent in the structural obstacles militating against America becoming more of a nation of renters.

Why it's so hard to fix the rental market

A lot of the reason for the lack of affordable housing in America is to be found at the local or even individual level.

Zoning is the biggest issue: NIMBYs like those found in Atherton are the rule, not the exception. Getting permission to build new multifamily housing is ludicrously expensive and difficult. 

Education finance runs a close second. So long as schools are funded by local property taxes, parents will prefer high property values to affordable housing, which often increases the number of children in local schools without raising tax revenues correspondingly.

The American dream also gets in the way. After looking at the behavior of older millennials, says NYU's Chandan, "the data suggests that homeownership as a natural and expected evolution is deeply ingrained in the American psyche." 

Federal policies that favored homeownership are already a lot weaker than they used to be. 

Former President Trump's tax reforms massively reduced the number of people claiming the mortgage interest tax deduction, and government-subsidized 30-year mortgages are widely available on multifamily buildings.

Once they get married and start a family, buying a house — and voting against further new construction — is just what Americans do, whether it makes financial sense or not.

Annual change in the total number of U.S. <span style="background:#ff7900; padding:3px 5px;color:white;">housing units</span> and <span style="background:#ffca8c; padding:3px 5px;color:white;">households</span>

Data: Census Bureau, Federal Reserve; Chart: Nicki Camberg/Axios

The Great Recession following the financial crisis of 2008 caused new-home construction — both single-family and multifamily — to fall off a cliff, and fail to keep up with U.S. population growth. But now it's rebounded, and more homes are being built than households are being created.

There's still a housing deficit we need to build our way out of. But Andreessen is wrong when he asserts that "our country is creating households faster than we’re building houses." 

The household formation rate is equal to the annual increase in U.S. adults, multiplied by the headship rate, which is always around 50%. Household formation plunged when the pandemic hit, but even pre-pandemic, in 2019, it was running at only about 900,000 new households per year.

New residential construction, on the other hand, is steadily increasing. Houses are being started at an annual rate of about 1.6 million units per year, well above the rate of household formation even after you account for older units being demolished.

Peter Boockvar, the chief investment officer at Bleakley Financial Group, tells Axios that multifamily homebuilders are responding to ultra-low vacancy rates by building fast.

Within a year or two, he says, if we continue to build at current levels, rents might even start to come down.

Why the rental housing market is so deeply broken

The problems with American housing are structural—and can't be fixed with technology.

Illustration of a "For Rent" sign in a window, the sign is torn in several places.

Affordable housing

Stock market

Top stories & latest news on the Federal Reserve, real-time data, plus the biggest shifts happening in the U.S. and global economy.

Economy

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

The Biden administration in recent days has been seeking to reassure Israel that it hasn’t agreed to new concessions with Iran and a nuclear deal isn’t imminent, U.S. and Israeli officials told Axios. 

Yes, but: Israeli officials said they‘re not reassured.

State of play: Iran gave a formal response this week to a “final” proposal from the EU, which has been mediating between the U.S. and Iran. 

That increased speculation that a deal could be close, and led to friction between the U.S. and Israel, which opposes a restoration of the 2015 nuclear deal.

The Israeli concerns were exacerbated by the fact that the country is currently in an election campaign. 

If a nuclear deal is announced ahead of the November election, it could give political ammunition to opposition leader Benjamin Netanyahu to use against Prime Minister Yair Lapid.

Driving the news: Over the last week, White House officials assured their Israeli counterparts that despite claims in the press, there have been no new concessions to Iran, U.S. officials said. 

But last Thursday, senior Israeli officials briefed reporters that Lapid had told the White House that the EU draft goes beyond the 2015 deal and crosses the Biden administration’s own red lines. 

Behind the scenes: The press reports surprised the White House, which on Thursday and Friday sought to reassure the Israelis once more that it wasn’t the Biden administration offering concessions but Iran, which dropped its demand the Revolutionary Guards be removed from a U.S. terror blacklist. 

“A deal might be closer than it was two weeks ago but the outcome remains uncertain as some gaps remain. In any case, it doesn’t seem to be imminent,” a U.S. official told Axios, describing the message that was given to the Israelis. 

Israeli officials confirmed there was intense dialogue with the U.S. in recent days, and that while most of the discussions remained behind closed doors and became more difficult, the press briefing was intended to make sure the White House understood how serious Israel’s concerns were.

Israeli national security adviser Eyal Hulata will meet his White House counterpart Jake Sullivan in Washington next Tuesday and Israeli officials expect more tough discussions. “We are not reassured. We are very concerned,” one told Axios. 

What they‘re saying: Israeli officials say that even though the discussions with the U.S. on Iran became tougher recently, Lapid has no intention of going on a public campaign against Biden around the nuclear deal with Iran. 

“Our policy is not to reach a public confrontation with the U.S. like the one that has taken place in 2015. We will not ruin the relationship with the Biden administration like Netanyahu did with Obama,” a senior Israeli official said. 

The White House National Security Council spokesperson Adrienne Watson said: “We are in intensive and constant discussions with Israel on Iran. National Security Adviser Hulata is coming next week to Washington. There is no greater supporter of Israel’s security than President Biden.”

Between the lines: Although the Israeli government’s official position is to oppose a U.S. return to the 2015 nuclear deal, several current and former senior defense and intelligence officials think differently. 

The current head of Israeli military intelligence, Gen. Aharon Haliva, told the security cabinet several times in recent months that a return to the 2015 nuclear deal will serve Israel’s interests. 

Defense Minister Benny Gantz also said in private that the current limbo with Iran is worse than a return to the deal. 

Former head of military intelligence, retired Gen. Tamir Hayman, wrote on Twitter Friday that the deal being discussed is bad, but still necessary in order to roll back Iran's nuclear program and leave time to prepare a military option.

What to watch: The White House and the State Department are still reviewing and studying the Iranian response to the EU draft agreement. It is not clear when the U.S. will give its response in private and in public. 

Go deeper: Not walking away from Iran nuclear talks shows "weakness," Lapid tells U.S.  

U.S. tries to reassure Israel over possible Iran deal

Israeli officials said they aren't reassured.

President Biden and Israeli Prime Minister Yair Lapid on July 14.

President Biden and Israeli Prime Minister Yair Lapid on July 14. Photo: Mandel Ngan/AFP via Getty Images

Iran deal

Iran

Israel

Conflicts, policies and powers are intersecting and shaping the world. Breaking news and analysis of national security, foreign policy and global crises.

World

2024 will be an election year like no other, as President Biden seeks re-election amid economic uncertainty, two wars and questions about his age. His likely foe, former President Trump, faces felony charges and vows revenge on his political enemies. Meanwhile, Americans generally are dissatisfied with those choices and are divided over immigration, race, education and more.

Politics & Policy

The U.S. State Department on Saturday called on Russia to release imprisoned political leader Alexei Navalny on the two-year anniversary of his attempted assassination.

Driving the news: A sharp critic of Russian president Vladimir Putin, Navalny survived Russian agents’ attempt to poison him in August 2020. After recovering, he was arrested in early 2021 and sentenced to prison in what the State Department has said were politically motivated charges.

 Moscow has denied involvement in Navalny's assassination attempt.

What they’re saying: “We again condemn Russia’s use of a chemical weapon to poison a political opponent, and call on the Kremlin to fully declare and dismantle its chemical weapons program,” said State Department spokesman Ned Price, in a statement on Saturday. “We also join Navalny’s family, colleagues, and supporters around the world in calling for his immediate release.”

The statement concluded: "We reaffirm our solidarity with Aleksey Navalny, Vladimir Kara-Murza, and other political prisoners in Russia, as well as the thousands of other courageous Russian citizens who, despite personal risk, confront the Kremlin’s lies with the truth."

Catch up fast: In March, Navalny was sentenced to nine and half years in prison after a Russian court convicted him of fraud. His appeal of the sentence was later denied.

The sentence compounded an earlier 2 ½ year sentence he was already serving for violating parole after fleeing to Germany to recover from his assassination attempt.

He is also facing additional time behind bars on charges that he is leading an “extremist” group – the Anti-Corruption Foundation, which he and two others launched to expose corruption within the Kremlin.

Earlier this week, Navalny tweeted that he has been placed in solitary confinement in the Russian prison where he's being held.

The big picture: Russia's treatment of Navalny is a part of Moscow’s broader effort to eliminate political dissent and hamstring groups advocating for human rights and democratic reforms.

Go deeper: Live updates: Russian invasion of Ukraine

U.S. calls for Putin critic's release on anniversary of assassination attempt

“We again condemn Russia’s use of a chemical weapon to poison a political opponent, and call on the Kremlin to fully declare and dismantle its chemical weapons program."

Alexei Navalny is seen on the screen during his appeal of a nine-year prison sentence in a Moscow court, on May 24, 2022. Photo: Contributor/Getty Images

Russia

A judge declined this week to block a Georgia election law that prohibits handing out food and water to voters waiting in line at the polls, the Associated Press reports.

The big picture: The new rule is a part of SB 202, an elections overhaul passed by Georgia lawmakers last year. Advocates argue that the reforms disproportionately burden voters of color and Democratic-leaning voters. 

The Department of Justice, Asian Americans Advancing Justice-Atlanta, Black Voters Matter Fund and GALEO are among the eight plaintiffs challenging various parts of the election policy overhaul.

Why it matters: The new rule will remain in place for the November general election, which features a pair of competitive races. 

Republican Gov. Brian Kemp is seeking another term in a rematch against Democratic challenger Stacey Abrams, and U.S. Sen. Raphael Warnock (D) is facing a challenge from Republican Herschel Walker.  

Details: The state argued that the new ban would protect against conditions at polls that could lead to worries over potential illegal campaigning or vote buying. 

Voting rights groups argued that the ban infringes on their right to free speech.

But, but, but: Although U.S. District Judge J.P. Boulee sided with the state, saying that it's too close to the election to make changes, he said the voting rights groups may ultimately prevail on part of their challenge.

Changing the rules from the primaries for the general election could cause confusion, he added.

What they're saying: “While Georgia’s cruel ban on line relief stands for now, we look forward to presenting our broader case against SB 202 at trial, where we will prove that many provisions in the legislation violate federal law and the Constitution,” said ACLU of Georgia voting rights attorney Rahul Garabadu, per AP.

Go deeper: Breaking down all of Georgia's election lawsuits

Judge upholds Georgia law prohibiting food, water distribution at polls

Advocates say the ban disproportionately burdens voters of color and Democratic-leaning voters.

Photo by TAMI CHAPPELL/AFP via Getty Images

Georgia

Former President Donald Trump is considering filing a motion that calls for a "special master" to review the evidence seized by the FBI from Mar-a-Lago, his attorney said on Mark Levin's radio show.

Driving the news: Trump's attorney Jim Trusty told Levin that there needs to be a "special master" who can review the evidence as a third party to help "vindicate the Fourth Amendment rights of the president."

"We have privilege issues that are extremely important here," Trusty told Levin. "We do think that one of the benefits of the special master, if the master agrees with us, is we can stop DOJ in their tracks when it comes to inspecting these documents."

He said the special master "won't be the answer to everything."

Trump wants "special master" to review evidence taken from Mar-a-Lago: Attorney

Trump's attorney Jim Trusty said a new motion may challenge the FBI's search warrant altogether.

Axios

Saturday's top stories

Why the rental housing market is so deeply broken

U.S. tries to reassure Israel over possible Iran deal

U.S. calls for Putin critic's release on anniversary of assassination attempt

Judge upholds Georgia law prohibiting food, water distribution at polls

Trump wants "special master" to review evidence taken from Mar-a-Lago: Attorney

Louisiana woman denied abortion after fetus diagnosed with fatal condition

Twitter suspends Florida GOP candidate who called for violence against federal agents

Pence says he didn't take classified material when he left office

Supreme Court temporarily blocks Georgia law, ruling it harms Black voters

Ukraine says Russia is planning "false flag" attack at nuclear plant

TV money is breaking college sports