Greetings, and welcome to ZacCast, your official podcast for local government nerdery. I'm Chad, that's Pat, and today we have a very special guest. Chuck, I don't think that our audience really needs much of an introduction-

Oh!

... but I'll go ahead and, uh-

Please.

Uh, so the, uh, founder and president of Strong Towns, Chuck Marohn. Thank you so much, Chuck, for, for joining us today.

I'm, I'm really, really happy to be here. I, I love the work that you guys do, and it's really cool to be able to come on and chat again. So yeah, let's have a... I'm looking forward to this. I- I've had it circled on my calendar for a, a week, so this is cool.

Good. A, a proper chat, as they say over across the pond.

That's right.

So Chuck, we first met you, uh, a couple of years ago when you were doing your book tour for the Confessions book. Um, so I'm gonna make this corny joke. As my daughter, who is a big Swiftie- ... she would call that your Confessions era.

Yes.

So now you're in your housing era. Uh, you're start- your tour, uh, is this your, like, second leg of a book tour that just started?

Yeah. Yeah, my daughter's a huge Swiftie, too. In fact, she wanted to watch the Chiefs game in the hopes of seeing... Like, this last weekend, in the hopes of seeing Taylor Swift, and I'm like, "You've gotta be joking me, kid." Um, so yeah, this is the second- the book came out this last April, and we did a, a tour then, and then I took part of the summer off. And then now, starting in early September of, of this year, I'm, I'm kind of booked until Christmas. And I th- I think, like, officially there'll be some stuff next winter, too, like, starting in mid-January, but they usually give me, like... I usually get, like, six or eight weeks off at Christmas time to-

Nice

... uh, catch my breath and do other things. Yeah. Yeah.

So, uh, for those of you in the DFW area, Chuck, you'll be up here next week, October 1st and 2nd, 3rd. Is that right?

Yeah, it's the first week of October. I know I'm gonna be in, in Addison and Duncanville, and, um, uh, I'm gonna be in Dallas. There, there's a, there's a bunch of different things. Some are open to the public, some are, are not. If you go to strongtowns.org-events, um, you can see not only all the events in, in Dallas but all the events coming up, period. Um, so yeah, everything.

Perfect.

And, and, and, you know, as new things are added, they're added there as well. So yeah.

Great. Well, we'll add that in the show notes so everyone can access it.

Cool.

So your new book is called Escaping the Housing Trap. Um, why don't we just dive in, and can you just tell us what is the housing trap?

Yeah. Housing, obviously for everybody listening who has a house, housing is shelter. It's where you live. It's your home, your castle, your place. Um, and even if you're renting, right, like, "This is my abode. This is the place where I live." Housing in the United States is also the foundation of our economic system. It literally is the... You know, a, a derivative of housing bundled together and securitized, it, it forms the reserves of our banking system. Uh, housing is a financial product. When we look at housing as shelter, uh, when housing goes up in value, it makes it less attainable for people. Um, but when we look at housing as an investment, when housing doesn't go up, it makes it a bad investment. Um, you have this tension then where, from an investment standpoint, housing prices need to go up. They kind of always have to continue to climb. From a shelter standpoint, the more housing climbs, the harder it becomes to attain, uh, the more scarce it becomes, and it has all these kind of negative social impacts. This is the trap, um, because we have created a system for ourselves where housing prices have to go up, and we've created a system where housing prices can't go up. And how do you resolve that? That is the, the, the trap we need to essentially deal with and get out of.

We're all pretty familiar with what the housing market and the, like, the financial side of it looks like right now, right? 30-year fixed rate mortgages, this all seems natural to us.

Mm-hmm.

But obviously it's not. So what did it look like before we started this process? Like, pre-Depression era, what did the housing finance look like?

It's a great question, 'cause I, I think we often think that, like, a 30-year mortgage is a natural product in the marketplace, and it- it's not. It's a, it's an artificial product that we made in the Great Depression to solve a problem, and that problem was people getting kicked out of their homes. It- before the Great Depression, if you were gonna get a mortgage, it was gonna be hyper-local. You were going to have to have 50% down payment, so y- a, a huge down payment compared to what we have today. Um, you were going to get that mortgage from a local bank. It was gonna be financed in over a short period of time, so a three- to five-year loan, where you would almost certainly pay interest only, and then at the end of the loan period, have a large, uh, balloon payment, where you would either pay it off in cash, uh, or you would recycle that loan over into a new loan. This kind of split the difference in risk between the property owner, who had to have more equity in the game, more skin in the game, more investment in order to do it, and the risk that the local bank was taking. Not only that you would potentially walk away, right? They want you to have a lot of skin in the game so you won't walk away from the loan. Um, but also, uh, in case the market shifts, in case interest rates go up, inflation goes up, market conditions change. It's a local bank that's literally taking your money and lending it to someone else. It has to be, like, super, super secure. When the Great Depression hit and housing prices started to drop and people had to refinance their loan, what they found is that at a lower price, the bank would actually lend you less, and there's a gap now between what you owe and what the bank will lend you because your house went down in value. And that gap, you would need to come up with cash during that refinancing period-... in order to, or that rollover period, in order to make the transaction work. And a lot of people just couldn't do that, couldn't come up with, you know, what, what in today's dollars would be the equivalent of, like, tens of, tens of thousands of dollars. They couldn't come up with that cash, and so they got kicked out of their houses. Their house got foreclosed on and sold into the market. When you foreclose on houses in a housing downturn, um, what happens is you drive the price down further, because the bank will sell that house into a declining market. When the market declines further, more people, when their loan comes due and rolls over, are not able to come up with that cash difference. They get foreclosed on, and you have this downward deflationary spiral that sets in. We stepped in, and I say "we," the federal government stepped in, this was FDR's kind of first 100 days, stepped in, said to local banks, like, "Don't foreclose on people. Sell the federal government the loan. We will take over the servicing of it." They then went to people and said, "Hey, how about we make that payment over 12 years instead of three? How about we add some principal to it? Um, we just wanna keep you in your home." Eventually, that extended to 15 years, and then 20 years, and then, uh, we developed the 30-year product that we're all known- you know, we, we all experience today. The idea was if we can lower down payments, use, uh, mortgage insurance and other products to make that less risky for local banks, if we can extend terms out over longer periods of time, if we can lower interest rates, um, we can make housing at a more, uh... W- we can, we can allow people to stay in their homes and finance these things i- in a way where, uh, they can build up some equity and some, uh, kind of safety net over time for themselves in this period of, like, massive financial turmoil.

So I guess, can you-

So in the book, you go-

Sorry.

No, go ahead.

Sorry, I was just gonna ask-

Sorry

... a follow-up question to that. So can you compare that a little bit to, like, the '08, '09 crisis, and like-

Mm

... how the government handled it there?

Yeah, man, 'cause that, by the time you get to '08, '09, you have a product that had gone from, in the Great Depression, being, um, a very hyper-localized project, where the, the federal government was coming in and, like, lending local banks a hand to kind of-

Mm

... fill this gap in the market, to now a product that is fully nationalized. Y- no local bank holds 30-year mortgages. They just, they just don't.

Yeah.

If you get a mortgage, it is, you know, maybe processed at a local bank or processed by a processor, and then it gets sold off to a bundler. The bundler takes it, bundles it with a bunch of other mortgages, it cuts it up into securities, and then sells those securities out into the marketplace. It is a fully financialized product now. And so by the time you get to 2008, 2009, you have, uh, something that is divorced from kind of, like, the local dynamics, to the, to the point where, you know, famously, you had the, the NINJA loans, the no income, uh, no job loans, right? You had the no-doc loans. W- w- we- this is such a financialized product that we actually didn't really care about who created the product or what their capacity was to pay it off. Uh, we needed mortgages so bad to fuel this intense demand for this product, uh, amongst every bank, amongst every pension fund, amongst basically every sector of the economy who wanted to buy mortgage-backed securities, that we didn't care how the mortgage was originated. We didn't care what the house was valued at, that the assessment was right, if any of that stuff went on. Um, we just needed, uh, that mortgage paper to be sold off, hypothecated, you know, all the stuff that we did with it. And so what you saw in, uh, in '08, '09, is, like, the divorce of the market from reality. Reality was what we could afford to pay and what, like, was responsible from a lending standpoint. Um, the market was doing something completely different. It, it was, it was, in a sense, betting on bets on bets.

Yeah.

And, uh, y- y- I, I think '08, '09 is the... Y- you could, you could just look at that market at that point and say, "There's a market for shelter that we all experience, and there's a market for financial products that is driving, you know, the overall economy today." Um, '08, '09 is like, those are clearly two separate things.

It's a great scene from the movie, Big Short, right? They're at, you know, the club. This is a family program. I won't go into too much detail there, but they're in the club, and he ask the employee of that club, the female employee of that club, uh, about her housing, and she goes, "Well, that's just one of my..." I think it was, like, "... one of my three mortgages," right?

Okay, let- let's say, let's, without making this a dirty thing-

Yeah

... she was a stripper, right?

She was a stripper, yes.

And she's like, "I got five houses."

Yeah.

You know, "I got five of these things." Like, what, what are you talking about?

Yeah.

They were... At that point, y- you saw people seeing housing as an investment, and it was not, um, institutions, it was not hedge funds doing this-

Mm

... it was individuals playing this investment game. So the, the scene that I like, the, the one where they went down to Florida, and they were talking to the guys who were the, the basically, like, the realtors selling the homes to people, and he said, "Why are they, why are they confessing to their crimes?" And it's like, they're not confessing, they're bragging.

Yeah.

'Cause they were talking about how they would get people into homes. They didn't have a job. They didn't have any documentation of their income, but they'll sign the paper, and then, you know, we just sell it off on the market. Um, this was the crazy stuff we were doing because we needed... I, I, I think this is the big ch- change that happened between '08, '09, and today, is that we needed, in a sense, investors to keep propping up this product, and at that point, the investors were-... little suckers who thought they could get rich quick on housing. Today, the investors are actually, like, institutions, right?

Yeah.

They're hedge funds. There are others that are being backed. You know, they're large venture capital, they're large capital holding places. So it's the same effect, it's just a different, a different source of the gambling, in a sense.

Yeah, and, and I think that's a, that's an interesting point of view, especially, uh, of what it was then in '08, '09, where you had individuals, um, you know, that were going in and buying it. Now, you have BlackRock, right? Some of these other players.

Yeah.

Um, we can track some of that within our, our system for cities that we do property tax analysis for. Uh, and so that's pretty interesting to see. We, we have seen a little bit of a slowdown in that over the last couple of years. Uh, obviously, BlackRock has slowed down their purchase of single-family homes in some areas. I know they've publicly disclosed some of that. But it was wild there for a while, them buying, you know, entire streets of D.R. Horton subdivisions.

It was wild, and I think that there's a- there's, there's a couple conversations that are going on about housing today that are, that are kind of myopically, um, advocacy-driven, that I think misses this nuance of the conversation. So part of the, part of the conversation about housing today is that there's not enough of it. We need to build more, and there's people who are hyper-focused on that issue. And I agree with them largely that, like, we do need more homes. But I think part of that conversation wants to deny that any of this, like, financial chicanery, this, this, this financial distortion is going on. You guys understand, and I'm, I'm, I'm guessing your audience understands, the idea of a market maker. You know, the person who is willing to bid the highest kind of sets the price that everything else then kind of falls in line behind. And, I mean, we've all experienced the dynamic where the house in your neighborhood sells for way more than you think it's gonna sell for. That all of a sudden sets the expectation for what the next home listing is. And what you see is that the market maker for, uh, you know, six, seven years, uh, were these investment firms. They were, they were the BlackRocks. They were the, uh, the other people who were buying up these single-family homes, and they were paying all-cash offers, the highest price in the, in the area. They were buying up, as you said, whole blocks of stuff. And it, it, it might only be a small fraction of the market. I mean, I think that's debated. There was an article I saw this week that said, a third of the, uh, of the homes sold in the last, uh, four years in Tampa were by investors- sold to investors. Um, but I think, you know, other markets might have less, might have 5%, 10%, but that 5%, 10% is driving the market price for everybody else. Everybody else is downstream of that. Um, as the... What, what I have seen, and what I think I've seen others report, is that markets like Florida, markets like Texas, that had kind of the extreme run-up, is now kind of the first ones to have this, uh, like, retrenching a little bit today. And you're seeing that the investors are starting to, if we want to say, divest, I, I think it's too early to know exactly how deep this is, but starting to move their money in a protective kind of way, right? The momentum... If you look at this from a trader standpoint, the momentum is, is gone, and so whatever momentum trades you're making are out the window. And typically, what happens in a market cycle is, after you get through the momentum trades, now you look for value trades. Where can I put my money in a safe place that is likely to weather whatever, like, tr- you know, downturn comes from the craziness that we just experienced? It feels like that's where we're at in the housing story right now.

If we can, I want to go back a little bit to the narrative-

Yeah

... uh, in the book, right? Like, we don't need to go through the whole, you know, 100-year history, 'cause obviously it's a lot to, to cover, and people should buy your book and read it anyway. But so yeah, in the introduction to your book, you reference Seeing Like a State by, uh, James Scott, where, you know, he talks about high modernism and this sort of scientific, um, rational management approach, right? And Patrick and I are fully aware of this, because that's the foundation of our field, right? The first thing that we learn in Public Administration 101 is, you know, Taylorism, Woodrow Wilson, the progressive movement, let's, let's bring rationalism and scientific management to cities. Um, but I, I also see, it... Like, in software, we have this thing called technical debt, which is, uh, you know, say I'm, I'm working on something, and, uh, a bug report comes in, and I gotta go fix it real quick. So in order to fix it quickly, I'm gonna do what I need to do, and it may not be the most elegant solution, but it's gonna work, right? And then I'll come back to it later, right? Like, that's a promise I'm making to myself, uh, like an IOU, that I'll, I'll come back and fix this later. And then this happens again, and again, and again, and again, and six months down the road, if I'm trying to do something else, I realize I've introduced a bunch of cruft and brittleness to, to my, my application. And I have to kind of unpack all of that, right? So it's just the, the sort of net effect of small choices to fix today's problem. So I, I'm curious for you, do you see this more, like, the whole pros- progress from, you know, pre-Depression to today, as more of a scientific management issue or more of a let's address this concern we have today, and then we'll deal with those consequences whenever they come up?

I love this. I love this question. This is why I, this is why I like you, Chad, um, 'cause you and I, I feel like, could talk for hours about this. The... O- obviously, there is a Seeing Like a State, high modernist approach here, and I don't think that that might-

Can I interrupt you real quick, Chuck?

Yeah.

Okay. If anyone is listening to this and hasn't read that book, and you're running a city, you need to go read it right now. Like, it's a great book. Anyway, I was- I apologize, I just... Go ahead.

... No, it's a, it, it is a fantastic book. Because I, I feel like the essence of that book is just noting that we can do very rational things in the short term. Like, we can do really rational things when we make complex systems appear to ourselves as they're only complicated, right? Like, if we can take all this massive complication that is a city or is a, a family's decision to buy a home, is it- buy a specific home in a specific neighborhood, the, the infinite number of factors that come to bear on those decisions, and we can simplify them down to a zoning district, a, a street width, a city population growth rate, things that we can measure easily. What we do is we make it hyper-efficient to do that transaction over and over and over again. We make it hyper-efficient for cities to grow in a certain way. We make it hyper-efficient for markets to trade in a certain way. Um, we, we distill down the essence of someone's, you know, entire history to a credit score, like, a, a, a finite number that describes everything about you. Um, we do these things out of efficiency, and that efficiency gives us, like, massive gain, right? And you can point to that. I mean, y- y- as you said, your whole profession is based on that. I'm a civil engineer. My whole profession today is based on that, right? Planning is based on that. What this all ignores is the massive underlying complexity, and I feel like Seeing Like a State points out just brutally over and over and over and over again how this organizational function, this i- this, this need to increase efficiency, to kind of, uh, have things be able to be counted and tracked and, and noted and taxed and, and everything else, simplifies and dumbs systems down in a way that they lose their... They lose their dynamism in the short term, and in the long term, that dynamism wells up from, that suppressed dynamism wells up from underneath and sows chaos. Like, creates the bubble that bursts, the financial correction that, that, that burns everything down, the forest fire that is suppressed, that, that then picks up and, and, you know, burns 10 times the area that it otherwise would've. These are all the symptoms of suppressing volatility and pretending that systems are overly simplified when they're actually really complex. And I, I, I, I think that there, you know, we have to acknowledge that there is this natural trade-off. As humans, we don't want to experience stress. We would like things to be efficient and easily categorized, and, and, and we'd like to see all the gains from that. We don't want volatility. We don't want stress. We don't want change. We don't want to be forced out of our comfort zones. And when we become very, very affluent, we can almost will that smoothness, as Nassim Taleb would call it, into existence for a period of time. And I, I, I, I do feel like the housing market is kind of the, uh, hyper-personification of that because we've made this market that is hyper, hyper-efficient from a trading standpoint. But what you are seeing is that the downstream negative impacts of that is including now widespread homelessness, widespread difficulty into getting in a home, widespread difficulty in keeping a home, um, i- widespread difficulty in affording things, so the idea that we push people to take home equity loans to continue to consume and, and, and keep up with things. All of this kind of financial squeezing that we've done of society is the by-product of this hyper-efficient, y- you know, centralized, top-down, easily managed system that we've created. Um, I'll also point out, in 2008, as you guys remember, there was a period of time where the government, and let's just say that, like, broadly, I mean, Henry Paulson, uh, Nancy Pelosi, George W. Bush as president, came to us and said, "If we don't give seven major banks in this country a trillion dollars in the next 24 hours, there will be no food on the shelves in three days. There will be no money in ATMs in 48 hours. This entire economy is gonna collapse." And I don't know. If you tell me, like, that is an option on the table, like, we've built a system where economic collapse is not, like, a one in 10 million, uh, possibility, but it's a one in 10 possibility? To me, that's a pretty bad economic system, no matter how much efficiency it gives you.

Do you think there was a point along this process where we crossed the Rubicon, or, like, where we, we could no longer turn back, the trap was set, and it was, it was inevitable?

I have struggled with that question a lot because it, it really is a question about human behavior as much as it is a question about, like, economics, right? You, you can go back to, um, the 1970s and read reports that say the same exact thing we say today about housing. "Housing is too expensive. It's unaffordable. There's people left behind. We need to make it more affordable for families." We- they use the same rhetoric then that we use today to describe the housing market. I feel like the, the big decision we made that was an incorrect one was at the end of World War II, we did not, in a sense, put things back the way they were. We did not go back. We did not say, like, "The New Deal stuff was a temporary thing. We're now going to kind of relocalize housing finance again." What we did is we said, "Wow, these products worked really well to stop a downward spiral. Let's use them to juice an upward spiral. Like, let's, let's use them to juice the economy." And I, I feel like that was a wrong decision, although-... A- again, I'm, I'm not gonna judge people, 'cause I kind of understand the- I mean, you were, you were demobilizing all these troops, you were shutting down all these industries of war. The idea that you were gonna go right back into depression was, was kind of obvious to the people there at the time. They did this to avoid that pain. And I mean, look at the generation. They had gone through a depression, they had fought a global war with tens of millions of people dead. I, y- I, I kind of cut them a little bit of slack, but I think in his- in history's terms, if they could have taken the capacity they had and used it to relocalize things, I think we would've been better off. I think in the late 1960s, early 1970s, when we had the first kind of major bout of post-World War II inflation, um, again, we, we had created this product that didn't work in an inflationary cycle. Um, the inflation, like, revealed that to us. And the reason why it doesn't work in an inflationary cycle is when inflation goes up, interest rates go up. When interest rates go up, the banks are left holding these lower interest rate notes. Um, y- you see this today where, like, I have a 3.5% mortgage, or 3 and 5/8ths mortgage. I'm not in any rush to go buy a new house and get a new house at 6.5 or 7%. This is a great deal. All kinds of people have low interest rates, and they're staying put. The problem is, is that the banks are now holding notes that pay 3.5%, and in order to get deposits, they have to pay 5%, 6% or more. So they're, like, slowly losing money every month. When that started to happen at the end of the 1960s, I think we could have, um, in a sense, reset things and kind of relocalize things again, and instead, we bailed out the banks, we went bigger, and w- since then, we've been on this, like, rollercoaster of a bigger bubble, a bigger bubble, a bigger bubble, and now today, the, the biggest bubble of all.

So I, I think to add to that, that makes it really interesting, is, is when you look at housing specifically, um... And actually, Chad sent me another podcast this morning, and I listened to some of this as well. Um, but when you look at housing now, I mean, there's a significant housing shortage-

Yeah

... and an affordability issue within housing today, right? Is that exacerbated by the way the government set-up occurs within the financing market?

Yeah.

Like, d- does it- is it so controlled by FHA and HUD on how things get built and how financing is done on the back end? Because the banks are trying to get rid of that 3.5% note, right? Like, they're trying to get that out of their books and off their books as fast as they can, uh, and then go sell it out there to a mortgage-backed security market, right? That's basically what they're trying to go do. And so the question is, is, is: How do we... 'Cause clearly we need to accelerate housing, and we need to make housing more affordable. I, I think, uh, Chad and I have talked about this quite a bit, but it's- that's one of the areas in the American system of government where the two-party system actually agree with each other right now. If, if you look at red states, blue states, they're all kind of moving the same direction when it comes to housing. That tends to be, take authority away from the localities.

Right. Right.

Seems like that's the theme right now, right?

Yeah.

Um, so I guess my question is, is, like, i- is it, is it the finance market that exacerbates that problem?

Yes. So this is where I feel like the, the- there's a, there's a part of the YIMBY conversation, and it's not all of it, but it is, it is a part of it, where I think there's a, there's a nuance here that is missing, and it comes to this, this financial part. There is a sense that if we just build enough housing, we can, in a sense, crash or l- let's, let's try to make it less pejorative. We can make the appreciation of housing slow down, and we can, in a sense, build enough supply to meet demand, where housing prices equilibrate or, in a best-case scenario, drop a little bit, right? I, I, I think that in a theoretical, like, hyper-libertarian supply and demand kind of way, there's, there's some logic to that. Like, that makes sense, and if the world worked that way, um, I can see where building a lot of units would actually fix this. But because we all finance units in a sense the same way from the same place, you have to recognize that the product is not a house that you buy. The product is a financial product that is created when you take out that loan. Just this week, uh, there was a report that I saw about a hotel chain, where the hotel, uh, there was a hotel that had been built, and I, I think it was in the Dallas area. I can't remember. There was a hotel that had been built, and then two other hotels went in afterwards, right next to it, and the pro forma on the first hotel no longer worked because, uh, there were too many uni- ho- there were too many hotel units in that area. Um, because of that, uh, the one was experiencing... First, they were experiencing vacancy rates higher than what they had projected, and then they had to lower their, their, their room rates, right? Like, supply and demand. Uh, there's too much supply, not enough demand. They had to lower their room rates, so they were able to get their occupancy rates at where they needed them but at a lower monthly or a lower, you know, nightly rate. They were losing money, and they sued. Um, I can't remember who it was, it, but it was, like, in part of this investment chain. They was- they started these lawsuits because they're like: "You knew these other things were coming. You didn't factor that into the pro forma, da, da, da, da, da." I, I looked at this, and what you recognize right away is that the, the thing here is not the fact that there are, there are bedrooms to fill.... the f- the thing that's driving it is the fact that the money, uh, the money side is not working out for these investors. The ramification is this lawsuit and this internal squabbling, like, okay, who cares? But the ramification for people downstream is that they're not gonna be lending anytime soon in this area till the market rebounds and prices, and all of these things are full. And not until all these things are full and everything is squeezed is there gonna be another unit built in this place. Take that insight over to the multifamily market. Take that insight over to the single-family home market. When, when banks are doing these things, they're not looking at y-y- you know, when they're doing construction loans, when they're building this stuff, they're not looking at you and what you're willing to pay as a, as a purchaser. They're looking at the overall market itself, and am I gonna get stuck... You know, I'm gonna, I'm gonna do this construction loan. I'm not gonna get that retired for six months, 12 months, two years, three years. Um, you know, on some of the bigger commercial projects, it might be four or five years. I'm not gonna get this loan paid off. Is there gonna be a market for that out in the future? And as soon as the market stops climbing drastically and starts to level off, what they do is they pull back the lending. They, they make the lending harder to get, harder from a construction standpoint to get. They slow down because they don't wanna be left holding the bag. Y-you- we have created a market that is really sensitive to price increases, and the capital will stop flowing when the price increases slow down. Um, and what that means is that you will never solve the problem by building and financing things the way we do now. If the problem you're trying to solve is affordability, and we're trying to take from this massive housing bubble down to something that would actually be affordable. I mean, we're at n- nationally, you know, double what historically would be an affordable rate. I realize that we've adjusted our expectations up, and we're all kind of, like, comfortable with higher housing prices, but historically speaking, we are about double what a family would be able to afford for a home price. If we were gonna cut home prices in half, it would not only destroy the entire economy, I mean, it, it, it would take down every bank, it would take down every financial institution. If we drop housing prices by 10%, 20%, it creates a recession. It creates a massive, like, problem. They're so sensitive to housing prices going down that they pull back lending when it happens, and you can never, ever, ever fix housing prices as long as we finance everything that we build in the same way we're financing it today.

Yeah, it's, it's not right at all, but I literally had this conversation with one of our clients, a city. Uh, and they were talking about how they were having a lot of trouble... They, they need housing, right?

Yeah.

And they, they need to drive housing, but they were having a lot of trouble, and they were having conversations with all of the major residential developers. It's a north, north, uh, Texas, uh, city. They were talking to all these major residential developers, and they just weren't getting anywhere. And I said, "You know, funny enough, you're talking to the wrong people." And they said: "What do you mean?" I said: "I don't like this market, but you need to go find the VP of the region for JP Morgan, right, and go have that conversation. Because ultimately, the drive that's gonna be there, you need to go meet with your FHA and HUD administrator, and you gotta go meet with all these people. 'Cause s- somewhere in your debt stack, something is not right in your market, and it's probably debt-related. It's not related to the actual builders themselves, right?" They're gonna buy dirt where they can get financing.

Uh-huh.

Uh, and, and those, those market dynamics to me are goofy because it's not the actual market, right? Uh-

But it, it-

... you know, it, it's not the consumer-driven market as much as it is, it's the finance-driven market.

I think that's what's so confusing to people because it is not... I, I think that is, like, the most succinct way to say it. It's not a consumer-driven market. It's a, it's a financial-driven market, and that is what, as a mayor, as a city council member, like, why won't people do this? As a consumer, like, I'm ready to pay. Like, where's the product? And I think there's this disconnect, and that disconnect, it, it, it makes it confusing and disorienting for us in this real world, not in the financial world, because the market is suddenly, and it's been decades now that this is true, but it really feel it now, it's non-responsive to us, right? It doesn't respond to... It doesn't respond to what I can afford to pay. It doesn't respond to what I'm asking for. It doesn't respond to what I need. And, like, markets are supposed to respond to consumer demand. I think what we don't recognize is that the consumer is a consumer of financial products, and the supplier is a supplier of financial products, and we just, like, live in there. We're just, we're just... Like, we are I- I'm gonna use a metaphor. If you're making gasoline, you start with oil. We're like the tar and the asphalt of the refining process. We're like the leftover by-product of that process. We're not the thing they're trying to get, but we do have some value that, you know, you can slough off at the end.

Okay, so Chuck, you tend to be a little bit more critical of demand-side approaches to housing affordability.

Mm.

Is that fair to say?

I, I'm critical of the idea that this is just a simple supply-demand thing-

Mm-hmm

... and that if we just build, build, build, build, build a bunch of five-over ones and skyscrapers and s- tracts of single-family homes, that somehow housing will become affordable. I'm, I'm really critical of the oversimplification of that narrative.

For sure. But in terms of, like, um, policy proposals about, you know, down payment support and things like that?

Oh, my gosh! You know, when you... When we lower interest rates, the idea was, well, we'll make housing more attainable. No, you, you just make someone with the same payment able to pay more, right? Um, when you give people $25,000 down payment assistance, what you do is you allow them to pay $25,000 more than they otherwise could afford. And in a marketplace that is, you know, especially a tight market, a market where we, we don't have enough homes to go around, you're just making housing more expensive for everybody else. Yeah, these are, these are not helpful policies.

Well, I mean, honestly-... even the 30-year fixed-rate mortgage has the same effect, right? Because if you can reduce the monthly cost by extending that term out- I mean, that's why you're- you see 84, 96-month financing for vehicles right now-

Mm-hmm

... because those cars are costing $100,000 and that's the only way that you can get-

Yeah

... the monthly payment to a, uh, to a, an affordable amount.

Well, Chad, I don't know if you've seen, but we're, we're... I mean, I wrote an article this week about the 40-year mortgage. There, there are, there are serious policy people discussing 40-year mortgages for the same exact reason. Like, if we spread out the payments over- Okay, Greece goes bankrupt. What do we do with Greece? We say, "Okay, you've got this debt that's 20-year bonds. We'll make them 50-year bonds. We, we don't forgive your debt, we don't lower it, we're just gonna make you pay lots of interest for the first two decades." Th- th- what, what we do with a 40-year mortgage is we say, "All right, here's the housing price. You can't afford it, um, with a 30-year product. We'll make it a 40-year product so that you can afford to pay that price." Well, what it means is that for the first eight years... um, I'm sorry, for the first 10 years, you're only gonna gain 8% equity. You're actually going to just pay almost all interest for that extra decade that you've added to your mortgage. Th- this is a horrible way to make people into, you know, debt servitude forever. We talk about, you know, an ownership society. If you get a 40-year mortgage, you're essentially renting a home from a bank, is what you're doing, right? You, you, you, you may, um... U- unless you can make that home go up in value, right? Then you're, then you're doing an investment, and you might not get any equity by paying off that loan, 'cause you're just paying interest to a bank. But if the loan, you know, if the house doubles in value in a decade, you've made a bunch of money, the same way that everybody else is making money by having an investment portfolio. It's no longer a home. And that's the... To me, the more we do this demand-side stimulation, the, the more we're buying into the game that is actually, like, choking off the market and making housing really toxic for people.

So then, without, like, revealing, you know, any spoilers for those who haven't read the book yet, what does a Strong Towns approach-

We can do spoilers. I'm, I'm good with that.

What does the Strong Towns approach to, uh, to, I won't say solving, but addressing the housing trap look like?

A- a- at the end of the day, what we need to do is we need to make housing more responsive to local supply and demand dynamics. We actually need to recognize that what is needed is a market that competes with the existing market. And by com- by the existing market, I mean, we have this macro, uh, financial capital market. We actually need a, a localized capital market. Um, we need local banks to make housing loans again and keep them locally. We need cities, uh, to actually get in and help create, uh, a market, the same way the federal government in the Great Depression intervened and created a, a, a, a market for housing. Um, the way we do that is by focusing on entry-level products. Um, how do we go out and build, uh, starter homes, small 500, 600-square-foot homes? How do we build backyard cottages? How do we take that spare fourth bedroom someone has and convert that into an accessory apartment, you know, like a efficiency apartment? How do we put a kitchenette in there and, uh, an exterior door and let some people rent it out? How do we fund that incremental developer that wants to take the single-family home and convert it into a duplex? These are all things that are small projects in the marketplace, um, and they're too small to really get funding in this big macro world. If you're gonna do that, we require you to do all kinds of, like, weird things. We make it really hard for you to do. Um, cities, local governments, uh, and to some degree, philanthropy and local banks, can finance these products, can make the, uh, the permitting of them really, really easy, and I mean really easy, like, you know, three-hour turnaround times. Like, go in, you want to build a backyard cottage, come in with your permit. Like, "We'll get you out... We'll get you out the door, and you can start building that right now." And we can actually flood the market, in a sense, with these products that will anchor our market at a lower price point. People will still get 30-year mortgages. They'll still build homes. We'll still build apartment buildings, and five-over-ones, and all the other things that are being financed. But the dynamics of our market will mean that there will be enough entry-level product where people can make that jump when they're financially ready, but they're not kind of forced to start in the crazy game. They can start with a, a, a smaller home, a smaller place, and, and, and basically, like, have that kind of security of being able to have shelter, build a nest egg, build a down payment, and participate in the other market i- from a stronger position. I think that does two things. I think it helps families g- get into homes. I think it helps people get into homes. Um, but it also anchors our market, because now there is, in a sense, a lower-priced product that these higher-priced products have to compete with from a price standpoint. And that won't crash the market, but it will, in a sense, put an anchor on the market that slows down the price increases, and ultimately, I think, makes it... l- will level it off and make it more responsive to local supply and demand.

So what happens? How does the, how does the current market respond to that? Like, like-

Yeah!

... let's say that this occurs on a, on a relatively large scale, uh, across the country. How, how does the existing market respond to that?

This is a, this is a, a good and urgent question that I don't try to even answer in the book, um, because I'm, I'm, I'm hypothesizing what I think would happen.... I- if, if cities start doing tax increment financing for starter homes and special assessments and co-signing loans at banks, uh, to get these, you know, backyard cottages built and other things like that, y- y- you will have a financial market that builds up locally around local banks and local government, financing this stuff and making it work. Um, to me, what it would ultimately do is slow the price of housing increases, and I think there would be downstream market-crashing, market-changing implications in the macroeconomy. I, I, I think that it would, in a worst-case scenario, um, force a bunch of banks that I, I think are gonna go bankrupt at some point anyway, that are re- a bunch of things that are really, really fragile, I think it would ultimately force those to break, and I think it would force us to kind of rethink and redo the macroeconomic system. In a best-case scenario, uh, there's no change, and that macroeconomic system just keeps functioning, and you can get a 30-year loan if you want. Um, you can get a Fannie, Freddie, uh, Ginnie Mae kind of product if you want, um, and that home financing system just continues on. Um, but there's this other kind of system competing with it that keeps it a little bit more in check. That's a, that's a range of outcomes, and I guess I'm not gonna predict which one, but I, I do think that having a locally responsive product would be really disruptive to the market.

So our listeners are heavy city-focused, right? I mean, uh-

Yeah

... if we looked at who listens to our podcast, it'd be a lot of city managers. And so I think one of the questions that we would get, uh, a response to that specific would be, okay, the financing marketplace, like, I think there are plenty of cities that, that could go through and set up those systems, work with a local bank, co-sign on loans, you know, do some fund balance set aside to be able to handle that, 'cause you're still cash on hand. You just kind of have a set aside for it. There's a lot of creativity that a city could have there. The question is the zoning, right? Which, you know, Chad's a huge fan of zoning. I don't know if you've ever talked to him about that. He's just, he's just really-

No, Chad-

-into zoning all the time.

I, I... We had, we had lunch, and he's like, "Chuck, I just love Euclidean zoning. I couldn't get enough of it."

Yeah, he-

It's my favorite cor- uh, court case, yeah, sure.

Yes, he really loves that one.

Right, right behind, uh, the Wayfair-

Yeah.

Yeah. So, oh, the Wayfair case. That's been a lot of fun for us. Uh, so but I mean, uh, so the, the question is, politically, how do you market, right? So as a city, how do you start to educate and market that these are the things that are needed for your community to be able to thrive, right? Uh, I think that's... You know, 'cause you're gonna be fighting the, the NIMBYism that's going to occur, no doubt, right? Um, you know, and you're gonna be fighting the lady who's on Nextdoor, who is gonna put your personal phone number out there and all the other type of stuff that happened to me as a city manager, all those lovely things. So what, what does that, what does that look like?

So I think that if you look at, as an extreme, what they did in Austin with CodeNEXT, as like the exact opposite of what I would do, the idea that we're going to work for years and years on, like, a huge, massive code revision and then try to, like, sell it politically to everybody, we just create, like, way too many targets for people to, to, to, to punch at. Um, I would go the exact opposite. I would say, "Let's start with people and what they wanna do." I- if, if I'm a city manager, I'm like, "Who in my city has extra bedrooms?" I, I mean, I, I, I use this avatar of the, like, widowed woman. I- there's a lot of different scenarios on this, but I think it's, like, the easiest one to think about. Think of an, an, a, a, a woman who's retired, lives alone, has a house that she's had a family in, uh, you know, uh, was married, had a, had... Grew up, she has all kinds of memories there. She goes to church up the street and has friends in the neighborhood and doesn't wanna leave, but has five bedrooms and doesn't have enough cash. Like, literally, like, "I can't take care of this house, but I don't wanna leave it. I don't wanna leave behind all this stuff." Why can't we let this person take one of their spare bedrooms, put an exterior door on it, uh, put in a kitchenette, and rent that out to a college student? Like, what is the problem with that? The college student can mow their yard for them. If they were here in Minnesota, they could shovel their sidewalk in the winter. There's all kinds of things that would be a benefit to an elderly person living in a house by having someone else live there. That's illegal through zoning in most places. Um, why don't we, first of all, find those people? And, I mean, we can, we can talk to people. We can go to different places where people are gonna say, "Here's the vision. Is anybody interested in this?" I think that if you cultivate a community of, of local, uh, incremental developers, they will find these opportunities. And, and then you say, "All right, instead of doing a massive code revision, let's just bring these three, you know, four case studies to the meeting and say, 'Hey, here's what they would like to do. This seems imminently reasonable and good. Here's what we would have to fix in our ordinance to make this happen. How about we do that?'" Now you're not fighting something in the abstract, you're not dealing with big developers, you're not doing, like, scary, scary rewrites. You're saying, "Here's four people. They live in this neighborhood over here. Let's change the zoning to make this available." When cities do things like that, they re- y- you know, they create... I think, you know, what Chad started with earlier is the technical debt term, and i- if you look at our zoning codes today, they have lots of technical debt because they've started out, and they've been amended and amended and amended. And, and a lot of city planners would like to just do the CodeNEXT kind of rewrite because we can get rid of all that technical debt and do... I'm sorry.... you, you, you don't get to do that without a lot of pain and the strong likelihood of failure, of system crashing. You've gotta fight every NIMBY, you've gotta fight everyth- like, you just gotta- you're gonna take way too much. You're gonna accumulate more technical debt. I think the technical debt will be, uh, just doing these small little fixes to make a little bit more allowable, a little bit more allowable, a little bit more allowable. And you do it in this neighborhood, and it works, and now you say to this neighborhood, "Hey, it, it worked out well there. It's not scary. Go see it. We'll do it here." Um, you know, to me, the worst thing to do is to try to rewrite the whole code for the whole city. Find where people wanna do this, and then use them as the vehicle to make the code changes, and then expand it over time from there.

I think, I think the personalization of that is huge, right? Uh, I'll give you a prime example of our days in city government. Uh, we had a resident- we had an accessory building ordinance where you could go build, you know, basically a full house, right, but it couldn't be livable. So you couldn't have a kitchenette in it, right? There were certain things that you couldn't have to make it livable. It's very common in codes in order to keep people from renting out a piece. Well, we had a family that came to us and said, "Well, we wanna make this livable." And, and we're like, "Well, why?" And they said, "Well, we have a special needs kid who's never really gonna be able to go live on their own 100%, but this would give them some independence." So obviously, you know, we went through the whole special use process. Uh, everything we did there went through their process, and one of the council members asked when we went through the process, "Why don't we just make this available?" Right? Like, why have to go through this, we're gonna notify everybody within 500 feet, and neighbors are gonna come in here and be critical, and everything else is gonna come? And we ended up getting it done. Everybody was in favor of it, 'cause they knew the situation, right? They knew what was going on there personally, and they knew that situation. So, um, yeah, I think, I think your point there of just, like, finding the person and not necessarily the, the whole code, um, and l- allowing that person to drive the vehicle that's used is... Yes, that's pretty brilliant. That's a good way to look at it, for sure.

Well, and I, I, I think that when we do this, um, you know, anti-NIMBY thing, I think what it allows us to do... I, I see a lot of groups, and, you know, there, there are some, particularly in California, I think, where there's, you know, the, the housing crisis is very acute. But there are some, like, YIMBY groups that, uh, spend a lot of time demonizing the, the, the NIMBYs, the people who show up and are against things. And I get how that, like, plays on Twitter and how that has a certain cachet to it, and certainly if you're trying to, like, mobilize people to show up and scream at people, or, you know, call your state senator and have them approve this or that, I, I get why that is a strategy. But if you're a city manager, the NIMBYs are people, like, you have to work with, right? And by working with them, you kinda have to understand their concerns and, and, and at least deal with the things that are reasonable about that. I don't think it's unreasonable for people to say, "I live in a single-family home neighborhood, and I really don't want a five-story condo unit up the next block. Like, that's not what I bought into." We, we, uh... There have been fights back and forth about how, "Well, Chuck, that, that suggestion is, is racist and elitist, and da, da, da, da, da." Okay, fine. But it's also real, and I, I don't think that that is, like, an incorrect... I mean, the marketing brochure for this neighborhood was single-family homes arranged in this way. If you wanna, like, change the marketing brochure of that, your fight to do that is going to be intense. Why not just say, "All right, the marketing brochure for this neighborhood was single-family homes. It was like this. That marketing brochure is gonna change, but it's not gonna change to something radically different. It's gonna change to this neighborhood, plus, you know, the, the, the lady next door is gonna have someone, uh, living there and helping mow the yard. Won't that be nice? The yard will be nicely maintained. And this person over here is gonna have a backyard cottage that they're gonna rent out to their cousin who's here in town going to college. And this one over here is going to be split into a duplex, and there'll be two families living there, but the front of it won't change, and so you're not really gonna see it any different." These are how neighborhoods, like, naturally evolve and thicken up. The reality is, is we can build a lot more units a lot quicker and make it done in a way that the people who are opposing more units now actually directly benefit from the creation of those units and will become our advocates. Maybe not wholesale advocates, um, maybe they won't all buy into it, but enough of them will buy into it or see the advantage for themselves, uh, that they will get, get on board and support what we're doing.

Well, there's two ways to win an election, right? You can either get people to vote for you or get them not to vote against you.

Yeah. Yeah.

So they don't have to be advocates, but maybe they realize it's not quite so bad.

Right.

Tone, tone down the rhetoric.

Uh, one of the, one of the issues we see in city management today is city managers become those people on Twitter-

Yes

... right? So you talk, you talk about, um, you know, the NIMBYism that occurs. A city manager will just be like: "Did you see that ridiculous NIMBY person in the lobby or in the council chambers who made those statements?" Um, this is a terrible example probably, but my grandmother had, uh, Alzheimer's and dementia-

Mm

... right?

Mm-hmm.

And so when she would roll into something, it'd just be like, "Ah, you know, it's just there." And I'm like, "But there's a kernel of truth-

Mm-hmm

... in there," right? Like, we actually have to sit at the kitchen table sometimes as a city manager, and we have to figure out what is the kernel of actual concern of that, that NIMBY individual. And all we- uh, if all we do is chalk them up to they're just crazy, which is really kinda what we have done in city management, and we become very defensive, um, which is probably why our tenures are not as long as they used to be-

Mm-hmm

... 'cause that also creates a person who just is gonna come after you and come after you and come after you.

Yeah.

Um-... you know, we, we don't. We, we just don't do that. I work for a really great city manager who taught me the best place to meet with somebody is not at City Hall.

Right.

It's at their kitchen table.

I think when we- I mean, just in general, and this is a Strong Towns thing that we talk about, um, when you, when you demonize people, when you turn them into, like, an avatar of, of either good or evil, right? But when you- particularly when you demonize them in a way that, like, strips them of their humanity and makes them just into a, a NIMBY or a, you know, fill in the blank. They're- you're just this. You reduce them down to whatever bad thing you think. Um, it, it does harm to them, but it also does harm to you because you stop considering their full humanity, you stop considering all the n- nuances, all the ways that you can work with people. I, I realize we're in a housing crisis, and I realize we need to build a lot of units, and I realize that there are a lot of people whose default setting is selfish and defensive a- and, and, you know, not very accommodating. Um, I think the way we deal with that is to make this a scenario where enough people can win from doing good, uh, that we all eventually want to do good, and doing good becomes, like, a reasonable thing. I saw the other day where one of these kind of highpr- high-profile, uh, YIMBY advocates, um, were criticizing a city manager. They actually said something like, "This guy's an... You know, this guy's an idiot who's got no idea, no understanding of supply and demand dynamics." And, like, the city manager's got, like, a master's degree. He's like a s- you know, this person is like a really smart, competent person. But, you know, "Oh, this person's an idiot and a fool." And then, of course, because Twitter's a cesspool, you get the, like, 200 comments about, you know, "Who is this guy? What a, what a jackass," you know, all that kind of stuff. Th- this is, um... To me, if you are someone who really wants housing and are serious about wanting to see it done at scale, uh, the key to unlock is making the people who today are resistant to it, um, embrace it, and, and I don't think that that is impossible. I think you can go to any neighborhood today, find people who are struggling financially to stay in their homes, who are house-rich and cash-poor, who you can, uh, give, like, a good proposition for how they can improve their life, their own lives, by having m- more housing units on their own lot, and I think we can do this at scale very, very quickly.

Well, if you want to test that as a Texas city-

Yeah

... right, I, I don't know if it's like this in other states, but if you want to test that as a Texas city to see who's struggling in a neighborhood or not, just go pull the deed of trust information for a specific subdivision-

Mm

... and look for the revised deed of trust, right? Because if they've worked out a payment plan with their bank, there's gonna be a revision deed of trust, and you're gonna- th- that person struggled, right? Or is struggling. Uh, I'm not saying to use that to go pinpoint somebody specifically. I'm just saying there's a lot more of that struggle in those "nice, single-family neighborhoods," quote, unquote, than, than we really know.

Well, and you have a lot of people... I mean, one of the complaints that we get a lot in older neighborhoods is you'll have a lot of people on fixed incomes who now can't afford the property taxes, 'cause the taxes have gone, you know, uh... The taxes have kept up with home prices. If you bought and you own your home outright, um, and you're on a fixed income, your monthly tax bill is gonna be many multiples of what your mortgage was when you first got that loan. Um, there's a way that we can help people like that. Y- y- the, the current system says to people like that, "Oh, you know, sure, your house went up 40,000 in value this year, and your taxes were 15,000. Like, you're making money. I don't feel bad for you. Um, go get a reverse mortgage or go get a home equity loan or do something like that." Um-

Another, another financial product.

Another financial product, right.

Yeah.

We've got a financial product that will solve your problem. And the reality is, is that that's not how people work. I, I- my parents are in their 70s. They've long paid off their house. They're frugal. They're curmudgeonly. They also look at what they've create- what they've built, and they're like, "You know, I, I, I wanna give this to my kids someday." They're not doing a reverse mortgage. I mean, that would be obs- uh, it would be, like, antithetical to who they are. They don't wanna do that. Um, they don't wanna take out a home equity loan. Like, it's, they, "I paid off my loan. I paid off my mortgage. Why would I do this?" We can sit here and say, like, "These people are dumb. They should do things differently. Uh, they shouldn't think this way. They should embrace the reverse mortgage." I, I, I actually think that, um, you know, someone like my parents or someone in that position would be far more amenable to other things that were brought to them and say, like, "Hey, uh, you know, you've got this, uh, this space back here. We can turn that into $1,000 a month of income. And by the way, uh, the city has a, a loan program where they've gone out and used their bonding capacity to borrow money. They will then lend to you at a low interest rate, and you'll pay that on your taxes. Um, and so, like, this is just gonna... You know, y- y- you will have, uh, a, a net income of a few hundred dollars a month off of this transaction. Um, this is gonna be really good for you. All you gotta do is sign here." I mean, we can literally make it that easy for people, um, and do these things at a h- at, at high scale with cities creating the market but not taking any risks in the market. I mean, I, I think that's the thing, is that y- you mentioned earlier, Patrick, um, you know, cities creating kind of funds of money. Cities do assessment projects all the time where they go out and build a road, they go out and build sewer and water. They do tax increment financing all the time, where they give Costco money and all this, you know, like, rebate-... if we take these tools and turn them towards housing, what we see is that we can actually finance a lot of small projects that are not financiable today in the, in the housing market we've set up. We can finance them locally with the tools that we have, and have the city be completely secure in that, and not lose any money doing it. Um, when a city does a special assessment, when a city does a tax increment financing project, the city, in a sense, jumps in front of the primary mortgage. The city becomes the primary mortgage holder. The city's gonna be paid off... In the c- in the case of any default, the city is the most secured of all the creditors, and th- th- the, the, the risk that the city would lose any money doing this is really, really, really tiny, but we can do this at scale. I mean, we can do this in a big, big way.

So Chuck, I'm glad that you brought up property tax.

Yeah.

You were, uh, recently on a panel down in Austin with the Texas Public Policy Foundation. So it was an interesting talk. It centered mostly around-

Did you wa- did you watch that?

Oh, yes.

Oh, we both, we both do.

Oh, man.

We watch everything the Texas Public Policy Foundation puts out, Chuck.

Y- did you see me, um, struggling during that to ...

There were, there were times when I was trying not to pull out the hair that I have left.

Uh.

Um, I mean, the, there are things about what was said by, by the council members that I, I don't necessarily disagree with.

Mm-hmm.

I think that there are certainly things that cities spend money on that they shouldn't. I'm not a fan of zero-based budgeting, but, um, the, the fundamental question that I- or fundamental problem that I think they were- are overlooking is that even if you remove all of that extraneous spending, there's still a fun- like, a fundamental gap between what we can generate revenue-wise and what we have to pay for. So, like, like, I-

I feel like they, I feel like they were arguing over, like, you bought a Hummer, and your car payment is $1,000 a month, and they're like, "Yeah, we can't afford it because the spark plugs cost 550-

Yeah

... instead of 450. And I'm like, "Okay, fix the spark plug problem, I'm fine with that, but you still got $1,000-a-month Hummer that you can't afford. Like, what are we talking about here?" It, it was... That conversation, you know, I'm a Minnesotan, so I was trying to be very polite. But it was, it, it was, it was like so... They were so distracted by these small, little things that were not going to have any impact at all.

So this-

I kind of felt bad for their staff, right?

Oh, yes. Well-

We always do.

There's something, there's something called Parkinson's Law, which states that, uh, in any agenda item or any meeting, the, um, amount of energy spent on an agenda item is inversely proportional to how important it is.

Dude, that's so brilliant.

Um-

Yeah.

Uh, so when I was running budget, uh, for a city back during the recession timeframe, um, you know, we're dealing with a pretty substantial budget shortfall, and I can't tell you how much time that I spent researching how much savings we would have by doing a citywide office supply pool.

Mm. Yeah.

Like, we're, we're just spending too much money on staples and pens.

Mm-hmm.

Let's just have, you know, the city secretary have this big pool, and if you need something, you can come over and check it out. It's like, "Guys, this is just... We're just missing the forest for the trees here."

Right.

Um, but the one time that you even, uh, admitted that you were maybe not gonna be so Minnesota nice was when you said that, uh... And this is something that Patrick and I have talked about a lot, and we're in full agreement with you, that Texas is California 30, 40 years ago.

Mm-hmm.

You also said that the tipping point when we'd know that we'd become California is when we institute our own Prop 13. Now, it was funny to me because w- we, we- I think we're, like, 65% of the way there with all the different reforms that we've had. I don't know how familiar you are with, with the Texas property tax regime, but, um, the, the Dallas council member kept mentioning, "Well, now we have all these fees, and we're moving all this money to debt because w- our tax rate's compressing because of all, all these, these reforms." Like, that's literally California, right?

It is.

When, when-

Yeah

... tax values can only go up 2%, then the only option that you have is to just fee people to death or try to find things that you can shift over, um-

Mm-hmm

... to, uh, to debt. Especially in a scenario with the housing crisis, where values are appreciating rapidly, um, the, the biggest challenge in Texas, I think, is that, like everyone else, even though property tax is the most important funding source for local governments, we all hate it, and we don't like the way that the mechanics work. So given that, I'm wondering, like, what do we do? And also, why are you so down on, on sales tax?

Oh, wow! That's a really, a really good question. So what about the mechanics don't people like? Like, the fact that you- commercial rate is different than residential-

No

... Like, in Minnesota, we've got 40-

I, I wish it was. But no. The, the mechanics of it are-

Okay

... it's a tax on the wealth that you have, right? So the value of your house-

Yeah

... goes up, you pay more in taxes.

Mm-hmm.

Um, we want our values to go up-

Right

... right, 'cause our housing is an investment, but we don't want the property tax to actually function the way it's supposed to. So in Texas, we do all kinds of crazy things. Like, if you have a homestead exemption on your house, then your taxable value can only go up by 10%, but the appraisal districts are required to actually value your home at its market value. So there's always this-

Right

... gap, or there's often a gap between what the market value is and what the taxable value is. So in 2008, 2009, this was a huge problem. Because even though the market value was going down, the taxable value still had room to go up-

Right

... and people were expecting their tax bills to go down, but they weren't. Um, so, so you have that problem. Um, then we have the, the 3.5%, uh, reappraisal growth cap, which was mentioned a few times in that, in that panel. So all the properties that are on to this year's tax roll, and also last year's tax roll, the revenue can only go up by 3.5%, which means that un- in many cases, cities' tax rates are, are compressing down, uh, which, I mean, eventually will go to zero if this continues. But, um-... we just have all of these little Band-Aids that have been added, because the legislature's most important goal is just to keep residential property tax bills from going up. Um, so-

Right

... like, we have this system in place, but we really don't like it- we don't want it to work the way it's intended to work. So we're gonna just make it super complicated.

So bread and circuses. Let me, um, let me answer both your questions succinctly, and then I'm happy to unpack any of this that you want to. So succinctly, and I said bread and circuses, Texas is, at the local municipal government level, functionally insolvent. The development pattern that we have built with, and this is my first book, Strung Downs uh, gets, like, deep into this. The, the way we have built gives cities a cash infusion today in exchange for the city taking on long-term liabilities. So the city gets the permitting fees, uh, which are lucrative. The city gets, you know, whatever development fees, connection fees to sewer and water and all that, which is lucrative, and then the city gets the immediate tax revenue from having those new homes or new businesses, and the city then takes on the long-term responsibility to provide service and maintenance to, to this new development. That road's gonna last 20, 25 years without needing any big repairs, same with the sidewalks. Sewer and water might be a little bit longer, um, the pumps maybe not as long. So you've got a decade- you've got a couple decades or more of positive cash flow off of each new development before you start to get real costs, real costs associated with sustaining that. This makes every city that's growing feel really, really rich and feel really, really smart, and like, "We got it all. We got it all figured out. We really know what we're doing. Everything's going great." And then that maintenance bill starts to come due, and things start to get hard. What I see happen in a state like California is that when things got hard, they reacted to that by saying, "All right, w- this burden is starting to show up now on people's property tax. We'll, we'll pinch that down. We'll, we'll alleviate that negative feedback loop for you. Yes, you can live in a way that is functionally insolvent. Um, we're gonna, you know, m- make it so it's, it's less painful." That pain was actually telling you something, like, this, this development pattern doesn't work. This approach doesn't work. But we're gonna alleviate that pain, and what happen is that cities respond by then, "Okay, if I can't tax our existing places more to cover this gap, I'm gonna do three things. I'm gonna add fees, like you say, and try to squeeze a little bit out that I c- can't get otherwise. I'm going to take on lots and lots of debt, because I can kind of cash flow these things with debt. Um, and then I'm going to try to get more new growth, because the new growth will come in at a market rate that pays higher taxes, and I'll have a couple decades of free cash flow before those liabilities come due." This is like a Ponzi scheme kind of development pattern. The sales tax makes that pain, in a sense, go away. It's like a... It's like an anesthetic. Uh, is that what it- is that the word? It's an, uh, anesthesia. Is it anesthetic, or would that be the active tense of that word? It, it, it numbs the patient to where you're not feeling that pain, that painful feedback of, like, "This system is not working." It also divorces the problem from the solution.

So we actually call it heroin.

Heroin is a good ...

Yeah, we a- we actually call-

Do you call sales tax heroin?

... sales tax the heroin of city... Yeah, sales tax is the heroin of city government.

Well, we call it, we call it, like, the, the new Walmart that brings in a lot of money.

Oh, my gosh!

Yeah.

So sales tax-

'Cause it's just one- it's one development.

Yeah.

It, it is like a cash cow with no-

Mm. Mm.

It, it is like, it is like financial heroin for a city. It is.

Yeah.

It's like gives you this, like, "Man, I'm feeling good now," and then, like, the, the h- the, the downturn later is, like, 15, 20 years away.

Yeah.

It is, um... The sales tax disconnects the problem from the solution. So the problem is that our neighborhood can't afford itself. We've built in a way that for the community, for the city, for the municipality, has more expenses to provide all the services than it generates naturally in, in revenue. When we raise taxes, people scream, right? And to me, that's a feedback loop that says, "This, this approach does not work." Um, when you go to a sales tax, what you do is you just divorce that whole feed- that whole feedback loop is gone. Your value as a resident is just how much you can spend and consume locally, and I, I, I, I think that the sales tax system is so pernicious because it actually puts what is good for the local government against what is good for an individual resident or a family. It, it puts them at odds. Uh, we have this view of government at Strung Downs, uh, where local government is the highest form of collaboration for people working in a place. I think that local government should have a much more vaulted role than it does. I, I've been for giving local governments, like, huge toolboxes of things, let them try different stuff. Le- you know, give them lots more flexibility than we give them today. Um, but local government, uh, has to be, in a sense, a reflection or working in concert with the people in the community. What's good for people in the community should be good for the local government, and what's good for the local government should be good for the community. When you have a sales tax, the worst thing you can have as a resident-... the best thing you can have is a Walmart and a Costco, and like everything else. The worst thing you can have is a resident. 'Cause what does a resident do for you? It's just cost. The best thing would be if all the residents lived outside the city, those costs could be borne by someone else, and they could just travel to our city and shop at our place, where we get all the revenue, and then they go back and have all the expense somewhere else. If they do happen to live in our city, the best thing possible would be that they just spend themselves into oblivion locally. We get all that sales tax, and then when they're poor and broke, they move, and we let someone else who's gonna spend move in. It- it's just not a system where the feedback loops are in anyone's interest. And I see sales tax, like Oklahoma, your state to the north, is locally governments- local governments are all sales tax. It has created a rivalrous system where most cities that you go to are either growing and everybody's, like, super happy because this heroin cash cow is kicking in and, and kind of, you know, making it all feel good, or they are not growing as aggressively, or stagnant, or even declining, in which case, the local government becomes almost predatory on the population. Because in order for it to survive, it has to do, like, insane, crazy things. Um, I think the sales tax is like the... If you are Istanbul or if you are, you know, a city right outside of Disney World, uh, and you've got like, you know, all this transient stuff coming through your place... You know, if you're Istanbul, and you're, like, literally sitting on the, the, the focus point of trade between East and West, or you're Orlando, and, like, everybody's just driving through you to get to Disney World, a sales tax might make a ton of sense because your economy is literally about transactions. But if you're like some city in Texas, w- i-i-it is a bad, bad option for you. I, I, I, I think that it is a seductive, quick, like, I was gonna say, highway to hell. It's like the- ... it's like the, uh, you know, the road to, uh, to bad.

Can I give you one counterpoint?

Please.

Okay. So admittedly, this is a unicorn scenario. Okay? But the city that Patrick and I both worked, both worked in, uh, Hudson Oaks, Texas, about tw- at the time, like what? 2,100-

Yeah.

Call it the lucky 2,100.

Yeah.

So this, this city was formed out of the ETJ of its neighbor-

Mm

... specifically because they didn't wanna get swallowed up and pay the property tax. Um, three-quarter acre lots for the most part, except for, like, the original town from the '50s. Although, that was still... I mean, those were still half-acre lots.

They were still half-acre. Everything was like double-

Yeah

... uh, double penetration, chip seal roads, so very inexpensive road surface, right?

Mm.

No, no underground drains.

But in Texas-

All open bar ditch.

Open bar ditch.

I gotta get all the engineering things in there before you check real quick.

Thank you.

Yeah, so, so our, our costs already are, are not quite as... Like, our obligations on the ground aren't quite as, uh, as severe. But in Texas, when you hit 5,000, you can have a lot more control over your destiny, right? You become a home-rule city, and so this was always something that was, um, desired, is "How can we get to 5,000?" And without a property tax, it's kind of a problem when a lot of the options are, "Well, what if we merge with our neighboring cities? Like, we can bring in these people here, and we'll, we'll take on all these new roads and all these new, uh, these new infrastructure obligations." But that constraint really helped us create some, I would say, almost StrongTowns-ian development projects-

Sure

... before we, before we even came across Strong Towns. When we finally came across Strong Towns, we were like, "W- why didn't we have this, like, three years ago?

Sure, sure.

Yeah.

This would've made our jobs so much easier." Um, but, but, but the constraint did really kind of force us to be more creative and not just do the three-quarter acre, you know, single-family residentials with a big box. We, we started looking at more compact development, more mixed use. Uh, you know, how can we, um... I mean, w- we, we got probably the first, like, actual mixed-use development planned in, in Parker County.

Yeah.

Um, a pretty big, uh, apartment complex with some mixed-use development in there, which, you know, five years before that was a no-go.

Yeah.

It was like a showstopper. "We're not gonna have m- multifamily, uh, in this neighborhood." It's a relatively affluent area. Um, but just chipping away at those, uh, those arguments because of that constraint that we had, allowed us to do a lot more creative things. And I think if we had a property tax as well, we never would've made any changes.

Yeah, and I would say our- so-

If we had a property tax at the time, we would've had so much money that we wouldn't have known what to do.

I think our residential base helped with that, too, 'cause we had a very highly educated residential base. Uh, they're engineers, aeronautical engineers. They build the F-35 for a living, right? So, um, you know, it's just a very... W- we had the ability to kinda have those, you know, dinner table conversations with a lot of people to talk about, "Okay, this is, this is why we wanna do that." So our marketing plan was very grassroots. Uh, and it was- it allowed us to do that.

Yeah. So a unicorn, for sure-

Very much

... but-

Well, let, let me say that I'm, I'm with you. I, I mean, I, I, I really admire the work that you guys do, and I think a lot of cities would benefit from having this conversation with you all because there is a lot of nuance here. I think the only, um, the only, the only reflection I would have on the sales tax is that there needs to be an understanding that if you're using this approach, you have a really high burden to understand the finances of your city. Because it's heroin, right? You know, because it's this... Like, it, it divorces you from reality, and what that means is that you have... If you're gonna run a responsible city, if you're gonna actually do this in a way that works out long term, you have a much higher burden-... than a city that is gonna get direct feedback. You have a m- a, you know, d- a direct feedback, like, "This is not working." Okay, sales tax, you divorce yourself from that direct feedback. That means you have to be really committed, really deeply, deeply intense about understanding the finances of your city. You have to actually understand, "Here's how much this subdivision is costing us. Here's how much this thing is, is, is taking out. Here's how much, like, each home in aggregate is providing in this, like, indirect taxing method." You, you actually need to know those numbers, and very few cities take the time and the energy to actually do that. And I, I, I feel like the sales tax, when it's done kinda ad hoc, creates even less incentive for that, that disciplined financial management.

Yeah, and, and to take that a step-

But you guys are, I mean-

To take that a step further, though, Chuck, 'cause you, you said that we need to disclose this, too, Chad. I think it's important. We've talked about it before on the podcast, and most of our listeners probably know. But in those developments that didn't make financial sense for us, in order for those developments to move forward, we did pilot agreements, payment in lieu of tax agreements, so basically-

Mm

... a property tax on that development.

Interesting.

Right. Yeah.

Fair enough.

So we-

Yeah, public improvement districts, things like that.

Yeah.

Things, things that-

And I mean, this is- ... that made sure that the burden was not, you know, taken on by existing residents.

Right. Right. Th- this is what w- w- you know, if a city's calling you guys, they are by default saying like, "We're, we're serious about the financial stuff that we're doing." And so, you know, I suspect that your pool... I'm sure you've got some outlier stories that would, would, you know, turn stomachs, but the pool of places that you guys are working with, to me, is gonna be just by default above average. I have traveled around North America, and I'm, you know, if, if you say half the cities are above average and half are below average, by definition, that's what average is. Um, when you give those below average places, half the places in this country, you give them sales tax, it's- they're not doing the, the discipline stuff they need to do to actually manage that well.

I think what's cool-

So-

... in Texas is the culture has changed a lot in the city management world, right? So-

Yeah

... we're, you know, uh, I think it's even shocking to us that in the state of Texas, we've grown to where we are. We're in 200 plus cities in the state of Texas now. It's-

Mm

... you know, substantially large. Uh, and there's now this understanding of, "We should know the financial impact of what we're doing," right? Um, I think for the baby boomer generation of city managers, uh, that's very difficult. They didn't have the same tools, the same softwares, the ability to crunch the numbers like we do now. Um, you know, some of my older city managers-

Mm

... are gonna give me some heck about this, but, you know, they, they, you know, they, they didn't- they couldn't journal all that out financially like we can in, um, you know, S3, Amazon-based databases and things like that, that we're using on the back end to crunch numbers and the amount of-

This is what happens when the non-techie talks about tech stuff.

Yeah, I start talking about all those things.

Well, well-

Amazon S3 is not...

Like, whatever the database is.

I, I actually think those baby boomers, if we cut them some slack, didn't- like, the heroin was flowing so freely, you know-

Yeah

... to use, to, to keep going on the metaphor. Like, those weren't the urgent questions, right? The urgent questions that we've been dealing with the last two decades, and, and, you know, two and a half decades, the urgent questions that local government has been, "Why aren't the things that are the generation did ahead of us working for us anymore?" And, you know, the answer is that, well, the bills have come due.

Mm.

And, you know, I, I, I think those, those boomers, we can, we can love them, we can hate them, they didn't... There will be... Let me put it this way, there will be questions that are obvious to people 25 years from now that are not obvious to us today, that they will say, "Why was Pat, and Chad, and Chuck not talking about this?" Because it, it's not ob- but to us, we can look back at those boomers and go like, "What the heck?" And I think, you know, they were just living in, like, the golden years. Like, it was just the cash flowed freely. There was a lot of state and federal support. You were building stuff that was brand new. It hadn't really aged out. You had a access to a lot of debt.

Mm-hmm.

Um, you know, this was easy, and you didn't, you didn't have the tools, but you also didn't need to develop the tools. Like, why?

Yeah, absolutely. The cities that I would applaud the most are, 'cause we have a lot of them, are those cities that are in the top 25 fastest growing in the nation, right?

Mm. Yeah.

And actually do utilize the data, right?

Mm-hmm.

Now, it's very difficult- one of the hard things in Texas, it's very difficult to, to adjust, right? It's like a... W- we're not a speedboat when it comes to adjustment or development. Uh, the property right side of Texas, some of the other things on residential developments that, that are there, uh, it can be very difficult for those cities to make quick turns, right? Um, and so, but we do have a lot of those communities that see it. Had a conversation, uh, last week, specifically with a city where, um, in our economics module, uh, Chad built this really cool color-coded map that shows them, um, you know, we take into account the depreciation cost of their assets, and we take into account all of their, uh, replacement cost of roads, and things like that. And the city is one of the fastest growing out there, and they look at their map, and everything is red, right?

Yeah. Yeah.

Uh, so 20 years from now, we know the music's gonna stop, and they are not gonna have a chair.

Mm-hmm.

Um, but at least they've got 20 years to figure out, "Okay, how do we prepare for that?" Um, and so, yeah, I think those, the right questions are being asked there. In Texas, we're seeing that. Um, as we move into other states, it's, uh, it's gonna take a while, right? I'm sure you see that on the road as well, right? You just see different personalities.

Yeah. Well, it... And, and, I mean, this gets back to what I said earlier about giving cities bigger toolboxes. I ultimately think that Texas cities need to be given a lot more options. If, if you have a great sales ta- if you have a place where you should, you know, you are that unicorn, and you should have sales tax, you should do that.... if you have a place where you, you know, a property tax or a land value tax or something else would work better, you should do that. Um, I think the, the, the thing that I see as I travel around the country is that when we do this at the state level, like every city in Texas will have this, you don't recognize the, the financial dynamics between Dallas and Houston are dramatically different, like, their economies are dramatically different. You take the little town, uh, outside of Austin, and you compare that to the little town outside of, uh, you know, Waco, it- they're, they are very different things. Um, the fact that we saddle them all with the same tax structure and the same tax system is not quite right. I do think, though, that there is a role for the, the, the state, and to me, the one thing that we allow cities to do that I would not allow them to do is to take on massive amounts of debt. Um, you know, to me, I would give them all the tools in the toolbox, but I wouldn't give them the one that allows them to blow themselves up, which is, you know, the ability to kind of, uh, push things off to the next generation by taking on lots of unsupported debt.

Not only do we allow them to take on that debt, uh, and also-

Encourage it

... I can ac- actually give you this whole story, uh, because they're a client now. Um, but we encourage it through the state system.

Mm-hmm.

Right? So we set up revolving debt funds and things like that, that in order for those to be successful, they have to push that instrument out to those cities. So they're promoting themselves and pushing projects into communities that if you just did a simple financial analysis, they would never be able to make those payments in, in, in a healthy manner.

Yeah.

Right? Um, you know, we're not even doing simple in-the-door, out-the-door, like, residential mortgage calculations, uh, on, on what your debt loads are. And so, uh, yeah, I, I agree with you that, um, some- a- and, and if, if we took some of that debt off the table for communities, it would do that. The other side of that is, is what they've done on the revenue cap side, so they've capped the maintenance and operations rate in Texas, that's actually encouraged a huge boon to the I&S side because cities are trying to keep the pennies that they're losing in their compression.

Yes.

Um, and, and the state doesn't realize that when they start tinkering with stuff, they don't see the whole picture that occurs within, uh, the numbers. And so, uh, and when I talk to state legislators, it's hilarious to me that they all point me back to the same state senator. "I don't really understand that. You've gotta go talk to Senator Bettencourt." Uh, who's a super smart guy, right? But the reality of it is, is that, like, we're all very dependent on one guy writing this legislation. Um, and so, uh, it's just, you know, it's a very complicated issue. We've got to do a deeper dive into this issue other than allowing the way that it's been written in Texas now, which is, which is highly driven by special interest, uh-

You should just go ahead-

The whole industry

... go ahead and pass Prop 13, rename yourself California Junior- ... and just get on with it.

Yeah.

Right?

Just get over with it.

Yeah. I think, I think for me, when I watched that, Chad, Chad said, "Hey, you gotta watch the rest of this," 'cause it, you know... when the Dallas City Council member was talking, I just kind of drugged for a little while. And so he's like: "Hey, you gotta go watch the rest of it." When that came up, I just started laughing, 'cause we've been talking about that.

Yeah.

Now that we do business in California, and we see all these things, the, you know, business licensing taxes and all the different fees and things that they have in California, those are survival mechanisms.

Yeah.

And what state legislatures don't understand is, cities are going to survive, right? They're gonna figure out a way to survive, and that's what's happened in California. We're just 30 years away from all of the different survival mechanisms that California's already put in place. Um-

Right.

Uh-

But you've, you, you've put them in... What, what California did is they said, "Okay, cities, we're gonna put you in the wilderness, and you have to survive, but we're only gonna give you, like, a jackknife and a spoon." And so now, you know, you don't have any survival tools.

Yeah.

You've gotta make everything work with these, like, blunt instruments, and it doesn't, it doesn't work. This is why, to me, like, if, if I'm running California, I give cities this big, huge toolbox, and I say, "You're gonna go figure it out within a range of stuff, but you're limit on how much debt you can take on, so that if what you're doing doesn't work out, you're gonna know, and you're gonna have to fix it. You're gonna have to change it. You're gonna have to address it." You can't cover up your mistakes by taking on huge amounts of debt and making the next generation pay for your mistakes. I, I, I think that we're gonna need... I, I mean, I'm gonna say this, and this is kind of crazy. Uh, I, I understand. I think that local governments across the board, at some point in the next generation, will need a debt jubilee. There will actually have to be some, like, resetting of debt. Um, and we might need this society-wide. I mean, I, I've, I've heard this discussed. This is kind of what, you know, a decade of inflation would do as well, right?

Mm-hmm.

It would make us all poorer again. Um, these local governments, uh, are, uh, have got- many of them have gotten to the point where they're so laden down with debt and debt payments, and then other obligations, that they actually can't... They can't make good, thoughtful day-to-day decisions with the, like, jackknife and spoon that we've given them to solve these complex problems.

Oh, it's Naked and Afraid out there, Chuck. That's what it is.

Yeah. Yeah.

You ever watch that show?

Yeah, yeah.

But... Well, Chuck, I don't wanna keep you any longer. We've, uh, monopolized quite a bit of your time, but-

It's been awesome.

So thankful for you, uh, for jumping on with us today.

Thanks so much, Chuck. That's, it was awesome, man. Really appreciate it.

Let me say this. I, I'm just, I'm thankful. This, this is a lot of fun. I love you guys, and I, I love being able to chat. Um, you guys do tremendous work, and really, I'm, I'm glad to see that you're reaching so many places, and I'm happy to see that... I didn't know you were doing any work in California. That makes me happy. That gives me some hope, too. So next time I'm going back to California, we'll have to chat, 'cause I'd like to know where you're at. Um, you know, y- you, you guys-... It's funny because when I talk to people, um, there's a lot of people where this stuff is brand new, and I always love running into people like you, who were working on this problem before I was working on this problem, or parallel with me. It's like we found each other, and we're both, like, working on similar things, uh, starting maybe from a different place. You know, me from planning and engineering, you from finance. And it's always affirming when, first of all, we're working on the same problem, and second of all, we've reached similar conclusions, right? It's like, yeah, okay, we're seeing this from two different directions, but we're actually seeing the same picture in the same focus. So thanks for, thanks for being that for me.

Well, we appreciate all the work that you guys do as well. Um, honestly, just really i- if anything else, just giving us the story to tell, right? 'Cause like I said, when we came across you, both of us were like, "Man, if we had had this, like, three years earlier, the, the storytelling would've been so much more succinct and elegant." 'Cause you had s- already spent, you know, a decade and a half of, uh, uh, of your, your time thinking through how to tell the story. So very much appreciated. Keep doing what you are doing, uh, Chuck, to build strong towns. If I can steal that from you.

No, please. Thank you. And steal it all. I mean, we are, we are a nonprofit, and our whole thing is to try to change the conversation. And people like you, uh, guys, when you take our stuff and use it, when you find it useful, that is the, the highest and best use of, of my, my life's work, so thank you. It, it, it, it is flattering to me when people working at the high skill and level that you guys are working at take the stuff that we put together and use it. So I'm just deeply grateful.

Well, that feeling is certainly mutual, Chuck, and we, uh, we do appreciate you and, and look forward to talking to you soon. Well, Pat, what'd you think about that?

Wow. Um, man, I just... It's always so much fun to talk to Chuck. Like, I, I just can't, can't say that enough. He, he's incredibly, um, enlightened into the issues that are seen. He- obviously, he gets to see it at a national level, so I think that's really cool. Uh, but also, like you said, the storytelling side, uh, trying to figure out the story that can be told in local cities to have these conversations. Because you have to have a marketing plan to have the conversation, right? Um, and Chuck's books give you a good point and counterpoint. Uh, they, they do a really good job of kinda getting everybody on the same page to have those discussions. Uh, and I know for you and I personally, it, it brings a lot to the table for us, uh, to be able to show our clientele, like, "Hey, um, it's not just Moneyball," right? We talk about that a lot, um, but what we do is not just Moneyball. Uh, it's, it's building communities, and it's, uh, telling that individualized personal story. I, I think that was the thing that came out of it the most for me, was the change... You know, we talked about California, and basically California putting in place, like, a statewide change, and we've had a lot of conversations on that, where, you know, there's RDU, uh, the residential dwelling unit allowances that are being, uh, allowed throughout California. Um, and I think Chuck's comment on a much better way to do it is to find those people who, um, who would be the story, and, and really create a localized process for that. I thought that was pretty cool. I thought it was really, really fun.

Well, it's a super strong towns approach because it's a small bet-

Yeah

... right? It's a-

It's incremental

... the smallest, next, the next smallest thing that you can do-

Yep

... is to literally go find someone and do it, right?

Yeah.

Not try to, uh, approach this from 30,000 feet and say, "We're gonna make these changes for everyone," and then it is an abstraction. And it, it, it's... Anytime that you can't put, you know, uh, a tangible angle on something, it's- it leaves o- open for interpretation all of those little details, and that room for interpretation is where you get the conspiracy theories and the, uh, the pushback. And so if you, if you have an actual test case, one house, maybe two, three, four, whatever, but you have an actual test case with an actual person that the people who live near that person know-

Yep

... it's a much easier win, right?

Yes.

And if, if, if the world doesn't collapse when this is done, then you've got your narrative, and you can build on that.

Yeah, that was just a lot of fun, man. We've gotta, we've gotta have Chuck on more often, obviously, and, and hopefully we will. Uh, but also just, um, the ability to bring in that point of view, uh, for our, our city management folks to be able to listen to, I think was incredible.

All right, well, we mentioned at the beginning that, uh, Chuck will be here in Texas. We'll post the link to all of the, uh, the book tour events. So if you are nearby, highly recommend going there and meeting him. Chuck's a really nice guy, and, uh, and he'll be more than happy to say hi and chat with you. A- a- and/or you can get your book signed. So anyway, Pat, uh, until next time, buddy. We'll see you.

All right. See ya.