In today’s Fat Tail Daily, A long list of countries around the world are experiencing housing shortages. But what common factor do they all share? A commitment to Net Zero which prevents them from building enough housing supply.
Welcome to my first edition of your brand-new Fat Tail Daily newsletter.
It’s been 13 years since I wrote my first article for the Daily Reckoning Australia. You can imagine the world has changed a little bit since then…
And sometimes my colleagues working tirelessly behind the scenes at Fat Tail Investment Research convince me to change with it.
But they didn’t need to convince me that this latest change is the right move for our brand.
It’s all about helping you discover what we really do all day. The Daily Reckoning was and Fat Tail Daily is designed to be just an introduction to our work.
Many of the people at Fat Tail Investment Research were mentored by someone called Dan Denning — a rare American fan of both cricket and AFL. He set up our publishing company in an old hat factory in Melbourne around about 2004, when I first arrived in Australia myself.
His most important lesson to us was that the newsletter business is a relationship business. We live and die by our customer’s perception of what we do.
Fat Tail Daily is the first step in how we live up to that tenet, so it’s an important one. It’s our chance to introduce how we think, and build trust with you over time.
But the real value proposition of reading our work comes from Fat Tail Investment Research’s otherpublications. These can actually give specific and actionable advice to you. They reveal the results of our in-depth research to a select group of people instead of just the general public.
We’ve discovered that the jump from a distinct brand in The Daily Reckoning Australia to Fat Tail was perceived as a leap into the unknown for many of our loyal and longtime readers.
We hope changing the name to Fat Tail Daily bridges this gap by making it clear that our other publications are coming from the same people with the same purpose and the same commitment to our relationship with you. It’s just an opportunity to upgrade.
That’s also why you’ll be hearing from a bigger cast of characters from now on. Some of whom I’ve known since I first walked into the office in 2010. Despite the variety of opinions, and the independence of our editorial, we are a team.
Unfortunately, we’re not the only ones with change on our minds. But no change can compare to what governments have planned for us in the name of protecting you from carbon dioxide…
Housing is on the block
Under Net Zero rules, governments must design and abide by plans to reach Net Zero over the coming decades. This means all other policies are subjected to that constraint.
Heck, even defence is caught up in the furore, with battery powered tanks on the drawing boards of newly environmentally friendly defence companies…
The point is that anything we do must fit into governments’ Net Zero plans. The fact that they’re very sketchy plans is part of the problem. But I suspect we’re already experiencing the consequences…
Right now, there’s a severe housing shortage in many of the countries whose news I follow each day. In each place, the pundits blame different reasons for this shortage.
It might be the banks, the government not freeing up land, taxes on landlords, and no end of other factors available for scapegoating.
It’s always intriguing to watch experts within a country blame local factors for a problem they share internationally. Sometimes the political agenda behind the false furore is obvious. The journalists just mention the particular factor that aligns with the side they’ve taken in local politics.
But when it comes to the housing shortage, I suspect the cause may be a common one — Net Zero.
You see, housing is extraordinarily carbon emissions intensive. The Australian Financial Review recently reported how:
‘Data from engineering consultancy Arup last year showed buildings typically emit 600 kg to 1000 kg of CO2 per square metre over a notional 60-year life span, with roughly half of that from embodied carbon and half from operational carbon.
‘Globally, 50 million square metres-worth of real estate is being designed that will reach completion in 2030, Arup says. Whatever carbon those buildings are built with now will be baked in for a long time.’
Australia’s construction industry accounts for 18% of our emissions and then buildings themselves for another 18% according to the government. Property Council Chief Executive Zorbas reckons, ’Buildings account for more than 50% of Australia’s electricity use and 23% of all emissions.’
In the UK, which I detailed in my book on Net Zero, buildings’ direct greenhouse gas emissions accounted for 17% of total national emissions. Depending on how you do the maths, the full figure including indirect emissions comes in at 45%.
The point being that building more housing goes directly against commitments made on Net Zero. And those are the law, whereas shelter is only a human necessity.
And if you think Net Zero policies don’t have a whopping impact on property development, consider this from the UK’s Telegraph newspaper:
‘New housing starts have surged to nearly a 50-year high as developers scramble to beat a Net Zero deadline.
‘Builders began construction on 73,600 new homes between April and June this year, a 34pc jump compared to the same period last year and the highest quarterly total on record since at least 1978, government data shows.
‘Developers raced to start projects ahead of a June 15 deadline that saw new homes subject to onerous regulations designed to reduce carbon emissions from buildings.’
In other words, Net Zero compliance is going to prove a real constraint to housing supply, cost, availability and standards in the future.
Governments will not be able to build enough housing without breaching their Net Zero commitments. Companies won’t be able to build affordable homes. And so supply will shrink.
But Net Zero will also impact immigration. I mean, how can Australia credibly have the same emissions target as Japan (Net Zero by 2050) when our population trajectory is just a bit different…
Australia expects its population to surge by 10 million by 2050 while Japan is set to lose almost an Australia’s worth of population over the same time frame…
Unless, of course, migration policy changes radically…
When the UK’s FIRES group of universities (Future Industrial Resource Efficiency Strategy) considered what ‘absolute zero’ would amount to, meaning we can only do activities which don’t emit carbon, they came to a startling conclusion that makes the World Economic Forum look like a charity. Airports would have to close, shipping would have to cease, cars could only run fully occupied, and the list went on…
This means that building airports and ports is likely to be in contravention of Net Zero laws. Which might sound ridiculous, but a UK court ruled just that over Heathrow’s third runway.
There are of course other ways to reach Net Zero. It’s called ‘net’ for a reason, after all. We could just offset all our carbon emission…right?
Well, so far, carbon emissions projects seem to be having as much trouble as the energy transition itself. After the Guardian found the world’s top 50 carbon offset programs were either outright dodgy or probably dodgy given the lack of information, Bloomberg reported this:
‘The integrity of one of the largest single sources of credits in the $2 billion carbon market faces serious doubt following the collapse of the partnership behind Kariba, a mega-project in Zimbabwe backed by the world’s top seller of carbon offsets.
‘South Pole, the company that sold most of the credits tied to the forest-protection project, said on Friday that it terminated its contract with Carbon Green Investments, which owns and develops the site. Dozens of corporate giants, including Volkswagen AG, Nestle SA, L’Oreal SA, Gucci and McKinsey, have purchased credits from Kariba representing millions of tons of greenhouse gas emissions.’
It’s a remarkably good business proposition, if you think about it. Sell carbon offsets to big companies and then fail to offset the carbon…
No wonder even the climate change activists see Net Zero as a scam. That’s why the FIRES group conducted the absolute zero analysis — what our world would look like without a functional and cost-effective carbon offset industry. Suddenly, we really won’t be able to fly or ship or drive…
My point here is that the pains we’re seeing in our economy and society are by design — by law. If we subject our economy to Net Zero by 2050, along with many targets in between, this is going to force a very long list of other changes onto our lives.
Things won’t be built, products won’t be made, energy won’t be provided and much more…
As more and more of these changes become obvious, the pressure against Net Zero will continue to mount until the dam breaks, perhaps literally in some cases.
Editor, Fat Tail Daily