Change my mind: Density increases local but decreases global prices
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The way that an urban economist would put it is that fundamentally cities are job markets. I would put it a little more broadly and say that cities are opportunities markets. For that reason housing in a dense urban environment will never be as affordable as housing out in rural North Dakota.
If you build more housing in a city, more people move there, and the city becomes more desirable as a result, is the city better or worse off for having built the housing?
Initially, geographic advantage (such as being near harbour, river, or some other geographic feature) gives a settlement that's not yet a city a big advantage in attracting more people there. This in turn, forces the city to grow as more people cram in.
To artificially build denser by policy doesn't produce opportunities - those opportunities would have to be there first! And it's this "expensiveness" of creating more accomodation in the city that causes the city to expand.
Most cities around the world (except some cities in the US) are "strategically" located near a river or on shore. Because of that, pretty much the whole world live near a river or sea. The most strategically located cities "become" a trading hub and these days have become large cities.
It's well worth mentioning, however, that if the people in the city (who where strategically located for trading) didn't adapt to the changes in the world conditions, then these cities simply disappear or become much less relevant. Many cities of the world would have lost this privilege due to digitalization and the sea becoming safer.
It's impossible to separate the people from the social institutions which do create the opportunity in the services sector which dominates modern advanced economies.
In the Bay Area/SF the digital economy is defined by the ecosystem of big tech, VCs, thousands of software engineers and maybe tens of thousands of support services like accountants.
not sure this is a good example - while it's true for actual gold mining, in the case of software developers, having other software devs around (plus also good computers, which you could argue is like gold) can be an opportunity in itself - look at all the devtools startups that happen in the Bay Area.
A large group of people is an opportunity in itself.
I'm not sure if there's been some slight shift of topic here. By "planned", I think we originally meant "deliberately built in relatively undeveloped land". But then you mention as an example of a failure of deliberately building a city in relatively undeveloped land, an example of a failure of micromanagement (also a kind of planning, but one that is completely orthogonal to the circumstances of the city's founding).
So does Brasilia's original strictly separated zoning show the problems of strictly separated zoning, or does it show the problems of deliberately building a city where none was before? It's possible we just had the wrong idea of what you need to have a great city during the 20th century isn't it? Washington DC, for instance, is an artificial city with top-down planning, but it was built at a time when people had different ideas about what made a great city, and it doesn't really seem to be a failure. It doesn't even appear on your list, despite being the case that served as a template for your other examples.
(I don't know. I don't know anything about Brasilia other than that it is the capital of Brazil.)
As I recall, DC was designed by George Washington himself (probably with help from his friends), back in the late 1700s, but the city as a whole was not: what they designed was the Federal district only. The Capitol, the White House, the National Mall between them, etc. Over time, this grew with the additions of the Smithsonian buildings and many other things.
The thing is, no one lives there. That district is entirely devoid of residential areas in fact, and with very little commercial stuff if any. All that stuff is mostly to the north, and I don't see any evidence of it being planned top-down at all, except maybe the original street layout which is largely a simple grid, with lettered streets running east-west, and a few interesting things like Dupont Circle (which probably came later).
DC is definitely not a place I'd call a "master planned city" or "artificial city"; it's evolved far too much in the last 300+ years.
I am from DC and it's pretty well known that it is a planned city. Look up the L'Enfant Plan.
I'm not really sure what you are talking about.
The military dictatorship decide to introduce strict zoning (probably lifting ideas that were happening in the USA during the 60s), completely destroying the urbanistic approach of the original design.
It's a failure of micromanagement from authoritarianism, inspired by the misguided (and nowadays considered idiotic) approach to urban design of the USA in the 50s onward.
Brasilia is also what I would call "not a city", it has a pretty large population which doesn't live in it like in a city. There's very few vibrant public places there, from an urbanist perspective it's a complete disaster.
I initially read this as meaning "if the money was ever moved out", and then laughed ... yes, if they ever stopped being the capital ...
Don't languages in general have single words with multiple meanings? Is this a special feature of English?
That's not what I'm referring to; it's the confusion over "capital" vs "capitol" (in addition to the double meaning of capital city vs capital-money).
also networking. there are no opportunities to meet people unless a city is large enough to have events.
movies or theaters, museums, specialty shopping (like a comic book store). anything like that is only sustainable with a large enough local population.
Density is an effective way of substituting for transport speed, which is the binding constraint on many opportunities.
The number of coffee shops I can choose to visit on my 15 minute break after stand up is limited by the density of the urban environment, for a given mode of transport.
Many public, private and social enterprises have this dynamic. A police station needs to be within a certain travel distance of the outskirts of their community to be useful, likewise a supermarket or nightclub.
There is an argument that, at a certain extreme point, density might have such a negative impact on transport speed that it might increase transit time. I'm personally split on this issue. Density definitely hurts motor vehicle speed but has little effect on walking speed and might even improve rail speed.
What is the dynamic in "this dynamic" ? Do you have an examples with social enterprises?
I intended the phrase "this dynamic" to capture the relationship between transport time and viability of the enterprise.
> Do you have an examples with social enterprises?
Sure thing. Food banks, soup kitchens and homeless shelters all need to be within a viable transport time of the people they intend to help.
Is the existing population of the city better or worse off? That's the question that matters politically, since only the existing population gets to vote in city elections.
Imagine you build housing such that 5 Million more people can move to Boston. Imagine that housing prices do not go down, and do not go down in other cities either.
That implies that that 5 million more people are now earning Boston-level salaries and 5 million more people were able to make the personal choice to move to Boston.
These 5 million people are on average doing higher-productivity jobs than before, which means economic growth.
Yet at the same time, these 5 million people now have a lower ecological footprint than they would have had if they stayed where they lived before.
These 5 million people are arguably better off, and the rest of society is also better off.
> That implies that that 5 million more people are now earning Boston-level salaries and 5 million more people were able to make the personal choice to move to Boston.
...How did those 5 million better-paid jobs got created? How did the 5 million people connect with them? Not everyone is 18-25 y/o you know, a lot of people know one profession and don't want to ever learn another (assuming the jobs pertain to a different profession, but I'd say that's a safe bet that not all of them will cover the professions of these 5 million people).
> These 5 million people are on average doing higher-productivity jobs than before, which means economic growth.
Better salary rarely correlates with better productivity in my experience and observations. People love their titles and prestige and are chasing after them just for the extra salaries they bring. And even if we ignore that, a lot of companies pad budgets for well-known reasons: if you don't spend your entire department's budget then it will be reduced in the next quarter or fiscal year, and you as a manager are very likely to get skipped when handing out bonuses. This has often led to managers hiring expensive consultants that barely do anything. These people are laughing their way to the bank and the economy gains nothing from it (those consultants will not reinvest 100% of the money in the local economy; I'd count it as a huge win if they reinvest even 20% but I have no data proving that they do or that they don't).
So yes, while the new 5 million people could have better salaries, that says almost nothing about productivity or helping the economy at large with this theorized increased productivity.
> Yet at the same time, these 5 million people now have a lower ecological footprint than they would have had if they stayed where they lived before.
I am most of all challenging this one. I've known a lot of people in rural areas years ago, some of them pile wood and small amounts of coal for 3-5 years ahead for prices I'd find laughable and a rounding error in my 3-month expense budget -- and before we talk about ecological impact or CO2 footprint, most of this wood was cut 5 years ago, it's not removing new forests. They manage their heating extremely efficiently. It really opened my eyes how much us the city people look down on others in terms of ecology when in fact we know next to nothing about how is our local electricity procured, how much CO2 it releases in the atmosphere, and how is it even subsidized (a huge topic for another thread / time).
So obviously this is down to context (and I have no idea where does Boston get its electricity, or any such city that your idea might pertain to) but to me this is not as clear and cut as you make it sound.
...And that's not even mentioning rural people getting solar panels and literally having 5-10% of their winter power bill during the summer.
......And it's also not mentioning that some of them did a combination of a family picnic + were gathering dead wood / twigs / dry leaves sometimes and these easily accounted for no less than 5% of all their heating in the cold months. This is not destroying the ecological system, it's merely being super efficient by removing mostly useless bio matter (and very far from such a huge scale that it will hamper enriching the soil, before you say it!).
> These 5 million people are arguably better off, and the rest of society is also better off.
As you yourself alluded to, that's not a given, like at all. 5 million people moving away from rural areas could arguably leave 10+ million elderly people without care or even ability to have their kids arrive to their location quickly if they have a medical emergency.
Which part of "society" is better off? City real estate renters for sure. Who else?
Local sandwich shops, laundromats, coffee joints, ice-cream truck? I'll give you all of those and I like how city people inter-mingle both in terms of physical presence and capital. But I remain skeptical that society as a huge entity is actually better off.
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IMO your take is a very idealistic one. Still, I do my best not to sound like I am attacking you, I am kind of confused that I can't see a single correlation in your string of assertions and I am curious if you can back them up with something more than aggregated (and very diluted) historical statistics.
So I will just pick your first question as an example:
> How did those 5 million better-paid jobs got created? How did the 5 million people connect with them? Not everyone is 18-25 y/o you know,
These jobs got created because companies were able to hire employees into roles that they would otherwise not have been able to fill. and yes, not everybody is 25, but a whole lot of people are…
I don't think that matters in this argument because the author assumes that housing prices will rise, which would only be possible if there is growth in desirable jobs. If 5 million high paying jobs don't get created, you don't have to worry about rising home prices because very few people would want to live in a place more expensive place on the same income. Instead you'd have a situation like Tokyo where housing prices don't rise.
>I've known a lot of people in rural areas years ago
They are alluding to suburban rather than rural migration. Your average country folk isn't going to suddenly decide to move to NYC. You need about 30 acres for an indefinite supply of firewood. You're probably not going to able to aquire that much land within a reasonable distance of an office, and if you can, you'd be wasting a lot of energy with commuting.
Agreed, that's what I am arguing for in fact. Prices either rise or stagnate, but for them to actually drop... it takes a while until the people who are very invested in the constant growth of the market to realize things don't always work that way, and correct their prices more in tune with reality.
Again though, it takes a long time.
> They are alluding to suburban rather than rural migration.
Ah, fair. Suburban living was economically viable for one brief dreamy moment in time but I am afraid it has not been that for a few decades now.
There's no way that urban living isn't far more climate friendly than rural, even if the rural housing is getting some energy from solar or burning wood.
Honestly, I even think detached houses beat most apartments. Apartments often depend on electric baseboard radiators and window AC units for heating and cooling. They often have multiple massive hot water heaters where the people on higher floors must leave their water running for 10-15 minutes before they start getting hot water. They also tend to have outdated appliances that are less energy efficient like electric ranges, and old refrigerators and ancient clothes washers/dryers. In most of the apartments I've lived in, it was firmly against the rules to hang your clothes on a line to be dried by wind and sun.
The appliances you get are often not as well maintained either. Tenants aren't pulling out the fridge to clean the coils and landlords rarely do either. Renters don't have the ability to make the kinds of improvements that would reduce their energy bills and landlords are incentivized to cut corners on construction and maintenance since it saves them money and the expensive utility payments are the renter's problem (a problem they can't even know about until after they've signed a lease and gotten their electric bill).
Public transportation is better than driving cars, but most people don't use public transpiration anyway and the number of cars on the road in dense urban settings is much higher than on rural streets. We can see that reflected in the air quality, which is abysmal in highly populated urban centers compared to rural areas.
Urban environments have fewer trees, fewer unpaved expanses of land, more pollution (air, water, light, noise), less wildlife (greater habitat destruction, more poisons and other dangers to animals) and more trash/litter.
Urban settings are by far less climate friendly than rural settings, but certainly we'd have new problems if everyone lived 2 miles from their nearest neighbor.
There's a middle ground that I don't think we've really reached yet but for now it's probably a good thing that we have masses of people concentrated into small tightly packed highly polluted pockets of filth and disease and also wide open spaces where it's clean and quiet, where animals can live, and the air is cleaner. We'd be smart to try to increase the efficiency of the spaces we move into while still avoiding going over the number of humans a given area can sustainably support, but I have a feeling that there will always be people who want to live farther way from anything else than is practical and people who want to live in areas that are too densely populated to be good for the environment.
The incentive to make improvements comes from ownership model, not form factor. Apartments can be owned and houses can be rented.
It's not about how much land a person uses, it's how that land is being used. Nobody sitting on a 5 or 6 acre lot in the middle of hickville is going to build one house and pave the rest with asphalt. Urban living is "paving over more of the environment" and you can see that with just minutes spent with Google maps looking at satellite views of urban vs rural areas. Rural areas are filled with grasslands and trees (and farms) while urban areas are vast expanses of concrete and asphalt with tiny islands of grass and trees.
People in rural areas take up more land while at the same time using (and abusing) far less of it. Having largely unspoiled nature around you is a big part of the appeal to rural living, or so I'm told, I actually prefer living in cities.
Rural people don't pave over all of the land that they have, but they certainly pave over more of it than each person's share of paved over land in an urban setting.
If all the people in the entirety of Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska, and the western half of Minnesota lived at the density of NYC, more than half a million square miles or more than 99.9% of the entire land area in those states would be completely untouched wilderness[1]. If you think that all human habitation in Idaho, Montana, Wyoming, North Dakota, South Dakota, Nebraska, and the western half of Minnesota combined has a smaller impact on the environment than 469 square miles of NYC, then you are clearly delusional.
[1] https://www.slate.com/articles/life/culturebox/2014/10/popul...
Like I said: the greater the number of people in a given area the worse it will be for that environment.
We need to find a better balance between stacking people on top of each other and destroying the ecosystem in the places where we live without any thought to biocapacity or local wildlife, and spreading out so far that it's impractical and inefficient to deliver or provide the goods and services humans want.
Since every human takes a massive toll on the local ecosystem, spreading that impact out more than we do in highly packed cities would be better for the environment and also better for humans who also suffer under those types of conditions. As I said, I don't think I've seen that balance hit quite right just yet, but it's something we're going to have to start thinking about more carefully as resources like drinkable water grow scarce, climate refugees from around the world are taken in, people along the costs are forced inland or to higher ground, and much of the western US succumbs to desertification and high temperatures that threaten to make large population centers unsustainable.
The US is likely going to get a lot more crowed in the future. We'll need to find a better way than absolutely trashing the land we settle on and suffering all the effects that go with that.
It is absolutely ludicrous to suggest that it's better for the environment to take up 1000 times as much of it.
And the parent commenter does not consider a garden "environment/nature".
Nature in general is important because it creates biodiversity and space to roam. Forests in particular are sequestering CO2 and are producing oxygen.
The average garden behind a detached house does approximately none of that.
It's cities that depend on gardens and parks to serve as the only available "nature". Rural areas are filled with forests and woods and grasslands and support far greater numbers and varieties of wildlife than cities do.
We could decide to pack people like sardines into the smallest possible space, completely destroy the local ecosystem in the areas where we live (allowing the pollution to spread outside of our overcrowded cities the same way China's pollution currently crosses the ocean to fill the skies in California), while also suffering the countless costs to our own health and safety those conditions cause in the process just so that we can have vast expanses of polluted but undeveloped land that no human can use for anything, but I propose something a bit more balanced, where we spread out enough so that the biocapacity of the land we settle on isn't exceeded, but still near enough to each other that we can still efficiently sustain a civilization. That means a population density that isn't overcrowded, but not so far apart that we lose all of the efficiencies we gain by living near each other. I'd much prefer to have biodiversity within the places we inhabit and keep space to roam for humans as well as the other animals.
[0]:https://www.nyc.gov/site/doh/about/press/pr2023/2020-vital-s... [1]: https://www.cdc.gov/nchs/pressroom/sosmap/life_expectancy/li...
You are saying “Rural areas have lots of forest”
Yea, but they do because not everybody is living there. If all the city people were moving to the countryside and building houses with big driveways and terraces like the country folk do, there would be much fewer forests.
That’s the point, I don’t know how to make it any clearer.
Cities are not the dirty hellholes you seem to think they are. Pollution doesn’t come from cities, it comes from power plants and factories. And that’s a totally solvable problem
I have actually seen this with concrete, but it is usually grass without trees. However, it isn't really the point. The point is this: https://www.nytimes.com/interactive/2022/12/13/climate/clima...
Many cities have obvious low-hanging fruit. SF is full of 1-3 story housing that could easily be made much denser.
Instead we've created a system where the lucky few whose parents bought housing years ago in desirable areas inherit a ticket to opportunity in a city. That's fundamentally contrary to the ideals of the American Dream.
*Well I actually think this should be global, so I support open borders. But that's a tangent here.
Of course will a house in the middle of nowhere cheaper than those in better environments. But what worth has the better environment, when most people can't utilize it? At the end, this situation will lead to multiple other problems, like people avoiding overpriced areas, and instead travelling long distances to their workplace in those overpriced areas, which means they waste energy and pollute the environment, have less time for their family & socializing, and so on...
So it doesn't matter for what reason a city might exists or not. The question is which burden it puts on society and to which future it leads.
> But Manhattan and London have the highest house prices in their respective countries, primarily because of their density and the opportunities density provides.
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> But if becoming just as big as Manhattan or London would make Oakland more expensive, shouldn’t we assume that a little step in that direction would make it a little bit more expensive?
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> No; I think the missing insight is that there’s some pool of geographically mobile Americans1 who are looking for new housing (or who might start looking if the right situation presented itself).
The question is whether or not an old building being replaced by a tower or a single family house will lead to more expensive housing throughout the city. I still am confused as to how density would hurt locally here.
You might as well ask how cities get started and grow larger. Contrast with farmers.
A positive feedback effect will keep going until there’s negative feedback counteracting it. That’s almost tautological. The specifics will be more interesting.
In general his thought experiments with data in the article just seem completely handwavy. “Imagine if I added 5x more houses to Oakland”. Well we can imagine that but we would likely be wrong about what would happen so it didn’t prove anything. Besides anything the most likely outcome would be you would have a lot of empty houses.
This really depends on how you measure real estate prices. Long Island can have very low price per square foot of ground land compared to Manhattan, even if the unit price of housing or price per square foot of interior space is similar.
A common YIMBY complaint is that single family zoning forces urban areas to become even denser because they are the only places where multi-family housing is allowed. This is totally consistent with the data presented here. Does that mean it is true? Not necessarily, but the analysis does little to explore options simply referring to the induced demand effect as "obvious". It seems he is out of his element here.
it's not, though. Tokyo is substantially more expensive than other cities in Japan. Tokyo is also more expensive than American cities when adjusted to per sq/ft rent and PPP.
"Tokyo is so cheap" is a meme at this point. Tokyo is cheap the same way having roommates is cheap (roommates are much, much rarer in Tokyo compared to NYC).
funny how no one can cite any other city. if the theory was true there should be dozens of examples.
Building more reduces prices below what they would have been if that building didn't happen.
seems like moving the goal posts. it's only expensive to begin with due to the density and subsequent amenities enabled by such.
why is for example Manhattan more expensive than Brooklyn? it's more dense, should be cheaper accordingly to the density makes cheaper logic.
people keep moving the goal posts, but anyone can go on Redfin and figure this out themselves. look at the median rent, find the median wage, find the median sq footage. calculate the adjusted wage by sq/ft. it's not higher in dense areas.
It's more expensive because many more people want to live there than want to live in Brooklyn, outstripping the available housing to a greater degree. It's basic supply and demand.
Isn't Tokyo famous for stuff like tiny, tiny microapartments? Are the rent increases comparisons you allude to measured per apartment or per square foot?
truth looks to be somewhere in the middle, but interesting how the polar opposites can exist so close to each other.
Even at that higher end of the Tokyo price range, there’s nothing like that for solo renters in SF or Oakland. You’ll have to go a one hour drive out of either city. Even then, there’s a good chance you’d end up in a room with shared amenities rather than a full apartment.
And let’s not forget that Tokyo actually has real transit. My first rental there was a luxury 4 bedroom home about 45 minutes from my office by train - I paid $1200 a month. It’d be even less today.
It only seems cheaper because rich Americans keep using their income and comparing it to the adjusted USD:YEN price. The Yen is trash compared to the dollar, so it seems affordable to an American. But it's not America.
I feel like many commenters have not been to Tokyo. Some of the apartments are literally the size of a single bedroom in an average New York City apartment.
Median household in New York is 120k; it’s 87k in Japan. Rent is over 200% higher than in Japan. Even adjusting for square footage and the earning differential, I assure you it is much easier to get an affordable place (and pay less per square foot accounting for income differentials) in Japan than in New York. Because of the Japanese transit system and the lack of household appreciation, there is a much broader range of rental prices and that range increases the further outside the city center you go.
Wanted to mention though that your sentence "the total cost of living in Tokyo blows NYC and the Bay out of the water" risks being interpreted with two very different meanings.
I've lived in 3 separate places in Tokyo (and currently own an apartment), and everything I've lived in has been bigger and cheaper than my apartment in San Francisco. I currently live in Sangenjaya (central Tokyo, a couple stops from Shibuya) and my mortgage, insurance, HOA, and total expenses are cheaper than my rent alone in SF.
My income is lower, but not in a way that I actually feel, because the overall cost of living is considerably lower in Tokyo. The conversion rate only really matters if you're going out of the country. There's been barely any inflation, so if anything, as the rate eventually goes back to normal, things will still be considerably cheaper here.
Yes, a lot of people live in tiny apartments here, but the cost of those units can be really cheap. You can pay ~$400 a month for a tiny unit here, which you simply can't get in NYC.
1 I’m limiting this to America because it’s approximately a self-contained housing market; I don’t think there are enough immigrants to really affect things. Thinking at a country level does make a difference - for example, I worry someone will bring up Tokyo as a counterexample. But I think Tokyo managed to build its way to low housing prices in the context of the rest of Japan also having good housing policy. Even if that isn’t true, Tokyo on its own is a quarter of the Japanese market, so it might be able to exhaust the entire pool of Japanese house-seekers by itself!Graph of Japanese Stock Market: https://www.macrotrends.net/2593/nikkei-225-index-historical...
Graph of Japan's Population: https://tradingeconomics.com/japan/population
Graph of Tokyo's Population: https://www.macrotrends.net/cities/21671/tokyo/population
Average Salary in Tokyo: https://www.timedoctor.com/blog/average-salary-in-japan/ (outdated exchange rate, yen has been collapsing)
In a nutshell: The Japanese economy was larger 33 years ago than it is today, the Japanese population is declining by the millions with even Tokyo now also seeing increasingly declining population, and the average salary in Tokyo is about $45,000. This can absolutely lead to low housing costs, but is probably not a model you want to emulate.
And that money has to come from somewhere. So either your population grows, so the more work is distributed better on more shoulders or you try to educate them better to increase the quality of the corporations etc.
But the fact that our economies expect constant growth has consequences for everything else
The important issue is that fertility is an exponential function. When one group has a low fertility rate they have fewer children, and those children have fewer children so onward. And so the rate of decline never changes unless the fertility rate does. But these numbers are also staggered out by the life expectancy of the first generation to have lower fertility.
So when going from high to low fertility society you will see a period of increase, stabilization, and then exponential decline. With Japan we're just about to head into the exponential decline phase. I expect the reason the UN expects a fertility rate change is that if you don't increase it, you go extinct. So it'll probably become the next big issue relatively soon - across the entire developed world.
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Also in terms of things like an 'aging population.' This does not change when the older group dies off. In fact if the aging population had a higher fertility rate than their children, then it will only become worse. It's the exact same issue in play. When you have lots of children, you end up with a high youth to elderly population. When you don't have many children, you end up with a high elderly to youth population. And that poses immense practical, social, and economic problems.
[1] - https://population.un.org/wpp/Graphs/Probabilistic/POP/TOT/3...
Social security would be insolvent if not enough people paid in to fund those being paid out. Stock prices and home prices would decrease as well. Debt would become more expensive since there would be fewer people to pay it back.
Because assets are priced based on their future value, growth is a huge component of the prices assets. The value of most everything in our society is predicated on that rate of growth.
What happens when this infinite growth starts to run up against finite planetary boundaries?
A lot of the foundations of economics fall apart once you assume logistic growth.
People in cities have higher incomes, and sellers - whether it's gas, rent, or property - are very adept as sussing out what the local market will bear and sustain. So they charge more. They have their own income and profit floors that they will resist breaking to compete on price, because they can see where a race to the bottom ends.
It wouldn't be surprising if a dynamic like that is a large part of these effects.
They need the higher prices to recoup the higher costs of land: mortgage cost, property tax cost, opportunity cost of the land.
Which is what happened many times ... which is why the remaining ones can charge a bit more.
A petrol station is not a charity...
That being said, I agree that it seems unfair that people can just own a piece of land for generations and keep profiting off it. Which is true for real estate as well.
A land value tax might help resolve this unfairness.
https://devonzuegel.com/post/agglomeration-effects-might-cha...
Sure
>So I don’t understand why Matt believes that building a few new apartments in some city - a very small move along that spectrum - would do anything other than make local prices go up.
Huh? Other than friends, none of the previously mentioned amenities are provided by apartment buildings.
Adding commercial real estate to a city adds jobs and amenities that make it more desirable, and thus more expensive.
Adding more housing does not.
That said, adding more housing raises the demand for commercial real estate (more available workers and customers), hence the cycle that leads to very dense, very expensive places like Manhattan. Strictly speaking though, adding apartments alone isn't enough to keep that cycle going.
Short term, the supply for a specific area increases while other factors are basically constant, exerting downward pressure on prices.
Long term, the positive effects of density increase the desirability of the area, pushing prices up.
Supply and demand still apply.
Those circumstances drive: prices, density, opportunities of which people speak in sibling comments.
There could be some forced or artificial dynamic, but these examples are plain bad. Chinese megacities are much better ones, particularly planned, not organic cities
Additionally. I think that it would be interesting to consider the distribution of housing costs. There are likely more affordable housing units in NYC than in Oakland (citation very much needed, I'm not sure this is true) , even if there are less relatively. So if your goal is to increase the number of people that can afforably live somewhere (as opposed to decreasing the average housing cost) building may accomplish it, even if it drives up median housing costs.
Lastly, this suggests that perhaps building needs to be accompanied with other policies if the goal is to decrease housing costs (whether rent control, demand reduction, or something else). Unfortunately, I doubt limiting job creation to reduce demand would be popular :)
People want to live in dense, well-serviced cities, and they actually pay for the privilege of doing so. Not so much for roads, unless it’s a toll road.
The idea for roads is that congestion moderates the utility of roads, so over a wide range of capacities roads will remain congested or even become more congested as you add roads, since if you build more you make the roads more useful (reaching more places faster, through better connections or increased capacity) and so people will use them more, potentially resulting in more congestion but almost certainly not less.
The parallel idea for housing would be that cost moderates the utility of the city, people move into the city until the cost matches the benefits of density for them (driving up costs and pushing out people for whom the equation no longer works out). If you add units, you've just allowed more people to move from Idaho into the city, and made the entire city potentially more valuable from increased network effect and caused costs to go up further.
This process shouldn't be expected make it affordable to live in the city, unless you've managed to either damage the utility of living in the city through the secondary effects of increased population/density or you've managed to build enough supply the you can sink the entire worldwide demand for living in one of the best and most valuable place, such that there are no more wealthier people anywhere in the world to sell to and you must go down market to get more customers.
It would however, increase the number of people who can have the benefits of living there, but at the cost of displacing more people who can no longer afford it... the benefits go to people outside of the city: The wealthy ones that can move into the city, and the rest who enjoy lower competition for housing outside of the city.
> Denser housing is very efficient
Housing itself increases in efficiency to a moderate level of density-- a duplex is somewhat more efficient to construct than a single family home, owing mostly to reduced land costs (materials are somewhat higher due to the increased isolation and fire protection required). But the effects fall off with increasing density, and you run into issues that building higher involves structural and safety related costs that hurt their efficiency.
E.g. https://ti.org/pdfs/APB36.pdf Page 2--
high-density construction is significantly greater,
per square foot, than low-density construction. Due to the
increased need for steel, concrete, and similar materials,
the cost of building three or more stories is progressively
greater the more stories are built
[...] building three stories costs 30 to 50
percent more, per square foot, than two-stories; four to
seven stories costs 200 to 300 percent more; and eight or
more stories costs 450 to 650 percent more" )Mostly, it is regulation. Example of something is the two staircase rule for buildings.
Here is how you could do a first order approximation: Find property zoned so you could build dense housing and get its cost minus the cost of the improvements. Then find matched property zoned for a single family homes, minus their improvements. The difference is attributable to zoning for the purpose of this approximation. What percent of that is that in the overall cost of the multi-unit construction?
I'm not sure of the figure but given that the entire land cost isn't that big a percentage in dense construction, I expect the impact from zoning to be fairly small but not negligible.
The benefit of dense housing is more so about the total resource expense of maintaining a city. If you have 1m people in single family homes, that city will sprawl, with attendant infrastructure requirements for roads, sewage and power distribution. A city with 1m people in (for example) denser 5 floor buildings will probably require 1/5 to 1/10th the space at a first level approximation, and probably even less after you eliminate excessive backyard space waste, less space dedicated to roads and freeways, etc.
The resident in the dense city will have to fund far fewer ancillary expenses, probably spend significantly less on transport and fuel, etc. That's how you get back the higher construction costs. This also ignores the value people place on convenience and the like, which is a significant component of why people choose to live in cities rather than suburbs.
However, in many cases housing is artificially expense, with very high cost components in the LAND, rather than the structure. You'd expect in a relatively efficient housing market most of the cost would be in the structure and construction, since there's enough housing that raw space wouldn't be an issue. In many places regulations make sufficiently dense housing impossible for fulfilling this requirement (since dense housing distributes the land cost amongst many dwellings)
Roads just don't scale the same way - someone else had a good comment on how free roads basically always fill up to take about the same time. Of course, more people are getting utility from it, but as you get more travelers you'd naturally expect the monetary benefit per person to come down;. PT doesn't have the same problem, since it can scale to more or less arbitrary amounts of people in comparison to a road.
With housing you also have a better chance of outpacing demand growth if you build densely enough. Even that's never enough to meet all the demand, at least you end up housing more people in a desirable area than you'd otherwise if the density was kept artificially low.
I realise it's a personal preference and in the US culture dense cities have a poor reputation, but dense cities can offer walkability and public transport infrastructure that wouldn't be economical otherwise. In many places around the world this is valued as a goal in itself.
But I think its far less clear that affordability should be expected to be among those benefits. It's hard to be sure how much value causes density vs density causes value, otherwise one would say that as the post shows-- the existing examples show that increasing density will decrease affordability. But many people do accept the argument that more roads mean more traffic.
I feel like one important driver of demand is missing here: investment properties.
It's no secret that at one moment AirBnB essentially took over tourist hotspots in the most attractive cities, jacking prices up to ridiculous levels.
There's a building in my neighborhood that consists of so-called "microapartments" - 18-25m2 units, which on the lower end, from a legal standpoint, wouldn't even be considered housing today.
Of course half of them are empty because they weren't really meant to be occupied in the first place.
This sort of demand is essentially boundless because while even a billionaire can only drive one car at a time, they can easily own thousands of investment properties and not even bother to rent them out if the market is hot enough.
Of course regulations follow, but shitty housing built with investors in mind doesn't just disappear overnight.
At this point, armed with the resources of nations, it can do many things - perhaps buy out an entire island nation, perhaps end wars. If the money is insufficient, sell a billion homes, and now you have a quadrillion dollars.
With that kind of money, this locality could simply acquire entire other nations and transform them into papercli- I mean investment properties.
This Von Neumann probe city state will soon encompass the known galaxy.
I'm in the market for an apartment and some of the best spots are already taken by such housing, while families are pushed to the suburbs.
Well, partially because induced demand is a little bit of a meme, and partially because it's actually different.
See, if you have a city that's dense enough that transit actually represents a high share of trips, it's possible that increasing road capacity will cause people to switch from transit to driving, which is essentially a wash for economic activity, and quickly replenishes congestion. In these very dense areas it's more appropriate to build infrastructure for other modes of transportation — just as it makes more sense to build apartments instead of houses.
But if you have a city where trips are already almost always by car, then any induced demand actually represents a new trip that wasn't taken before. This must be distinguished from the true Braess paradox [1], which is rare. More trips usually mean that you actually improved people's lives, which is a good thing.
The thing is that some modern urbanist activists just absolutely hate cars, so they exaggerate the case against roads. There are still other reasons to avoid expanding the road network: it costs money, it creates pollution, it causes crash risks, it drives sprawl and balkanization, and it contributes to impermeable ground cover and urban heat islands. Parking lots do all of this and make life more difficult for people who are walking. But the notion among some urbanists that building roads does absolutely no good is simply wrong. The literature on the economic benefits of road construction is extensive.
I think that people who study the issue are leery of alienating their already tiny support base by gainsaying them about this, though. I personally like to point out that replacing intersections with roundabouts can achieve most of the goals of road widening while improving safety and pollution. Strong Towns in its early days emphasized building roads in such a way that all built capacity would be used as effectively as possible, but some more recent activists have been unhappy that they aren't more stridently anti-car.
I think you could potentially generalize the Braess paradox to talk about where people live.
The intuition is that we'd be best off if the distribution of demand matched supply, then housing costs from town to town would be identically distributed and all markets would be well utilized and none over-congested. But many people selfishly prefer to live in dense areas because network effects make it more valuable to live in those places, more choice in jobs, more people to interact with, etc.
Not only does this cause under-utilization in less desirable locations, it huts affordability-- which people consider a terminal value ('cause housing is necessary for life) independent of the overall utility or efficiency. Though we're OKAY with certain houses or even neighborhoods being out of reach of some, we consider it a problem when whole cities or regions are broadly unaffordable.
[It's not clear to me that we should, any more than we consider it a problem that not everyone can afford to live in SwankyHeights. But it's a complicated situation, since there is a reason people want to live in dense areas, like wanting access to jobs or services, making "so go live elsewhere" not a great answer.]
Okay, so we add housing. Now the incentives change around in terms of who wants to live where, and there isn't a particular guarantee that the equilibrium prices that result will be lower-- they could well be higher because we just shifted the balance to attract more people from elsewhere.
It's a handwave, but over the time span of years, I'd argue that demand for dense cities is more like your transit-to-driving example than your "everyone-is-in-cars" example. People outside of the dense areas are "taking transit", but if you changed the economics they'd prefer to take a car.
> More trips usually mean that you actually improved people's lives, which is a good thing.
Right but that also assumes overall improvement is the thing people care about.
So in a hypothetical where increasing the number of units in a city made every unit more valuable and so made the city less affordable, it would still create an aggregate improvement in utility and so it arguably should be done. But the issue being complaint about wasn't cities doing the most good possible, it was about cities being affordable to the most people.
Kind of like complaining about roads because they take up space that could benefit mankind in other ways, vs complaining about roads because they facilitate cars.
You're supposed to pay for your own housing no matter how dense it is. Hence induced demand makes no sense here.
It probably goes up at first, then comes down once you’ve hit some level of density relative to demand.
But price is not a function of density!
You think building more apartments in Cumberland, MD will increase prices, or decrease prices? I should point out: Cumberland is already a very densely built city. Its inner urban geography is not unlike Oakland. It just happens to be in a long, painful period of decline. So many of those buildings are empty.
The answer is pretty obvious, here. Prices would likely drop. The "induced demand" is caused by economic success, not density itself. Plenty of dense cities have declined. (Cumberland isn't even that cold! And it has legal marijuana! And it's close to ski resorts! Eat your hearts out, armchair prognosticators!)
>we find that indeed, the denser an area, the higher its house prices
The data in this graph skew California cities upward because their suburbs are not part of their core urban areas — Concord/Walnut Creek is considered separate from the Bay Area, as is Dublin/Pleasanton — while cities outside of California are more likely to be connected. This is due to mountains intersecting dense urban geography in California, which doesn't happen in most other major cities (but Miami is constrained by swamps and New York does hit mountains to its north). But there are other unusual forces on housing prices in California (Proposition 13, construction difficulties), and without the major California cities the correlation becomes much weaker, before we even consider reverse causation.
>No; I think the missing insight is that there’s some pool of geographically mobile Americans1 who are looking for new housing (or who might start looking if the right situation presented itself). These people have various combinations of preferences and requirements. One common pattern is to prefer any big city - they would be happy to live in Seattle, or NYC, or the Bay, if the opportunity came up.
High decadal growth rates in Nashville, Charleston SC, Fayetteville AK, Boise, Jacksonville and Bend among other places put the lie to this. There are certainly "trends", but they aren't limited to big cities, and they don't really affect all big cities: the Los Angeles metro (of all places!) grew a measly 3% from 2010-20. Surely LA's high prices aren't primarily driven by a growth rate just a little higher than that of Pittsburgh.
There might be some induced demand from certain kinds of housing construction in certain contexts, but this blog post is a long way from demonstrating any such effects. The most well-justified negative effect I've heard of from new housing construction is that businesses serving poorer populations are closed due to increasing commercial rents and competition from businesses serving the new clientele. And this can increase the cost of living for local residents, as well as causing job losses (even if employment statistics improve). What we do know is that sometimes people are worse off after construction happens (hence the uproar in the first place), and unfortunately I don't think this kind of 10000-feet analysis brings us closer to understanding why.
> So many of those buildings are empty.
> The answer is pretty obvious, here. Prices would likely drop.
If many of the existing buildings are sitting empty already, it sounds like there is far more supply of housing in this city than demand. So prices are already as low as they can go, since rent can't trend to zero.
So seem like building more housing there couldn't really drop the prices further.
If people want affordable housing, affordable housing needs to be built. It's housing that kinda sucks, accomodations that aren't attractive, streets that aren't safe, neighbours that are noisy, metro stops that are far away, plumbing that breaks, windows that aren't et al.
If it's attractive, it will be expensive. That's how pricing works.
Substitute desirability for expensive and it becomes clearer
Density around desirability can super-charge it
Everybody wants to get closer to it
> If it's attractive, it will be expensive. That's how pricing works.
No. Prices are set by both supply and demand, and you're only considering demand.
1. Major housing developments are accompanied by more jobs than the units being built could serve.
2. Developments are accompanied by local initiatives to improve the neighborhood that take effect soon after.
3. The quality disparity in a given area results in people far higher than the neighborhood median income moving in, resulting in (2) and eventually (1).
I’ve yet to see anywhere on earth that’s both dense and cheap which I believe more or less proves the point. If building more houses really made things cheaper it would be trivial to prove: cities, which are denser, would be cheaper than the nearby suburbs. Across virtually every region this is not true, when adjusted for square footage.
The problem with the United States isn't that housing is too expensive - it's that housing is too big.
To that end I agree with this article. The area that has people leaving their (presumably less dense) locales will become cheaper, but those areas will also become less desirable and ultimately have fewer people. If that’s the case, the price decreases is not really relevant in the same way the price of housing in Oklahoma City is irrelevant to someone in Brooklyn.
That being said, post COVID is very different as commercial real estate is not nearly as lucrative. Who knows what will happen now.
And as you said, the neighbourhood gets improved - isn’t that a good thing?
Or are you saying that the solution to the housing crisis is to make cities as inhospitable as possible such that people are forced to live in the countryside?
Have you considered the effects that dense cities have on the ecological footprint, the welfare and the technological progress of a society?
Have you considered how allowing free movement - including into cities - increases human welfare and happiness?
We need a better metric. If you have some number to describe the quality of a city, perhaps let's call it fun, then the fun/$ is probably much higher than in a cheap suburb, for sure.
Density and price are both simply measures that track other desirable factors like jobs. It is correlation, not causation.
Every city has already run this natural experiment. You have units that are high density and low density that are completely paid off. People will pay more for a larger space in an urban center. If people wanted density for its own sake, rent would be higher for a tiny apartment in a large house in the same location. It is not the density that they want, it is the short commute and high paid job. This is what I mean by causality.
You do, actually, pay more for "density". Moving things closer together, incurs extra costs (Even ignoring all other factors). Building codes have to be stricter (for equivalent safety levels), when buildings are closer together. Walls and insulation need more expensive materials (for equivalent sound dampening levels), when buildings are closer together. Insurance rates get higher (for equivalent coverage), when units are closer together. Labor costs are higher and labor time needed is higher (for equivalent results), and so on.
A few costs go down (less length of pipe material, or less length of wire, etc). But those minor material costs are usually far out-shadowed by the increases in labor to accomplish them (it costs less money to replace all shared water pipe in my 20 house suburban street, than it costs to replace all shared water pipe in a NYC mid-level with 20 units, even though the literal length of pipe material might be cheaper). It costs more to remodel a bathroom in Manhattan than in (say) Louisville, KY., even for identical bathrooms with identical fixtures and identical sqft.
Denser usually means more complexity or more labour, both things that cost extra money.
---
Density advocates generally acknowledge this, density fundamentally costs more. Their argument usually rests on cities having hyper-overvalued properties -- the argument is that the extra cost of density is cheaper than the extra cost of land, and that's how they manage to make density look like a cost savings. Which kind-of works in major cities downtowns, but doesn't really pencil out elsewhere.
If offered to rent a large home on a 1/4 acre in downtown Manhattan, or a dense condo for the same price, almost everyone would choose the less dense option.
People want space, and put up with density because they have limited money and like the location.
Usually, liking the location means you like that it's close to other things, right? In other words, you like the density.
Location means being close to things you like. Those things can be, but are not always other humans. you might like a location because it is beautiful, by the ocean, mountains, or a short commute.
I might like a location because it is close to a high paid job, but hate the population density. That is to say, population density can be a negative attribute of a location.
Because the most people want to live there and population is growing?
There are plenty of high density old towns all over Italy that are dirt cheap because nobody wants to live there anymore. You can buy a whole house for $10 in a town built for such high population densities that streets are a meter wide.
If you build 100 houses, but 1000 people move there, you can say "Oh look building more houses didn't help, prices still went up". It's not that building more didn't help, it's that you didn't do it enough. The obvious answer is to do it more, not to ... stop building houses as if that is going to bring prices down.
Lets take your theory to be true.
Even if this is the case, it would still effectively cause housing prices to decrease, relative to the amount of money that people are making.
So, if density causes people's income to double, by having all these awesome and cool jobs, but housing prices only go up by 50%, this is still a massive win for the residents.
This isn't true at all, though, empirically. Trivially you can look at the minimum wage in the top 10 most expensive cities vs the bottom 10 and see this.
> So, if density causes people's income to double, by having all these awesome and cool jobs, but housing prices only go up by 50%, this is still a massive win for the residents.
Why exactly would that happen? Ironically denser places result in lower wages, relative to the rent. Your theory is empirically false. This is why people like remote work, so they can better arbitrage.
> Ironically denser places result in lower wages
No it doesn't. The highest paid locations, in the US, are located in these high cost of living areas.
> This is why people like remote work, so they can better arbitrage.
Yes, they work remote, because dense locations have high salaries. That supports my point. You just agreed with me.
If people had high paying jobs, where they live, they wouldn't work remote, to get the highly paid jobs in dense cities.
I'm talking about the wage relative to the price sq/ft. You're laughably wrong. Just google Median NYC salary and look at the median NYC sq/ft, and do the same with say, Dallas, TX. It's not even close.
I'm not talking about nominal wages, I'm talking about sq/ft monthly rent adjusted wages. When you look at that, the densest places do not have the highest wages. People are sacrificing earning potential to be in a more fun area, which makes sense.
If they could get highly paid jobs, elsewhere, they wouldn't pay the high cost of living, to be near the high paying jobs.
I am not sure what theory you could invent, that would cause people to move to a high cost of living area, if not for the high paying opportunities in those areas.
If, instead they could get better opportunities elsewhere, why pay the high cost of living?
> People are sacrificing earning potential to be in a more fun area
Hey, if you know of any jobs that pay 500k a year, for a sofware eng position, not in SF or NYC, please let me know then!
I'm going to say, that actually its the salaries though.
adjusted wages for rent is not the only consideration. cities have far more amenities, which are beyond the scope of the discussion.
it's simply a fact, however, that if you're simply looking at square footage, rent, and wage, the densest cities in the united states do not give you the highest wages. there's really no point in arguing about it, you can go look for yourself.
Housing cost, measured in $/month
Housing cost/sqft measured in ($/month)/sqft
Wage/(housing cost/sqft) measured in sqft.
Why is sqft a measure of earning potential?
That said, I think the fundamental claim that adding houses doesn't reduce prices is pretty absurd. You simply have to ask what would happen if we stopped building houses.
Of course density is not the driver of price. Houses in urban center are not more expensive because they are denser. They are more expensive due to proximity to jobs.
Build a high density structure in the middle of the desert and it will be cheap and dense.
After a certain point, density probably increases unit costs, which would mean the densest housing can't be the cheapest.
I'm reminded of an all-hands meeting years ago, where employees were asking for parking improvements in very office building large building (surrounded by very large parking lots). They wanted a parking garage, and the management said flat out that wasn't going to happen because it would cost 10x+ more per parking space.
That's before you factor in the cost of land which tends to be one of the most expensive parts of building in a city, that also goes down per unit built.
I'm not sure, 'should we build a structure or just pave a field is really a good comparison here'