Urban Density and Home Prices
econlib.org
econlib.org
* https://cayimby.org/its-only-a-housing-market-if-you-can-mov...
* https://www.pewtrusts.org/en/research-and-analysis/articles/...
* https://kevinerdmann.substack.com/p/we-need-affordable-housi...
Just off the top of my head.
Edit: Wow, some of the comments here are like exhibit A for Jerusalem Demsas' piece on how housing breaks people's brains:
https://www.theatlantic.com/ideas/archive/2022/11/us-housing... - "Supply skepticism and shortage denialism are pushing against the actual solution to the housing crisis: building enough homes."
So if you add a ton of houses you have the same problem just many years later but now everyone is living in a massive overcrowded area. Adding supply seems to just be postponing the problem.
The real solution imo is to spread out the jobs to other areas so that these major urban areas aren't the only places people have to move to find work.
There's tons of gorgeous places between the coasts that wonderful to live but there's no jobs.
While that definitely works whenever doable, I'd say investing in much better infrastructure to reduce commuting time and complexity is the other big factor. Living far away from the workplace isn't a biggie if I can take for example a train and be there in a reasonable amount of time. For sure an expensive solution but a solution that will pay off nevertheless.
I mean does anyone want to take a train 2 hours both ways to get to work?
We just need good jobs/offices available in other regions.
None of these things are mutually exclusive.
You're absolutely right. There's definitely real limits, vertically and horizontally, to how much density is physically possible.
As an upper limit, we have good historical examples density of around 1.2 million people per square kilometer being workable. I don't think any part of the US today comes close to that - what data I can find says that the most densely populated part of the US is at 66,000 people per square km. That's multiple orders of magnitude different.
With that in mind, I think it's possible that we haven't yet hit any real physical or space-based limits in American cities. Only political ones.
https://en.wikipedia.org/wiki/List_of_world_cities_by_popula... only goes up to about 80 thousand ... and the city with the highest population density in that list is one I must admit I'd never heard of, so there's a pub trivia question, perhaps.
More realistically, we can see examples of nice residential neighborhoods in Washington DC ranging from 30,000-100,000+/km2. [1]
[0] https://en.wikipedia.org/wiki/Kowloon_Walled_City
[1] https://ggwash.org/view/42469/what-do-80000-people-in-a-squa...
Your list of cities misses this because it's comparing entire metropolitan regions (not clear how this is precisely defined), as opposed to neighborhood-level densities, which is where you can get the hundreds of thousands or millions of people per km².
What would the sewage infrastructure look like for a 1km square with almost two million people in it? How about the ventilation? Police and fire? It's not really tenable.
SF, to pick an example near and dear to HN readers, is not full. All residents of the Bay Area could fit between Market Street and Van Ness Avenue with lots of room to spare.
as one commenter suggested, the problem is that job locations are too concentrated. we have already proven that remote work is effective, so there is no need for that any more, and super high density is not necessary.
the environmental issue with low density is mostly cars, which can be solved with good public transport, which btw will also be needed in super high density areas because people will also want to go out of the city some times. i also believe that environmental friendly construction affects the possible density a city can have. concrete is not exactly environmental friendly material. (for high density steel without concrete would be better, it's more lightweight too, so allows for higher buildings)
in short, there are a lot of factors that go into environmental friendly living. what are the factors that favor high density?
good point.
i live in an area where climate control is not needed at all, so that changes the equation considerably here.
First, only some jobs can be done efficiently in a remote way. We should not be in a rush to generalize this to every job.
Second, public transit can be more energy and cost-efficient when in a denser context. In addition to public transit, there's also cargo transport for things like food, which given dense areas can be handled by more carbon efficient methods like water and rail instead of trucks. We haven't even touched on the efficiencies for water, sewer, and electrical infrastructure.
Third, dense construction can be done with timber. We've now reached a point technologically where a 100m building can be constructed primarily out of wood (search "plyscraper"). Wood is a very ecologically friendly material, as using it means capturing carbon.
Fourth and finally, building up instead of sprawling out means less deforestation, less draining wetlands, and less paving over prairies.
In short there are a lot of factors that go into environmentally friendly living, and most of them favor higher density.
i am skeptical about that. at least with the existing huge high density cities like those in china. less density (well, actually small islands of high density, in relation to your point four) would allow space for local food production. and truck vs train is not a factor of distance. if anything longer distances are more efficient by train and water whereas the last mile likely will remain with trucks (which could be electric though)
i agree with the other points, and i wasn't aware that wood construction went that far already.
capturing carbon
coincidentally i was just listening to a german audiodrama about capturing carbon.
Suburban houses require more resources and energy to build, maintain, heat/cool. Transport is just a small part of it.
So it's not necessarily dense that's the most environmentally friendly.
That's why I think upzoning to medium density 15-minute cities is the best of both worlds.
Not to mention that living in a dense urban environment has a worse quality of life for a lot of people - that's why people don't want to do it. They like the space.
Imagine if no zoning code could prevent a developer from creating up to 3 story, multi-unit buildings on standard quarter acre lots. Just that alone would more than double the density in the United States overtime and still give most people PLENTY of space before we even have to start making sacrifices
I'm as density-friendly as it comes, but I think that we'd be much better off at maximum 20,000/sq km or so.
(That's not a magic number - that's about the density of the city of Paris, ignoring inner ring and outer ring. That's average across Paris, mind you, not some absolute maximum.)
Oakland is 3,000ish per sq km, for reference. Now, I'd prefer that we don't have to live in the 400 sq ft/40 sq meters kind of options that are older Parisian apartments, and I think that proper sound insulation is ground stakes (which current 5 over 1s in America don't do a great job with) but I think we can make the argument of more density without pushing for the extreme argument here.
I do agree that decentralizing the jobs is a really good thing. But while people want to cram into the same area, the government should not fight them.
Let's fix the low hanging fruit.
When you consider that airports & parks & golf courses take up a considerable amount of space - you're down to <10% of the city (proper) dedicated to space people actually live in.
And that's often times single story - with no vertical use whatsoever.
That's not a slippery slope though, it's an eventual limit that you might hit some day. If adding housing now is a win, add the housing. It makes people better off today.
« Actual solution » as in temporary - good enough for now, not as sustainable - can work and scale for tomorrow ?
Houses needs lots of time, energy and material to be build. Let’s not « market » them as they were plastic bags.
Denser housing tends to be more efficient in a lot of ways, so it's better if your concern is for the environment. People living in denser housing also tend to have an easier time of walking or biking to things, which is also better for the environment.
That happens because increasing housing density, as long as it takes to build, is rapid compared to increasing public transportation. Not everyone can bike or walk to work in big cities, especially when the subway commute is 45 minutes.
https://bettercities.substack.com/p/americas-infrastructure-...
Why would those areas be overcrowded instead of just appropriately dense? The suburbs, for example, are under crowded and that's a huge problem.
> The real solution imo is to spread out the jobs to other areas so that these major urban areas aren't the only places people have to move to find work.
I completely agree with the general theme here. I was hoping remote work would have a larger impact here than it has but alas major tech companies can't get away from a few select cities.
But I would just say that in the spirit of spreading things out we should be mindful to not spread too much. Farmland should stay farmland, forests should stay forests or areas that were previously home to dwindling populations of humans should return to nature. Appropriate levels of urban density (walkable neighborhoods, you can keep your car and your SFH still) should be the goal because it solves a lot of problems. We already have a model for cities that has lasted for thousands of years. It works because it's based on human evolution. I have yet to see a model that deviates from this that is successful.
> You have to just keep adding supply but unfortunately the amount of living space that can be built in an urban area is constrained at some point both vertically and horizontally.
In cases like NYC/SFO I do think that's a problem. As you build more it actually has the unique phenomenon of becoming more expensive because you have to buy land, you have to build the building, and you have to attract tenants that can afford to pay for those things + your profit. And naturally you aren't going to lower rent on your existing places because that contradicts any reason to build new units. This isn't an absolute truth, but I think New York City proves the point. If you could just add supply to lower prices, New York would be much cheaper than, say, Columbus or Pittsburgh.
Why is that such a problem though. As suburbs become denser, exurbs form. There is always going to be a huge chunk of the population that don’t want density but also don’t want rural life and since there is demand, the market will create supply especially since it is usually cheaper and easier to build on empty fields than in a dense area.
You're also not accounting for the infrastructure costs. Here's a recent example [1]. The state of Missouri is allocating $2.8 billion to expand a highway. Why do they(we) need to expand a highway? Well, because people want to live in the suburbs and drive their cars everywhere so now we have to pay to do that. Obviously there is some utility to highways and cars for that matter, but we don't need as many highways or to spend as much trying to maintain or build them if we don't use them as much. They're also one of those projects that have a big number so useless bureaucrats really like them because it's easy to do and nobody complains about it too loudly even though there's almost certainly rampant fraud and corruption in every state department of cars or equivalent.
What other costs are there? Well, pollution. That's an easy one. Energy - we have to go fight wars and stuff to secure oil and other energy supplies (whether it's our own or policing the world to ensure that container ships get from A -> B). It takes a lot of energy to move a 200lb human 3 miles down the road in a 3,000 lb SUV to get a loaf of bread or a couple of apples or whatever.
What about health and wellbeing? Well, it's easy to hate people when you sit inside your house all day glued to Facebook and don't go anywhere. It makes people crazy. We're also fat. Like really, really fat. Is it our diet? Nah not really. Certainly that's a factor but otherwise relatively healthy people are overweight because they get little exercise compared to people in peer countries. Why don't they get exercise? Because they live in a house, drive a car everywhere, and get maybe 1,000 steps each day unless they dedicate time to working out.
What about costs to your community? Well, it's hard for a small coffee shop or grocery store to compete with the likes of Starbucks or Giant Eagle. Why is that? Well how can they compete when Starbucks sets up a drive-through and can crank out 5 lattes/minute? They can't buy and build real estate. Entrepreneurship numbers go down too and all the money you spend on your car, tires, Starbucks, California grown tomatoes (nothing wrong with that besides negative externalities), and leave your local community and flow to where the companies producing these products are headquartered.
So when we say "it's cheaper and easier to build in empty fields" you are certainly correct in the short term. But in the long term it makes us poor, costs us our natural beauty, and destroys our livelihoods.
Now you might say, but hey I don't want to live in "some shoebox apartment and ride the bus everywhere" and I would say hell yea me either and thankfully that's not a choice we need to make. You can live in a normal SFH, or an apartment, or a duplex, or a townhome. You can have a garage, or park your car on the street. You don't have to ride the bus, but we can make the bus services work well so that you have options depending on what activities you are participating in. And we can do all of this by making changes to zoning and how we build. We can have our cake and eat it too. Instead, we choose not to because we're held captive by bureaucrats and vested interests that make a profit off of our fat assess, our water and soil, and are happy to be taking the welfare checks we depend on because the jobs moved away and nobody can start a business anymore because there's nowhere to start one.
[1] https://news.stlpublicradio.org/government-politics-issues/2...
The existing regulatory landscape already accounts for this in many places. That's what California's CEQA is all about. I'm a fan of infill development along with available exurbs but I'm also a fan of taxing or blocking externalities and if you feel there's a gap where you live, I highly recommend lobbying your local government to add legislation around curtailing externalities.
You can tell that the externalities aren’t priced in because the problems they cause continue to stay the same or get worse (obesity, coral reefs dying, car crashes killing kids and stuff).
If the entire US lived at the population density of Manhattan, everyone would fit in 4500 sq miles, which is only seven times the size of Houston.
Just let people build dense housing in the places where people want to live. There is no realistic possibility of running out of space.
Federal, state and local spending in the US on roads adds up to around a quarter of a trillion dollars per year.
Agglomeration is important to our economy. Forcing people into Fordlandia does not work and trying to would destroy our ability to compete on the world stage.
"They added two more lanes to the freeway, but the traffic is worse than ever.” But that’s a wonderful result"
No, its not. Thoughput is a function of speed * vehicles. Having a 6 lane highway at a crawl is as effective as a single lane highway at decent speed. Induced demand is complicated to grasp but the core is that highways are terrible at moving lots of people and any additional highway will make more people drive to match the highway's new capacity. A neverending traffic loop. Trains, trams, buses and cyclepaths all move more people which should be prioritised. Many countries atleast have priority for buses which makes them a better option. Most american cities treat them like another car but with lower status.
You can pack a lot of buses onto a bus lane. Trains and trams scale even better because you can expand the same vehicle by adding more sections.
[0] https://en.m.wikipedia.org/wiki/99_B-Line#:~:text=It%20is%20....
This holds true as long as the population is constant, becaus a single human can not spend an indefintly amount of time in public transport.
If the population can increase eg. Housing Markets in cities, this wont work. If you could double or quadruple the amount of available houses instantly the demand would also go up after some time…
Induced demand isn't actually a bad thing unless your transportation gets less efficient the more people use them. Which is definitely the case with cars. Just look at the amount of parking spaces needed to cope with peak hours. This can all be avoided if trains and buses are a viable and comfortable option for people.
Just think about the average car ridership only having 1.2 passengers. While a bus that takes up three parking spaces can have 50-100 people. Or a train that could hold up to 1500 passengers.
If you build a 6 lane highway in Alaska, it's not going to get traffic. Induced demand is really supressed demand; people avoid trips because the cost in time is too high, increasing throughput allows more trips to be made at the same time cost, and so more trips are made.
But, if you look at Caltrans reports before and after highway widening, there's usually a decrease in the hours of congestion. At least until population growth overcomes the increased capacity. Mass transit can certainly move more people per vehicle and that can make more throughput, but it also limits the viable trips. If you loom at somewhere like the LA area, it's hard to live near where you work, especially if you have two workers in the household or you change jobs. Some routes have mass transit options, but a lot of commutes would take all day without a car; especially if the commute is at off hours.
The real explanation is more subtle which is that sure, you can just keep adding freeway until there's no traffic, but it's actually bad to have monster 30+ lane highways running through the middle of your cities.
Think of a webserver with a 100M link; if it's at capacity all day long, you know you should upgrade the link, but should you add a second link so you get 2x100M, or does it need 1G or 10G or more? Hard to say. If your 100M link is only at capacity for a few minutes or even an hour a day, adding another link is likely to be enough. Of course, network capacity is easier to add than road capacity.
That is why people disparagingly call unmet demand for roads “induced demand,” because it makes it clear it will be very difficult to just more-roadway your way to low traffic.
You probably wouldn't be happy saying we shouldn't build additional housing in (wherever is housing capacity limited) because it will just induce demand for housing and it will still be capacity limited. Certainly, you'd need to build a lot of housing in San Francisco or New York or lots of metros to satisfy the unmet demand for housing and unless/until you build enough, housing will still be a congested resource, but there's no inducement; same thing with roads.
At some point, if you're not going to build housing and you're not going to build transportation (whether that's roads or rails or bike paths or flying carpets or whatever), you need to have a real coming to terms of this metro is full and how do we manage its population in a reasonable and fair manner.
The problem is generally selling capacity expansion as "reducing congestion" when it does nothing of the sort. That, and the capacity gets used so quickly that you are very quickly spending yourself into a hole trying to build ever more highway capacity. The thing about a train is that it's very hard to make it so crowded the service degrades due to congestion, at least not within the first 20-50 years.
This black hole of money needed for highway congestion then starts pulling away from other municipal and transportation funding needs.
And, more than not being a problem, the highway filling up immediately is actually a benefit. Because more people are able and are choosing to travel, to accomplish whatever they need and want to accomplish.
Granted, the externality costs of all that car travel are high. But that's almost a separate issue and one that we really should be solving by a better accounting of costs and additional taxes. It's a shame that won't happen.
Traffic speeds generally have a floor of how long the equivalent public transport journey is. (If the public transport journey is faster, people will use that instead.) The issue now is that American land use is so out of whack it’s hard to deploy transit widely enough to make that true for the majority of trips.
Downs-Thomson Paradox is also interesting here and relates to your second paragraph. In a built out environment, transit trips and car trips will take roughly the same amount of time, door to door. Transit advocates have used that finding as a way to complain about road projects, but I think it actually is a much more interesting finding that suggests a more multi-modal approach to planning. I wonder how relevant or irrelevant it is for non-built-out environments.
Usually the issue with suburban transit investment occurring over urban ones is that urban areas are so weak they cannot fund expansions by themselves, and if you want the suburbs to pony up they’ll get their pound of flesh
So yes, the widening of the highway makes the suburb more valuable, but the second effects make the city spend more resources on parking and makes the streets worse for anyone nearby. It's no picnic for the suburb either: A car-centric infrastructure basically bans anything else. That would be fine and all, if ultimately it produced more value than the alternatives. But look at the parking lots that were designed to never get completely full on black friday, back when it was actually a time where people did local shopping. Nowadays it's all wasted infrastructure, expensive to redevelop. If you thought that the commercial real estate office in dense cities was in trouble, don't look at the one in suburbs.
So it isn't really the highway, but all the things that relying on the highway leads to.
The alternative isn't eliminating those trips. It's taking the trillions of dollars we waste and spending it on an alternative, more efficient modes that deliver better outcomes (travel time, cost, speed, comfort, etc)
Urbanists tend to prefer walkable cities. They want to use less above-ground space for traffic and parking, leaving more space for buildings, parks, and public squares. Highway capacity expansions work against that, because they encourage more people to drive into the city.
* driving is just less healthy than walking, biking, or walking to and from public transport
* driving causes high noise pollution and emissions; EVs will solve the latter but not the former, since above low speeds most of the noise is tires rolling against roads
* increased driving in the US has led to higher fatality rates for the people still walking and biking
* increased driving leads to lower funding levels for other types of transport since road infrastructure is so expensive, and not everybody can afford a car to avoid getting left behind
I found this neat article https://millersamuel.com/change-is-constant-100-years-of-new...
In the 1910s when Manhattan's population was 2.3 million, price per square foot (PPSF) was $8. In the 2010s when the population was 1.6 million PPSF was $1070.
Inflation from the 1910s to the 2010s was about 22x. PPSF in Manhattan rose by 134x over the same time, even as the population fell.
Sure Manhattan is expensive but you can easily find a 2 bedroom in Jackson Heights for under $300k and still take the F train to work in the city. In the Bay Area that price point will have you on the freeway 4+ hours every day.
I agree with your overall point, but home prices are somewhat misleading in NYC. The "affordable" places tend to have lots of fees. That $300k 2b in Jackson Heights that's within walking distance to a subway line is probably going to have a $900 HOA.
With shared ownership models, you typically pay into a shared pool that can be drawn from to pay for maintenance needs.
I'm not from the US and I thought the HOA were only these evil organization that control the color of your paint and the height of your lawn, paying that much for these felt very wrong. In the context of an appartment building it's different (although still super expensive !).
LOL. That's some of the faintest praise I have ever heard.
No, I don't have an example of a reasonably priced detached single family home in NYC near a subway stop.
Nobody can make a controlled test to demonstrate millions of years of macro evolution, or to demonstrate the effects of housing policy on home prices. Smaller controlled tests or past observations are all explained away by countless confounders.
All that we’re left with is partisan bickering.
It’s up to you to decide whether your opinion on housing economics is like evolution or like intelligent design.
With the exception of 2021 and part of 2022 Austin has had plenty of inventory.
Texas A&M actually has really good research data on this: https://www.recenter.tamu.edu/data/housing-activity/#!/activ...
For context, I'm from Dallas. The same thing happened there. What were affordable apartments and starter homes went up in price as businesses consolidated there with high paid workers. The metroplex has worked to expand to all available land and yet they still struggle to make houses and apartments affordable.
Extraordinary claims like "supply and demand don't actually apply to housing" require extraordinary proof.
If you look at the table the cost of homes quadrupled over a period where inventory rose substantially. There are incentive systems at play with residences and those incentive systems go far beyond just inventory counts and density is my point.
About 54,000 people have moved to Austin (or been newly born) in 2023. https://www.macrotrends.net/cities/22926/austin/population
~7000 available listings for 54,000 new residents doesn’t exactly sound like “plenty of inventory”. Do people usually live 7-up in Austin? That’s a lot of roommates …
There aren’t enough tech workers to buy 500,000 $1m homes. So keep building homes until the prices drop to $200k and then maybe there is enough supply.
Anytime people have to “compete” for housing, there isn’t enough.
It is difficult to build a house for less than 200K these days in any dense urban area, so expecting prices to drop to that level is fairly unrealistic unless you're way out in the boonies.
> Anytime people have to “compete” for housing, there isn’t enough.
Builders don't build houses for fun, they do it as a for-profit business. If there is not enough demand for housing in a given area to drive prices up to a sufficient profit, they just won't build anything there.
Builders have no motivation to keep building until prices drop. They want to build wherever prices remain high enough to make a decent profit.
In the past this was naturally handled by older housing being "handed down" to people as starter homes, etc; but that cycle has been disrupted in many areas.
That cycle is what urban economists call 'filtering'. It's like used cars that lose value over time.
The disruption is a severe housing shortage so that even older housing starts getting more expensive and sometimes quite rapidly.
https://www.sightline.org/2023/02/07/yes-oregon-there-is-a-w...
But the vast majority of people in the United States, if given the choice, will pick a single-family home over a condo/apartment.
In my view, housing problems are a function of ever denser cities. It's clear that we can stuff an immense amount of humans into a single square kilometer, but there has to be a downside. That downside is the fact that demand will usually be much higher than supply. If that wasn't the case, we couldn't convince so many people to live so close to each other in the first place.
The author clearly has an agenda and basically wrote the article around it. Why all the conjecture?
I was bored so I did a very crude estimate.
Houston has 982,694 homes according to the census data in 665 square miles.
Austin has 426,899 homes in 271 square miles.
So Austin is denser and more expensive. To me this makes sense. Denser areas are more popular, and popularity results in high income people coming in and biding up prices. This is why there are no dense areas that are cheap.
No per Capita analysis? No income analysis? Only two cities?
This is actually a challenging question to answer. Thankfully other people have done research and we can reference that if we actually want to know the answer, rather than just prove our priors to ourselves.
Let's look at the prices in Chicago, which is a pretty dense place: https://www.realtor.com/realestateandhomes-search/Chicago_IL... - $350K
Now let's look at the fairly bland, suburban college town where I grew up, which is not dense: https://www.realtor.com/realestateandhomes-search/Eugene_OR/... - $495K!
Eugene is far more expensive than the dense place with a lot of amenities and jobs.
This relationship between density and cost reverses for nearby towns like Springfield even though they share many of Eugene’s characteristics.
This sketch of an analysis is significantly worse than what's in the article. You can't estimate effects by correlating levels. You need to correlate deltas, at minimum. You also need a reason to think those deltas are causally linked, in that you're not suffering from omitted variable bias, which is why you need a natural experiment. The article follows this correct methodology by discussing the Austin natural experiment.