> It only results in a decrease in per-unit average house prices
It never does. Upzoning does NOT reduce per-unit prices, but it certainly increases everyone's misery.
It never does. Upzoning does NOT reduce per-unit prices, but it certainly increases everyone's misery.
Rents right now are an unreliable indicator because they are heavily affected by the downtown blights that are spreading in many cities.
Sale prices are much more reliable, and Minneapolis prices (as expected) grew: https://www.redfin.com/city/10943/MN/Minneapolis/housing-mar...
Yes. And the solution is not to drive people into dense slums, but to make sure that jobs are available outside of city cores.
It will require concerted action, probably something like cap-and-trade for dense office space.
It's exactly how we dealt with all other types of pollution, btw.
> Do you have a single data point to back up your assertion?
Is there any case of increased density causing a reduction in housing costs?
Manhattan is the most dense area in the US. It is also the most expensive.
If density reduced cost, one might think Manhattan should be the cheapest?
Can you mention a city that massively increased density and the consequence was reduced cost? I'm very curious to know which ones?
""" Notably, intensively-developed properties decrease in value relative to similar dwellings that were not upzoned, showing that the large-scale upzoning had an immediate depreciative effect on pre-existing intensive housing. """
Or this https://research.upjohn.org/up_workingpapers/307/
""" . Next, I combine the address histories with a simulation model to estimate that building 100 new market-rate units leads 45-70 and 17-39 people to move out of below-median and bottom-quintile income tracts, respectively, with almost all of the effect occurring within five years. This suggests that new construction reduces demand and loosens the housing market in low- and middle-income areas, even in the short run. """ To give some random examples
The summary of the paper seems sound, can't disagree.
But then, why have we never seen these effects at a macro level, citi-wide?
How come there are no examples of an expensive city that became cheap as density increased?
See https://www.fresheconomicthinking.com/p/the-auckland-myth-th...
Let's start by defining "cheaper" as "cheaper rent" specifically. Rent will only decrease or stabilise when supply outstrips the absorption rate of the market. In New Zealand, for example, at least one analyst sees the equilibrium absorption rate of rentals to be 2.5% vacancies to total rentals. This means that to make rents go down (or stop going up at the same rate as household income), the available rentals must be greater than 2.5% of the total rentals.
One way to achieve that is to build a whole lot of housing and rent it out, far in excess of population growth in a city. To enable building a whole lot of housing, you can upzone a city. However, increasing potential housing does not actually increase the amount of housing.
To do that, you need to actually build houses. Now, anyone who wants to build a house will usually only do so if it makes financial sense to do so; essentially, when the risk-adjusted return on investment is high enough. Upzoning doesn't really change the risk-adjusted return on investment for developing a house.
Now, lowering rents WILL change the risk-adjusted RoI for building a house; it will LOWER the RoI! So builders will stop building when rents start decreasing, because the financials stop making sense. This is a natural hand-brake on (private) house-building rates, regardless of upzoning. Build enough housing to lower rents, and house builders will stop building houses!
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The kind of counter-factual we are looking for is not really expensive cities that become cheap as density increases, because density brings about more jobs, income, competition, and so on that mixes in with housing data as confounding variables.
Instead, we want: cities where rent as a proportion of disposable income goes down, while increasing population and density. Most likely, any city in that situation is going to be increasing housing units faster than population growth.
The next part of the analysis would be to figure out how they managed to do that despite absorption rates being a handbrake on the market :)
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A side-note; Auckland, which did upzone in ~2016 and again more recently, has not had a notable reduction in rent as a proportion of household income, despite increased density. Population growth meant that it hasn't really beaten the absorption rate of the market, except during Covid (lots of house-building going on at the same time as population decrease).
This is why I tend to question the YIMBY war cry of build build build until rent is affordable, as unrealistic. As you say, the build rate has to be consistently above the absorption rate. But that seems quite unlikely since builders are not chasing diminishing profits.
That's why don't see real world examples of cities that become denser and denser while becoming more affortable (relative to income, as you point out).
If you can build a 100 floor skyscraper on a piece of land, that land is insanely valuable!
If you could build 100 floor skyscrapers in the entire metropolitan area, this advantage goes away.
Guess what it does to prices?
No. I'm reading it exactly right. Density _causes_ higher prices. It makes it easier to create jobs near dense locations, which in turn makes it more attractive for people to move in. This in turn increases housing costs.
There should be plenty of different levels of density for people to choose to live in as everyone has different preferences. What's not sustainable in any way is exclusive single family zoning. If, as so many backers of exclusionary zoning claim, people only want to live in SFH, why would we need a law to force that to be the only built form? Surely every single unit built of any other type would fail to find a resident.
This had the effect of driving all the developers into fewer land parcels, hiking up prices. New York has not substantially deviated from this zoning model since then.
it's not a good look. hope my comment doesn't flag me in unforeseen ways 20 years from now.
To be clear, I'm saying effectively yep need bedrock otherwise it makes zero actual sense. (I do take you point, and lesson learned on my part)