Markets fail : without intervention economic activity aggregates and centralises. There are three responses that are possible. 1) You can "let the market sort i

Markets fail : without intervention economic activity aggregates and centralises. There are three responses that are possible. 1) You can "let the market sort it out" - but in the limit you end up with Mexico City and a very hard issue of transport and quality of life in the suburbs. In addition "the market" will optimise to local optima... Flats are built with 1 or 2 bedrooms because that's what young professionals want, or can afford. In London if all new builds were mandated to be built as multiple (min 4) 3 large bedrooms (325m^2) units, the demographics and loci of the current market would be very altered, family life would become more practical for many and there would be much less of a flight to commuting and more community in places like The City and Westminster. 2) You can say no to more housing and the untrammelled market and do nothing (or little) to deal with the over demand; this means that you have a "nice for the elite" city (Manhattan, London, Dublin) that lots of people would love to live in but few can afford. 3) You could* intervene with state planning and move some of the locus of economic activity to other centres. For example in Ireland a high speed rail line could connect Dublin and Belfast and could alter the economic balance between the two (of course they are in different countries and soon different economic systems!) In the UK investment in the transport infrastructure in the Northwest (for example high capacity urban rail links between Leeds, Bradford, Manchester, Bolton and Preston) could create an alternative focus to London and enable substantial relief for the current housing crisis because the urban infrastructure required to house people at a high quality of life (schools, colleges, parks, leisure centres, restaurants, theatres, culture and community) exist. My point is that letting the market build housing is an effective intervention up to a point; but it's not the only option by a long jaunt.