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Wait, correct me if I misunderstood something - building high-rise apartment buildings makes living there more expensive? But how does that happen, since high r

Wait, correct me if I misunderstood something - building high-rise apartment buildings makes living there more expensive? But how does that happen, since high rises provide greater supply of living space?

cogman10 7y ago
Supply vs Demand. There is a lot of demand for high rises close to city center and not enough supply of those buildings for the entire population. Similar to how all real estate works really. Pick any small town Kentucky and you'll find housing prices that are dirt cheap with huge lots. Why do you find those? Because very few people want to live in tiny towns in the middle of nowhere.
dr_dshiv 7y ago
It is so strange. I'd love to read an economics paper on it. I think it has to do with the fact that building a lot of expensive (above market) housing stock in an area tends to increase surrounding housing prices. It makes sense, but somehow seems to violate supply vs demand.
- balfirevic 7y ago
  Well, I would first like to read an economics paper that investigates whether the premise is true at all :)
barry-cotter 7y ago
The only places people will build high rise apartments is where there’s a demand for it, near concentrations of jobs. Having more housing allows more people to live there which will lead to more people having jobs there. Imagine if you doubled the population of Manhattan. Finance in the US would become even more concentrated there and they’re well paid. By allowing agglomeration effects[1] to work more more housing could lead to higher housing prices. The solution to this is to build more housing. If you increase supply enough prices will fall. [1] Tech and Silicon Valley, Fashion and New York, Oil and Texas, if you want to be in X industry you go to Y city. It’s easier to get a job, the jobs are better and better paid, there are more people doing the job. https://en.wikipedia.org/wiki/Economies_of_agglomeration https://en.wikipedia.org/wiki/Economies_of_agglomeration

cogman10 7y ago

Supply vs Demand. There is a lot of demand for high rises close to city center and not enough supply of those buildings for the entire population. Similar to how all real estate works really. Pick any small town Kentucky and you'll find housing prices that are dirt cheap with huge lots. Why do you find those? Because very few people want to live in tiny towns in the middle of nowhere.

dr_dshiv 7y ago

It is so strange. I'd love to read an economics paper on it. I think it has to do with the fact that building a lot of expensive (above market) housing stock in an area tends to increase surrounding housing prices. It makes sense, but somehow seems to violate supply vs demand.

balfirevic 7y ago
Well, I would first like to read an economics paper that investigates whether the premise is true at all :)

barry-cotter 7y ago

The only places people will build high rise apartments is where there’s a demand for it, near concentrations of jobs. Having more housing allows more people to live there which will lead to more people having jobs there. Imagine if you doubled the population of Manhattan. Finance in the US would become even more concentrated there and they’re well paid. By allowing agglomeration effects[1] to work more more housing could lead to higher housing prices. The solution to this is to build more housing. If you increase supply enough prices will fall. [1] Tech and Silicon Valley, Fashion and New York, Oil and Texas, if you want to be in X industry you go to Y city. It’s easier to get a job, the jobs are better and better paid, there are more people doing the job. https://en.wikipedia.org/wiki/Economies_of_agglomeration https://en.wikipedia.org/wiki/Economies_of_agglomeration