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If adding housing supply actually increased the value of surrounding housing, you could generate unlimited wealth by building more and more housing in a city!

mnaei 4y ago
Aren't network effects the whole idea behind cities?
- BurningFrog 4y ago
  Sure, but this is not how they work. Each new building adds to the total value of the city, but also competes with the other buildings.
Aeolun 4y ago
I think they made some attempts to prove that theory in China and the middle east.
nine_k 4y ago
It sort of works (see Manhattan, and most downtowns), but proximity is limited. You can go upwards only so far, and building out more areas takes areas further and further away from other parts of the city. Density is limited. It does not necessarily make a large city split into a desirable "center" and less desirable "periphery" (see Tokyo), but avoiding that takes skill and determination which is not always there (see e.g. São Paulo).
twblalock 4y ago
Obviously that would be ridiculous in a general sense, but it can definitely happen in certain neighborhoods. But it's not only the value of the existing housing that increases, it's the value of the land under it. Once the gentrification begins in an area, developers want to get in on the action to add amenities, renovate existing buildings, and replace older housing with newer, more expensive housing. However, if the newer housing is better than the older housing elsewhere in the city, which is usually the case, that older housing should become less attractive. An extreme historical example of that is the decay of urban cores caused by white flight to suburbs (which were often only a short drive away from the urban cores, and therefore part of the same overall housing market with the same pool of buyers) in the postwar period. Some of the areas now being gentrified in major cities are becoming desirable for the second time.

mnaei 4y ago

Aren't network effects the whole idea behind cities?

BurningFrog 4y ago
Sure, but this is not how they work. Each new building adds to the total value of the city, but also competes with the other buildings.

Aeolun 4y ago

I think they made some attempts to prove that theory in China and the middle east.

nine_k 4y ago

It sort of works (see Manhattan, and most downtowns), but proximity is limited. You can go upwards only so far, and building out more areas takes areas further and further away from other parts of the city. Density is limited. It does not necessarily make a large city split into a desirable "center" and less desirable "periphery" (see Tokyo), but avoiding that takes skill and determination which is not always there (see e.g. São Paulo).

twblalock 4y ago

Obviously that would be ridiculous in a general sense, but it can definitely happen in certain neighborhoods. But it's not only the value of the existing housing that increases, it's the value of the land under it. Once the gentrification begins in an area, developers want to get in on the action to add amenities, renovate existing buildings, and replace older housing with newer, more expensive housing. However, if the newer housing is better than the older housing elsewhere in the city, which is usually the case, that older housing should become less attractive. An extreme historical example of that is the decay of urban cores caused by white flight to suburbs (which were often only a short drive away from the urban cores, and therefore part of the same overall housing market with the same pool of buyers) in the postwar period. Some of the areas now being gentrified in major cities are becoming desirable for the second time.