3 ms·

> We can use basic math The math checks out on paper, the arguments make sense. And yet, whenever I see a very dense city, I also see an extremely expensive p

by jjav 3y ago

> We can use basic math The math checks out on paper, the arguments make sense. And yet, whenever I see a very dense city, I also see an extremely expensive place to live. When observations contradict theory, I have to think there's some flaw in the theory.

AnthonyMouse 3y ago
The observations are entirely consistent with the theory. Suppose you have an area with 10,000 acres of land and local demand for 250 housing units, i.e. a rural location. Housing here is going to be inexpensive; land is not scarce so people will build a hundred single family homes on a hundred acres of land, there will still be 9750 acres available and the main cost will be the cost of constructing a house. Now suppose you have the same 10,000 acres of land but local demand for 25,000 housing units. In the absence of zoning restrictions, this will still result in somewhat higher prices. Many of the lots will need more than one housing unit, these may cost a little more to build, and the cost of the land will be a little higher because there is more demand. In the presence of zoning restrictions requiring only single family homes on an acre of land, you're completely screwed, because the maximum number of units you can build is 10,000 and you have demand for 25,000. We see the latter in practice in many places, e.g. places where any single family home with an acre of land is selling for more than a million dollars. Now suppose you have the same 10,000 acres of land but local demand for 250,000 housing units. It is not only not possible to satisfy this demand without multi-story buildings, it will take tall ones at that. Without any restrictions that is what would happen, and prices would be a little higher for the same reasons, but still be kept in check by new construction. However, if zoning only allows 125,000 units to be built, you would have a significant amount of density and still fall well short of the 250,000 you need, causing prices to be much higher. The prices in the area where you need 25 units per acre are always going to be higher, but there is a difference between "higher because it costs somewhat more to construct a 10 story building" and "San Francisco prices". Moreover, there is another reason why the highest density areas have such high prices. Common zoning practice is to assign some very small area where the tallest buildings can be constructed, e.g. here's the NYC zoning site: https://zola.planning.nyc.gov https://zola.planning.nyc.gov Have a look at what proportion of the land is zoned R8-R10, allowing for the sort of densities seen in Manhattan. It's only allowed where it already is. It's not even allowed in all of Manhattan, which itself is less than 1% of the New York Metro area. So if you want to build a very tall building, it has to be in that tiny sliver in Manhattan, causing the price of land with that zoning to be astronomical because it's so artificially scarce, and adding that cost to the price of any housing there. You keep asking why housing costs so much in Manhattan -- that's why, because you're not allowed to build those buildings somewhere else, and the price of land operates on supply and demand. What's happening is exactly as the theory predicts: Artificial scarcity raises prices. Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.
- jjav 3y ago
  > Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF. Ultimately, the question I find most interesting is: Which cities have achieved very high density while maintaining a low cost of living (relative to local salaries)? We can debate "If only they did ..." forever, but if there are no actual cities where this has ever happened, maybe the answer is that it can't happen.

by jjav 3y ago

AnthonyMouse 3y ago

The observations are entirely consistent with the theory. Suppose you have an area with 10,000 acres of land and local demand for 250 housing units, i.e. a rural location. Housing here is going to be inexpensive; land is not scarce so people will build a hundred single family homes on a hundred acres of land, there will still be 9750 acres available and the main cost will be the cost of constructing a house. Now suppose you have the same 10,000 acres of land but local demand for 25,000 housing units. In the absence of zoning restrictions, this will still result in somewhat higher prices. Many of the lots will need more than one housing unit, these may cost a little more to build, and the cost of the land will be a little higher because there is more demand. In the presence of zoning restrictions requiring only single family homes on an acre of land, you're completely screwed, because the maximum number of units you can build is 10,000 and you have demand for 25,000. We see the latter in practice in many places, e.g. places where any single family home with an acre of land is selling for more than a million dollars. Now suppose you have the same 10,000 acres of land but local demand for 250,000 housing units. It is not only not possible to satisfy this demand without multi-story buildings, it will take tall ones at that. Without any restrictions that is what would happen, and prices would be a little higher for the same reasons, but still be kept in check by new construction. However, if zoning only allows 125,000 units to be built, you would have a significant amount of density and still fall well short of the 250,000 you need, causing prices to be much higher. The prices in the area where you need 25 units per acre are always going to be higher, but there is a difference between "higher because it costs somewhat more to construct a 10 story building" and "San Francisco prices". Moreover, there is another reason why the highest density areas have such high prices. Common zoning practice is to assign some very small area where the tallest buildings can be constructed, e.g. here's the NYC zoning site: https://zola.planning.nyc.gov https://zola.planning.nyc.gov Have a look at what proportion of the land is zoned R8-R10, allowing for the sort of densities seen in Manhattan. It's only allowed where it already is. It's not even allowed in all of Manhattan, which itself is less than 1% of the New York Metro area. So if you want to build a very tall building, it has to be in that tiny sliver in Manhattan, causing the price of land with that zoning to be astronomical because it's so artificially scarce, and adding that cost to the price of any housing there. You keep asking why housing costs so much in Manhattan -- that's why, because you're not allowed to build those buildings somewhere else, and the price of land operates on supply and demand. What's happening is exactly as the theory predicts: Artificial scarcity raises prices. Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF.

jjav 3y ago
> Or to ask your question in reverse, show me a place with a large amount of land area under permissive zoning that has higher housing costs than NYC or SF. Ultimately, the question I find most interesting is: Which cities have achieved very high density while maintaining a low cost of living (relative to local salaries)? We can debate "If only they did ..." forever, but if there are no actual cities where this has ever happened, maybe the answer is that it can't happen.