Reihan Salam at NRO questions the Kotkin hypothesis, asking: “Are people choosing low-density metropolitan areas — or did rising prices in high-density metropolitan areas [like Marin County, in the Bay Area pictured -ed.] drive the population shift?”
What is cause, and what is effect, is not immediately obvious. There are trade-offs. High-density areas are naturally more expensive (due to greater demand, otherwise they would not be high-density). High-density areas are also typically formed by physical constraint, meaning less supply. They are also more regulated due to their higher density. Density naturally produces more regulation because density naturally produces more externalities [See tomorrow’s post]. Even expensive metro areas have inexpensive housing in places, it just tends to be either lower quality, or in less desirable neighborhoods.
I wrote Height limits produce a positive externality recently, to which the technology/urbanist/libertarian blogger Timothy Lee tweeted (but I took more than a month to respond to, since I don’t live on Twitter), and I replied (this is reformatted for presentation, but I think captures what was said in the right sequence)…:
You don’t think there’s a shortage of space near multi-line transit stops like Metro Center and Gallery Place/Chinatown?
The higher you build there, the shorter you build elsewhere. There is plenty of land in DC that could be denser at less than 10 stories.
why does taller buildings one place mean shorter buildings elsewhere? There is a region-wide housing shortage.
Regional demand is largely fixed. Someone who can’t get in block X will be far more likely to locate in block Y than Charlotte.
you don’t think real estate prices affect migration between metro areas?
not much. People have jobs before they migrate. Firms locate for lots of reasons, but a shortage of hsg in a small dtwn no.
there is plenty of moderately priced real estate in metro DC, SFO and elsewhere, how else could poor people live there?
Only if the savings on the labor costs outweigh the savings on economies of agglomeration. This indicates few e of a.
I recommend amazon.com/Gated-City-Kin…
I read Avent and Glaeser, I believe they overstate e of a. The more important point is full social costs. New dev. should pay.
Firms move to save on labor costs (which are connected to housing costs) all the time.
If everyone paid full social cost, (and compensated losers) build away. In the absence of FSC pricing, we regulate.
Clearly Twitter is not a good way to have an academic discussion. Blogs are much, much better. There are several points wrapped up in this:
- Empirical questions about Intra-urban vs. Inter-urban migration
- The rights of the property owner vs. the rights of the community
- Economic productivity (positive externalities?) vs. Pollution/Congestion etc. (negative externalities)
- Empirical questions about the scarcity of land
- Empirical questions about what constitutes good urban form
- Empirical questions about the need to be downtown or simply in the metro area [plenty of suburbs even in DC would be happy to accommodate growth]
In short, I think height limits are not the dominant issue in any US metropolitan areas. This is not to say that regulation does not matter at all, as there are lots of regulations beyond height limits, but that its effect is limited. I discussed this previously in Zoning and Externalities.
If there is value, where are the side payments from otherwise rejected developers? My perhaps cynical view, ‘No side payments, no evidence of super-normal social profits, no evidence of huge value being lost’. While the developer may be losing potential profits, society is not, as those who are negatively affected are not being given compensation to offset the negative effects they would receive were the project to go forward. I realize there are transactions costs limiting the ease of implementing side payments, but surely some institution could arise to facilitate this.
I also wrote on the Limits to agglomeration, suggesting that agglomeration economies arguments are overstated, and in fact it is agglomeration externalities that create density, not (or not so much) vice versa.
DC and New York are both edge cases, being political and financial capitals respectively, both of which at least historically generated important economies of agglomeration.
One of the critical problems here, as with much research is the difference between marginal and average effects. E.g. Clearly transportation matters. If there were no transportation there would be no economic activity. However, that does not mean that a marginal increase in transportation supply will have a significant, or even positive, effect on economic activity, that depends on context. The network is mature, the marginal returns to new investment now are much lower than the historical average returns. Similarly, the marginal returns to density might be much smaller than average returns. Cities exist for a reason. That reason is economies of agglomeration in various forms. That said, where cities are continuing to grow, those economies must be valuable. Where suburbs are growing, the daily face-to-face inter-firm interactions emerging from the classical 19th and early 20th century transit-based downtown has declined relative to the need to be within auto-commuting distance of places that are to be dealt with on a short-term basis. When new cities grow, new patterns of economic activity are forming, and these may be more valuable than incremental changes to mature cities.
All of which is to say cities and their economies are dynamic, and the first order factor is the underlying market economics, while regulations (which are themselves the product of political market preferences) are second order effects.