Does Density Make Cities More Affordable? Alex Steffen Thinks So

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I am not an economist; I am an architect, and in a past career, a real estate developer. Ryan Avent is an economist, and in his e-book The Gated City wrote:

Our thriving cities fall short of their potential because we constantly rein them in because we worry that urban growth will be unpleasant. The residents of America's productive cities fear change in their neighborhoods and fight growth. In doing so they make their cities more expensive and less accessible to people with middle incomes. These middle income workers move elsewhere, reducing their own earning power and the economy's potential in the process.

Alex Steffen has been making the same point on Twitter and in a new post, Density makes cities more affordable. He is not, to the best of my knowledge, an economist, but he is pretty sure that housing is all about supply and demand.

As long as there is more demand than supply, prices rise. There is no way around that fundamental fact of capitalism. That means, if we wish to moderate housing prices to limit displacement of lower-income citizens, we have two options: reduce demand, or increase supply…..And this points to the hard truth here: we need to build, and build a lot. The amount of housing we need to build to address this challenge though, is often an order or orders of magnitude more than most cities have been building in recent years. To keep many cities affordable, we need policies that result in thousands, sometimes even tens of thousands, of homes built each year. This is basic economics.

The trouble is, it's not that basic or simple. There are eighteen million empty houses in the United States, and there is another economic principle from Alex Steffen that I quote often: "there is no such thing as garbage, only useful stuff in the wrong place." We don't need more houses,it is much more important to figure out the misallocation of demand to put people to work in those amazing cities with so many assets sitting on the ground rotting.

Those cities with so many of the empty houses happen to be in places like Buffalo and Detroit, with water and rail and electricity and so many things that could make them terrific places to live and work, if economic policies had not led to the building of thousands, sometimes tens of thousands, of homes in the middle of Arizona deserts.

I agree with Steffen and Avent that the NIMBYs do tend to resist change for their own self-interest. Avent wrote:

The residents of America's productive cities fear change in their neighborhoods and fight growth...”[they use] zoning rules, historical designations public pressure to preserve neighborhoods, views, and buildings they love from changes they fear.

But Steffen and Avent are complaining about the NIMBYs who are fighting 40 storey towers in Seattle or people like me who are troubled by 85 storey Frank Gehry towers in Toronto. Towers that are almost entirely composed of tiny apartments for singles or downsizing boomers. You could build ten thousand of those and it wouldn't do a thing for the demand by poorer families until they emulated David's Tower in Caracas.

In fact, you can get very high densities without fighting those battles. I recently wrote how in Montreal, they get 28,000 people per square mile in 3 storey buildings. In Paris, they get more in seven or eight. Steffen gets it right when he notes:

Every North American city has a myriad of broken places — half-abandoned commercial streets, strip-mall arterials, neighborhoods with lots of vacant lots and surface parking, and so on — and done right, lots of new housing can fix those places, and make city much better in the process. Density, used correctly, is not just how we add to our supply of housing, it’s a valuable place-making resource.

That's the kind of density we need. We have to stop using the density argument to defend those spiky glass tower projects that are natural and figurative lightning rods, and instead, to paraphrase the great urban theorist George W Bush, make the whole pie higher.

I could go on. In fact I will. The housing industry, from both the buyer and seller point of view, has almost nothing to do with the supply and demand of product; it has everything to do with the supply and demand of money. The entire financial crisis in the United States was based on the fact that money was pouring out of the taps to the housing industry and the bankers who sliced and diced it; turn off the money and demand stopped dead. Just as many people needed roofs over their head as the day before, so real functional demand had absolutely nothing to do with it.

Where I live in Toronto, the Provincial government stopped sprawl with great greenbelt legislation, promoted densification policies and pretty much opened the taps for just about any density anywhere; Bylaws, preservationists and NIMBYs were steamrollered by provincial policy. Then the Federal finance minister decided it was all getting too frothy and clamped down on lending regulations and sales dropped 30% this summer. There are still just as many people trying to come to Toronto and find a place to live, the only thing that changed were the lending rules.

Almost everybody wants to own the roof over their head; demand is infinite. It is only money that is not.

I am convinced that Avent and now Steffen are wrong; I am not sure that I am up to challenging two of the smartest people I ever met, but I am going to try.

Does Density Make Cities More Affordable? Alex Steffen Thinks So
Shortest snappiest subhead ever: I don't.

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