Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

(Not So) Infinite Demand

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New York built a lot in the 60’s and 70’s. Not so much anymore…

In a recent blog post, Julia Galef has generated a fairly comprehensive list of pro-housing arguments and counterarguments to those arguments.

She gives the most detailed consideration to the “infinite demand” argument- in her words,

“So even if SF adds a lot of additional housing, prices will still rise almost as quickly as they would have anyway, as long as demand to live here continues to soar. This view is mainly based on examples of other desirable cities, like New York or Singapore, which have built new housing at a faster rate than SF but nevertheless saw steep increases in price.”

To which I respond:  New York?  Really?  New York is only pro-housing when compared to San Francisco- which is a bit like saying Iran is a libertarian paradise compared to the Islamic State.  In fact, New York has built housing at a glacial pace.  Between 1960 and 1976, the number of new housing units completed per year ranged from just over 14,000 to over 60,000, and exceeded 20,000 in all but four years. In the almost forty years since 1976, the number of new units exceeded 20,000 in only four years (2006-10) and was above 14,000 for only ten years (1989, 2002, 2004-10, 2015). Meanwhile, demand for housing has increased: between 2006 and 2014 alone, the citywide renter population grew by 600,000.

A better example of a “desirable city” would be a city where both the population and the housing supply is growing at a rapid rate- Raleigh, for example, or Las Vegas.  These cities are much cheaper than New York or San Francisco.*

Another example of a cheap, permissive city is Tokyo.  But the post suggests Tokyo may not have grown as fast as American cities.  In fact, Tokyo’s regional population grew by 17  percent since 1990- from 32.5 million to 38.2 million.   By contrast, New York’s metro population has grown from 19.7 million to 23.7 million– an only slightly higher growth rate.

*I can’t really comment about Singapore, given the obvious difficulties of finding and comparing data from that nation.

  • Ben Jamin’

    Julia Galef does have a valid point. If high selling prices/rents are preventing more people from moving to where demand is highest, by increasing the supply of housing the population will increase and densify. This increases agglomeration effects ,which in turn increases demand and leads to higher selling prices/rents. It’s akin to adding twigs to a fire in order to put it out.

    Yes, adding enough twigs may “dampen” prices for a short time, but not in the long term. This is why everywhere we look in the World, house prices and rents are highest where populations are at their largest and densest.

    That’s not to say we shouldn’t be building houses. We should for economic and welfare reasons. Only these issues are separate from affordability issues.

    It needs to be understood that high aggregate land values are a very good thing, as they reflect the totality of all externalities in the spatial and economic environment. This insight was first noted by Stiglitz and Arnott in their 1979 paper “AGGREGATE LAND RENTS, EXPENDITURE ON PUBLIC GOODS, AND OPTIMAL CITY SIZE”

    Trying to make housing more affordable by increasing building supply in order to lower land values isn’t therefore only unlikely to succeed, but is counter productive from a economic and welfare maximising POV.

    Affordability and market dysfunction issues only exist when high land values are capitalised into private rental incomes and selling prices, as they act as a transfer payment from one group in society to another.

    Instead of trying to lower land values, we could and should end their capitalisation by taxing the rental value of land at 100%. Which would not only solve affordability issues instantly and permanently, but would also allow the market to rationalise existing housing stock and allow new stock to be built in the right places, in the right numbers.

    Most importantly, we have to share the benefits we get from agglomeration effects and our shared environment equitably. This can only happen when the State is incentivised to do so on our behalf.

    http://markwadsworth.blogspot.co.uk/2016/06/laffer-curve-of-planning.html

  • Overlooking the Sky

    I don’t understand how talking about land values adds or detracts from either side of the argument. The prediction of people advocating for looser density restrictions is that unit price will be more affordable than it would be otherwise. To put that in other words, the cost of a unit of floor space will be more affordable.

    Where is the conflict between claiming that land value becomes less affordable, but floor space becomes more affordable?

    On a side note, do we know for certain what side of the argument Julia Galef is on? Reading her post, I got the impression she was just summarizing arguments she’s heard rather than taking a side.

  • Dave B.

    I hear you.

    But taxing land at 100% of capitalized value, like Henry George proposed, would essentially be an unconstitutional Federal “taking” – the owner would be “owner” in title only as the financial benefits of land ownership (which case law has clearly defined as a “right” of property ownership – this is why the government must pay you to take your land under eminent domain) would be eliminated unless capital were put to use on it.

    We obviously have strong private property rights in this country, which includes the financial benefits of land ownership. To redefine that right at this point in the game would be to redefine what it means to be an American in a very important way.

    I see the argument of land value taxation all the time in message forums and some popular writings (Richard Florida recently mentioned it in latest book) but the point is almost always academic and doesn’t advance solutions in the real world, as it will never be implemented.

  • a concerned observer

    I just came across your site and was immediately intrigued. Then I read this post, which concludes that the ‘obvious difficulties’ of obtaining data from Singapore prevent comment. Umm, obvious to whom? I am not Singaporean but the city state is famous for its aggressive state construciton and high levels of home ownership (and infamous for the social engineering that goes along with it). Singapore has fabulous data on just about everything. Google it. Why do you ask readers to share their time with you when you don’t even try?

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