Tuesday, June 26, 2018

Why Dense Development Might Make the Housing Crisis Worse

Why Dense Development Might Make the Housing Crisis Worse

Posted By  on Mon, Jan 11, 2016 at 1:05 PM

  • Mike Boening Photography/Flickr

Good news if you’re in a NIMBYish mood of late: A new study from Chapman University in Orange County gives you the anti-Manhattanization rationale you’ve been waiting for. In “Building Cities For People,” author Joel Kotkin, a former San Franciscan turned urban studies fellow at Chapman, argues that increasing building density actually makes the housing crisis worse, and also makes San Francisco less likely to attract and retain anyone except the super-rich.

Kotkin contradicts the common supply-side argument that a modern metropolis can only drive down housing prices (and retain populations of working and middle class families) by building more, thus reducing scarcity and bringing supply in line with demand. That sort of thinking only makes sense to a point, he says.

“Once I started talking to developers, they pointed out that once your building gets higher than four stories, your price goes through the roof,“ Kotkin says. “That has to do with seismic safety, the switch from wood to steel frames, bigger crews of union labor, lots of things.”

In San Francisco, it also means a much longer planning and approval process.
The result, Kotkin argues, is that the only way big buildings can be commercially attractive to those building them is by catering to the rich. The “pack and stack” method of approving bigger and bigger development in an attempt to relieve the housing shortage only pushes prices higher, because builders want a return on those huge investments.

“In San Francisco, townhome building can cost more than double that of detached buildings. Units in condominium can cost as much as 7.5 times” to build, according to “Cities for People.”

“It surprised me too,” Kotkin says, since it flies in the face of basic assumptions about supply and demand. But it does explain a few things, like why
the world’s biggest cities have been unable to build their way out of soaring home prices. Kotkin cites East Asian cities such as Singapore — so dense that it’s a miracle light can escape its borders — as the ultimate case study. There, housing prices only come down when government steps in and converts buildings to public housing.

That’s music to the ears of San Francisco activists who oppose towering condo palaces on principle anyway. Kotkin notes that he’s a pretty middle of the road guy politically, and “very sympathetic to Libertarians, normally.” But numbers don’t respect your politics.

If the present building trends continue to proliferate, even the young Millennials who are supposed to fuel our tech economy will eventually drift away, back toward the suburbs or to cities in places like Texas, where housing costs are on average less than 30 percent of monthly take home pay. That means a city that becomes older (we have the smallest percentage of child residents of any large city), whiter (white people now count for only a fifth of suburban flight), and, of course, wealthier, since only those who can afford those giant buildings will stay.

A better solution, Kotkin argues, is to build small: wood-framed, single family houses, the type we usually call starter homes. Rather than turning the city’s disused industrial tracts into towering redevelopment complexes, we’d be better off replacing them with something that resembles the Sunset, homes that builders can afford to erect and then sell more cheaply, and homes that young couples would want to raise families in. 

Otherwise, we only need to look abroad to see what the future might be. “A place like San Francisco will end up what H.G. Wells called ‘an appliance of luxurious extinction,’ home mostly to the rich and childless, plus a few of the poorest people, who qualify for public benefits,” Kotkin says. “Wells was talking about the future of London. And he was right.”

Provocative stuff. But like I said, it would explain a thing or two. 

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