Building the Skyline

The Birth & Growth of Manhattan's Skyscrapers

by Jason Barr 4 Comments

The Economics of Skyscraper Height (Part II)

Jason M. Barr    January 3, 2019

Note this is Part II of a series on the economics of skyscrapers. The rest of the series can be read here.

When we think of the world’s tallest skyscrapers, the natural reaction is to insist that they are “freak projects,” built by ego-driven, greedy developers who imposes their will onto a city. And yet, this whiff of conspiratorial thinking exists side-by-side with our fascination with tall buildings. Countless coffee table books—skyscraper porn, if you will—have been published that compare the world’s tallest buildings, and offer dazzling photos and fancy drawings. Skyscrapers are the soap operas of the real estate world; they generate a guilty pleasure that deep down inside we believe are not good for us. But, before we start drawing conclusions, it is important to first itemize the different elements of building height and focus on those that relate to the world’s tallest buildings.

Types of Height

Economic Height

First is Economic Height, which is the height that best balances the costs and revenues from the project, assuming it doesn’t impose hardships on the neighborhood. As a project goes taller, the cost of adding another floor increases at an increasing rate. But adding another floor also increases the revenue. Above the Economic Height, building one floor taller will add a cost that is greater than the revenue it generates. Below the Economic Height, money is “left of table,” since adding a floor will increase revenue more than the costs.[1] Economic Height is the sweet spot and is a useful benchmark because it also represents the most efficient allocation of a society’s resources. As discussed in another post, the height of the majority of the world’s tall buildings are consistent with the notion of Economic Height. But what about the world’s tallest buildings? Does the concept apply to them? We will return to this below.

Developer Height

The next height type is what I call the Developer Height. This is the actual height of a completed building. Developer Height can be taller or shorter than Economic Height. In some cases, height restrictions might force developers to build structures that are economically too short. In other cases, developers may build structures taller than pure economics would suggest, thus making them economically “too tall.”

Left: Rendering of the Jeddah Tower (1 km), under construction. Source: CTBUH. Right: Rendering of Sky Mile Tower (1 mile), Tokyo, proposed. Source: Wikipedia.

Symbolic Height

The difference between Developer Height and Economic Height, when the former is larger than the latter, is what I call Symbolic Height. It is that part of the structure’s height that is too tall from a pure profit maximizing perspective. Symbolic Height is meant to convey some kind of message or information to the world. The key point is that if we are going to make conclusions about supertall skyscrapers, we need to more fully analyze the causes and consequences of Symbolic Height.

Vanity Height

But, before we proceed, we need to break down Symbolic Height a little bit more. In 2013 the Council on Tall Buildings and Urban Habitat (CTBUH) introduced a new concept, Vanity Height, which is the difference between the height of the structure and the height of the occupied floor. Many skyscrapers, especially among the supertalls, have spires and antennae that are not usable space.

I would argue, that from an economic point of view, what matters is not Vanity Height per se, but rather that part of Symbolic Height that remains after removing the Vanity Height. From a resource allocation question, how much of the floor count is “too tall” from a socially beneficial perspective? Adding spires or non-usable space simply to stand out does not strike me as inherently an excessive use of the world’s resources. These spires may naturally emerge as architectural elements that at, relatively low cost, allow the building to stand out. Being so high in the sky and quite thin, they are not likely to add to traffic congestion on the street or excessive shadows, and they may make the structures more pleasing and marketable.

Furthermore, some Vanity Height is necessary because plant and equipment and wind dampers are often placed on the top floors. Then there are antennae, which, while giving the buildings a height edge, also perform a useful service. The rest of these “vanity” decorations are architectural spires. In some cases, like One World Trade Center, we know there was a non-economic purpose at work, since the spire was used to bring the building height to 1776 feet. But in other cases it is not so clear. The existence of Vanity Height does suggest that developers and architects are interested in the “iconification” of their structures (and that there is a competitive element to this).

Source: CTBUH.

Theories for the Drivers of Symbolic Height

A common failure in the thinking about Symbolic Height is that people first observe the height of the building and then draw conclusions about the forces that generated it. Yet it’s nearly impossible to get into the heads of developers to know what they are thinking. Because these buildings are so large and visible, our brain is naturally drawn to infer that they are arrogant Towers of Babel. But this is backward logic.

Scientific investigation, including in the social sciences, is the process of offering theories, which generate testable hypotheses, which are then supported or not based on rigorous tests or experimental evidence. To simply say that the world’s tallest buildings are too tall based on casual observation or loose correlative exercises is nothing more than a leap of faith or faulty reasoning.

What are the theories about why supertall and megatall buildings exist above the heights predicted by economics? Some are theories are “nefarious,” others benign, and while others productive. Here I list nine, which can be divided into four categories: “economics,” “the selfish developer,” “the selfish politician,” and “urban growth strategy.”

Theory I: Economics

It might simply be the case that economics is on the side of the developer so that a supertall structure has little or no Symbolic Height. The world’s tallest building may naturally emerge from a “perfect storm” of factors that produce tall buildings in general: having a large lot in a central location, combined with a high demand for building space, and particularly low construction costs. Or, in some cases, the Economic Height is sufficiently tall that adding Vanity Height has a low enough cost to perform the additional function of advertising the building, city, or developer. In some cases, a large international corporation may be willing to pay for naming rights or to guarantee a minimum rent because of the advertising it brings to the company itself, which can be a useful signal to consumers about the quality of the company’s product.

 “Selfish Developer” Theories

Theory II: The Ego Prize and Developer Competition

In the economics literature, one of the most-read papers on skyscrapers is by Helsley and Strange (2008). They observe that throughout the world, a city or region’s tallest building is much taller than the next tallest one. Based on this observation, and from readings from the popular press, they conclude that this suggests that developers aim to satisfy their egos by claiming the “prize” of “tallest building.” They then generate a mathematical model where two developers compete against each other. In equilibrium, a too-tall building can result. This model suggests that the outcomes we observe are theoretically possible, but it does not prove or disprove anything about the true motivations of builders.

Theory III: Easy Credit, Irrational Exuberance, and Moral Hazard

Another theory that looms large is that during times of easy credit, builders succumb to irrational exuberance. Banks and other financial institutions are so eager to lend money, that developers are emotionally compelled to build while the spigot is open. In this case, developers construct a region or world’s tallest building knowing that if the project loses money, the creditors (or society at large) will bear the cost of failure. Easy credit leads to a moral hazard: risk-loving, ego-driven developers are subsidized by the credit markets to go too tall.

Theory IV: Corruption or Legal Ambiguities

Demand Side

Corruption can take on many forms. In the case of Donald Trump, there is evidence that the demand for his buildings is due, in part, from those who want to launder money. It may be that the mega-wealthy are willing to pay higher than market rates for units to have a safe place to park their ill-gotten gains. In this case, developers are responding to the favorable economics, but they ask few questions about whether the funds were legally obtained.

Supply Side

Developers in some countries may bribe political officials to get tax breaks, low-interest loans, or artificially cheap land in the central cities. Thus, by illegally lowering the costs to construction, the economics of supertall construction becomes profitable. Another version of this is that builders can use clever strategies to interpret the law to their advantage, and in way that is not strictly illegal but is morally ambiguous. The real estate company of Jared Kushner, Donald Trump’s son-in law, is known, for example, to use the Federal Government’s EB-5 Program to get access to cheap financing for luxury towers in central locations. The program was designed to promote the redevelopment of economically depressed areas and was not intended to subsidize luxury towers.

 “Selfish Politician” Theories

Theory V: Bread, Circuses, and White Elephants

This theory says that autocratic rulers use supertall skyscrapers to further their political agendas. By building them, these leaders provide symbols of their power, or seek to give pride of place to residents, who need justification or reasons to legitimize their autocratic leaders’ rule over them. Or, perhaps, autocrats use large skyscrapers as projects to put citizens to work or to distract them from their own oppression.

Theory VI: Political Career Promotion

A somewhat more benign version of the greedy politicians theory is that local officials use skyscrapers to advance their careers. In China this appears to be common, since the Communist Party makes decisions about who gets leadership positions within the various levels of government. In this case, promoting skyscrapers is a visible means for a local leader to signal that they can “get things done,” so they can then be entrusted with greater responsibilities or placed at a higher level in the government.

Urban Growth and Development Theories

Theory VII: Urban Growth and Neighborhood Formation

In the 21st century, the world’s richest nations manufacture mostly services and intangible products. These are created by high-skilled workers who need to cluster together in large cities. The economic forces of agglomeration mean that larger cities have an edge over smaller ones. Governments throughout the world, recognizing this, might use a supertall building as a way to “spark” these forces of city growth. By building (or subsidizing) a landmark structure, local or national governments attempt to create business clusters that will draw people to that neighborhood and make it more productive.

Theory VIII: Tourism

Nothing is more fascinating than being on a viewing deck high in the clouds. People pay good money for a vertical road trip to the sky. A ticket for the observation deck at One World Trade Center is $34 (and for $74 you can upgrade to the “luxury” experience). Local leaders may subsidize a too-tall building because it draws tourists, which increases employment and economic opportunities for the locals. Visiting these icons creates pleasure and a memorable experience.

Theory IX: The Economic Map

The fastest growth in the world’s cities are in developing countries. Political leaders there realize that to promote their economies, some form of advertising helps to turn the world’s eyes toward them. This leads to greater foreign direct investment (FDI), tourism, and improved employment opportunities. Because skills and services generate the highest paid work, countries seek to increase the prospects of the urban-based services sectors, including their financial sectors. By building a too-tall structure, local officials seek to advertise the city, and increase global confidence in the place.

The Evidence

What does the evidence suggest about which theory best applies? This will be taken up in the next post.

Continue reading. The rest of the series can be read here.

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[1] Note that Economic Height is a theoretical concept because of the “lumpiness” of construction, the uncertainty about future revenues, and that we hold lot size and other things constant–meaning that building height is the only decision to be made. Lumpiness is due to the fact that there are thresholds when, if passed, make the costs can jump significantly, such as the need to add a new elevator shaft.

by Jason Barr 10 Comments

The Economics of Skyscraper Height (Part I)

Jason M. Barr     December 17, 2018

Note this is Part I of a series on the economics of skyscrapers. The rest of the series can be read here.

Clark and Kingston

In 1930, W. C. Clark and J. L. Kingston (CK), an economist and architect, respectively, published a book called, The Skyscraper: A Study in the Economic Height of a Modern Office Buildings. In this work, they act as a hypothetical developer of a Manhattan office skyscraper. Their aim was to determine a height for the structure which maximized the return, given the rents, and the costs of land and construction.

In fined-grained detail, they laid out the various elements of erecting such a building, including floor plans, and the all the different types of costs a builder must pay, from bricks, to elevators, to steel. For their analysis, they chose a large lot across the street from Grand Central Station, in the heart of Manhattan’s midtown business district. 

The point of this exercise was to demonstrate that the supertall towers rising in Manhattan during the late 1920s were not “freak” buildings, but rather, were based on reasonable economic foundations.[1] They showed that when one did all of the accounting—comparing the income to the costs—the height that maximized the return was 63 stories. (Ironically, this is not that much different than today. One Vanderbilt, an office building currently under construction across the street from Clark and Kingston’s hypothetical lot, will rise 58 stories.)

Manhattan Skyscraper Rendering by Architect J. L. Kingston. At 63 stories is was considered the ideal height at the time. Source:
The Skyscraper: A Study in the Economic Height of a Modern Office Buildings (1930).  

 

Economic Height

In their book, they present a definition of what they called the Economic Height of the building, based on the writings of the engineer, J. Rowland Bibbins; and one that is still reasonable:

The true economic height of a structure is that height which will secure the maximum ultimate return on total investment (including land) within the reasonable useful life of the structure under appropriate conditions of architectural design, efficiency of layout, light and air, ‘neighborly conduct’, street approaches and utility services. (pps. 8-9)

Economic Height provides a useful guide (though not the only one) for understanding why skyscrapers get built, since this height is determined by the best balance between the revenues and costs. In general, going taller will generate more income, but will also add to the expense. In modern economics terminology, the economic, or profit maximizing, height is one where at the highest floor, the additional or marginal revenue from that floor just equals the marginal or additional cost to providing it. If built one floor higher, the cost of adding the floor will be greater than the revenue and will not be worth it. If less than that height, money is “left on the table,” since adding a floor would produce more income than it would cost to produce it.

It’s worth stressing is that a developer builds this optimal height to earn a profit. People and companies are willing to pay the high prices because of the needs they fulfill and the benefits they provide. Thus, Economic Height is a response to the demand; not the other way around.

Land Values and Building Height

As CK also demonstrate, there is a direct relationship between the cost of acquiring the land and the return on investment from a taller building. We can think of developers as a type of urban farmer; the more it costs to acquire a lot, the more they must intensely develop the land in order to receive enough income to compensate for the high cost of the location. Thus, around the world, we observe taller buildings in places that have higher land values.

Given this notion of Economic Height as a benchmark, we can then say that any building that is taller than this can be considered economically “too tall” in that it is higher than it “ought to be” for pure economic gain; and hence produces lower profits than a shorter building. The difference between the actual and Economic Height is what I call Symbolic Height.

Height in the 21st Century

Even though Clark and Kingston published their book nearly 90 years ago, the question of whether buildings are economically too tall remains as relevant today as it did during the Roaring Twenties. To look at the Economic Height at one location, Clark and Kingston 
(funded by the American Institute of Steel Construction) hired a stable of expert consultants to help them analyze the problem. The ability of someone like myself to determine the Economic Height for even one building must come from publicly available data; and it’s virtually impossible to calculate it for many structures. However, we can make statistical inferences if we collect a large enough data set.

Skyscrapers around the World

For convenience, let’s define a skyscraper as a building that is 150 meters (38 floors, on average) or taller (and just focus on 1960 to 2017). Now imagine that you were a giant and could “harvest” all the world’ skyscrapers and put them into a jumbo pile—like a child might make a pile of sticks of various lengths.  Now in our little game, we pick up each skyscraper (stick) and measure its height. Then we place it in one of several bins or buckets. The first bucket will contain buildings that range from 150 to 199 meters. The second contains buildings 200 to 248 and so on. The last bucket ranges from 788 to 836 meters, and which contains the Burj Khalifa at 0.828 km tall.

Which bucket has the most buildings? And what does this suggest? According to the CTBUH, there were 4,162 skyscrapers built between 1960 and 2017. It turns out that the vast majority of tall buildings are less than 200 meters (68.3%).  Only 23 are 400 meters or taller. Statistically speaking if you were to randomly pick a skyscraper constructed since 1960, the probability that you would select a building greater than 400 meters is about one-half of one percent. The vast majority of buildings are “regular-talls” (under 50 stories); while the number of “super-talls” is minuscule, in comparison. The super-giants, while most visible from media accounts and their appearances in skylines, only make up a tiny, tiny fraction of the world’s skyscrapers.

 

Skyscraper Heights Histogram. Each blue bar shows the fraction of skyscrapers (≥150 meters) around the world in that height category (completed between 1960 – 2017). For example, 68% of all skyscrapers are less than 200 meters. The orange line is the fraction in a category or lower. 99% of the world’s skyscrapers are less than 350 meters. Source:  CTBUH.

The Drivers of Economic Height

The evidence suggests that the bulk of the world’s skyscrapers are consistent with the notion of Economic Height. This is not to say that all skyscrapers reflect the best balance between the costs and benefits, but it is to say that the majority of the world’s skyscrapers have a strong economic rational, in that they are catering to a demand for building height. So what are the key economic drivers of skyscrapers?

Economic Growth

Most important is the process of economic growth and urbanization. The more economic activity there is in a city or region the more central locations become vital because people and business need to cluster near each other to more efficiently produce the goods and services that our modern economies require. The skyscraper shrinks space so that hundreds if not thousands of people can be at the same geographic coordinates at the same time. The tremendous demand to be in the central city creates a kind of “battle for place”—if more people want to be at a central location than can be accommodated, the price of that location rises. As land values rise, so does Economic Height, and skyscrapers rise as a result.

The ability of a country to build skyscrapers is directly related to the size of its economy. Once a country hits a threshold, in terms of its gross domestic product, there is then a very strong relationship between both the number of skyscrapers it has and the height of its tallest building. Arguably the greatest predictor of the height a country’s tallest building is the number of highrise buildings it has; and the greatest predictor of the number of tall buildings is the size of its economy.

 

Left: Number of Highrise Buildings in a Country versus its Gross Domestic Product ($PPP2011). Right: The Height of a Country’s Tallest Building versus the Number of Highrises. The figures show that there is a strong relationship between national income and number of highrises, and the more highrises the taller is a nation’s tallest building. Note: All variables in natural log form. Sources: GDP,  #Highrises, Tallest Building.

The Cost of Construction

Today’s skyscraper technology is the result of a 130-year learning curve. Innovations in design, materials, and engineering, combined with lower labor costs in the developing world, make them attractive investments. While there has been no systematic research on the evolution of (inflation-adjusted) marginal or per-floor costs over the entire 20th and early 21st centuries, the evidence we do have suggests that these costs have been declining.

In Manhattan during the early years of skyscraper construction, between 1900 and 1920, I estimate that the marginal or additional cost of adding another floor averaged about 7%; between 1921 and 1931 this cost dropped to about 3%.  In other words, in New York City, during the Roaring Twenties it was getting much cheaper to add extra floors. Builders were responding accordingly by adding more floors; this can explain, in part, the building boom of the era.

Costs around the World

Fast forwarding to the 21st century, it’s instructive to look at a few recent examples. In January 2010, the world’s tallest building, the Burj Kalifa (163 stories) was completed. Its total construction costs was only $1.5 billion, or $9 million per floor. The comparatively expensive 128-floor Shanghai Tower, completed in 2015, cost $2.4 billion, or $18 million per floor. Contrast that with the 2009 58-story Bank of America Tower in Manhattan, which cost $1.76 billion, or $37 million per floor. While a few examples do not prove anything, it does illustrate that Asian countries can pay less to get more, in terms of building height. In New York and other U.S. cities, it seems to be the case that the cost reductions from technological progress are offset by the rising cost of labor and materials. In Asia, rapid economic growth, and intense urbanization, combined with lower building costs and an eagerness to employ innovations in design and construction, are driving building booms in their cities.

Are Megatall Buildings Good or Bad?

But what about the megatall giants like the Burj Khalifa, the Shanghai Tower, or the Taipei 101? They must be wasteful projects, with little economic rational, right? I would argue that the answer is not so clear, and that maybe we should not be so hasty to judge. Stay tuned.

Continue reading. The rest of the series can be read here.

 

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[1] I would add a few caveats to their conclusion. First, they only analyze one hypothetical building on a very large lot of land in the center of midtown. So their ability to generalize is some what limited. And, second, to the extent that land values and office rents might have been inflated because of over-optimism and an overheated stock market in the late-1920s, means that their resultant height might have been too high.

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Skyscrapers and Cities: A Q&A Interview with Edward Glaeser (Part I)

by Jason M. Barr    September 5, 2018

[Author’s Note: This is Part I of a two-part Q&A interview with Professor Edward Glaeser. You can read Part II here.]

 

Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics in the Department of Economics at Harvard University. He one of the world’s leading experts on the economics of cities. He is the author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier.

On Skyscraper Research in Economics

JB: While there are a handful of research papers in economics on investigating the causes and consequences of skyscrapers, such as by Helsley and Strange (2008) and Ahlfeldt and McMillen (2017), it seems that, by and large, even for urban economists, this topic is not a significant area of research. Do you think economists have ignored studying the economics of skyscrapers?  And if yes, what kinds of research questions might be of interest to economists?

EG: I would go further and suggest that economists have spent too little time on the technology of building more broadly.  Building technologies have shaped our cities and suburbs for centuries.   They provide important sources of exogenous variation and are intrinsically interesting.  For example, one of the unfortunate side effects of excessive land use controls is that building often occurs on a one-off basis.   Mass production becomes impossible and there are large costs savings from building multiple units at once.   Consequently, land use controls increase effective housing prices both by restricting the number of new units and by pushing construction into an inefficiently small scale.   Perhaps, this helps explain why productivity advances have been so limited in construction in recent years.  That weak productivity growth is itself an important topic for economic research.

Skyscrapers are themselves a particularly fascinating technology.  The origin of the skyscraper is itself a fascinating story showing the ways in which ideas flit from sector to sector.  I tend to give early credit to Joseph Paxton, the English gardener who had used metal frame structures for greenhouses.  His inexpensive plan was chosen for the Crystal Palace exhibition in London and this then inspired Napoleon III and the French architect Victor Baltard.  Baltard then used metal frames for Les Halles and for St. Augustine’s church in Paris.  It would take another decade for William LeBaron Jenney to start using steel frame for a skyscraper: Chicago’s Home Insurance Building. Jenney performed the crucial combination of connecting metal frames with Otis’ safety elevators.  His idea spread like wild fire in Chicago and was then adopted and improved by Louis Sullivan, Daniel Burnham and many others.  This provides a classic model of how ideas spread across dense urban areas.

The skyscraper has two effects on the price of land.  First, they allow more usable space on the same spot of land which should push land prices up.  Second, they allow more usable space overall in the city which should push down the price of usable space and indirectly the price of land.   One hypothesis is that rising urban land prices in the late 19th century were driven by the first effect, while declining land prices during the early 20th century were driven by the second effect. The connection between new building technologies and urban real estate cycles is a particularly pressing topic for future research.

Tallest Skyscrapers around the world. Source.

On the Economics of Skyscrapers

JB: Do you have any thoughts about the debate about whether skyscrapers are economically too tall? The common perception is that the world’s (or region’s) tallest buildings are driven by the desire to claim an “ego-prize” (such as discussed in Helsley and Strange (2008)). Yet, in principal, one can think of a host of other rational reasons for excessive height—such as place-making or inducing agglomeration benefits by attracting high-skilled workers. How do you view this? And do you think “too tall” construction is good or bad for cities?

EG: I don’t have that much new to say about this question.  The usual stylized fact is that building exhibits roughly constant returns to scale up to about 50 stories, but then costs rise dramatically after that point.  This suggests that some skyscrapers (under 50 stories) are too short while others (over 100 stories) are too tall, except in conditions of extreme demand.  I think both phenomena are worth more study.

The too small phenomenon is important for cities because if there is some force that artificially restrains the ability to build up, then the supply of usable space will be too small and prices will be too high.   One candidate explanation for skyscrapers being too small is land use regulations.  Yet developers often speak about their unwillingness to build up because of their limited appetite for risk.  Credit restraints may also be important.

“Too tall” skyscrapers presumably reflect exaggerated expectations about future price growth, or the egos of their builders.  Both phenomena were on display in New York’s great skyscraper race of the late 1920s.  Both phenomena may also have been on display in Dubai a decade ago as well.

The issue of externalities from height is particularly fascinating.   The original New York City zoning ordinance of 1916 was motivated by the excessive shadow allegedly cast by the Equitable Building on 120 Broadway.  There are still complaints about shadows and views to this day.  On the upside, large towers help agglomeration economies to flow and potentially reduce traffic congestion.  A city in which people ride elevators and walk from tower to tower can be much more functional than a city that is mired in cars.

On Luxury Highrise Apartment Buildings and Regulations

JB: One of the vigorous current debates about tall building construction is regarding supertall luxury apartment buildings in places like New York, San Francisco, London, and Vancouver. Detractors argue they exacerbate gentrification and income inequality, while harming the quality of street life, and throwing shadows on the street and in parks. What is your view of the effect of tall luxury apartment buildings on cities? Should they be taxed or regulated? Or should they be encouraged? 

EG: I think that the starting point has to be a serious quantification of the externalities that I just mentioned.  Almost none of the land use regulations that cities have ardently adopted for over a century have been justified by any serious quantitative work.   The existence of even the smallest externality, such as a shadow, has been seen as justification for massive interventions in the housing market.

My own belief is that we have almost surely limited skywards construction excessively in our most successful cities.  I think that the externalities from height are real, but that they are overwhelmed by the pure economic benefit of building, which can be quantified by comparing construction costs with the current price of usable spice.  More than a decade ago, I estimated that the cost of building another story (which is the marginal cost of extra space) was less than one half of the market value of that space in Manhattan.   Prices are even higher today.  I can’t imagine that the negative externalities from building are anywhere near high enough to justify such a massive implicit tax.

One of the reasons to be skeptical about these negative externalities is that if people don’t live in an urban skyscraper, they will live somewhere else, and there are also externalities from other forms of building.  Suburban homes lead to more driving which generates congestion and pollution externalities.   Restricting construction in America’s more temperate cities, which include Seattle, San Francisco and Los Angeles, induces more construction in hotter places like Houston.  The impact of that rerouting of construction is more air conditioning and more carbon use.

Planned and Completed Luxury Apartment Buildings in Manhattan along “Billionaire’s Row.” Source.

On NIMBYism

JB: One of the main arguments in Chapter 6 of Triumph of the City is that landmarking, historic preservation, and zoning are driving higher housing prices, and that places like Paris and New York should allow residential building height to increase according to the demand. But this raises several important questions. How can a city realistically make such a plan? It seems that nearly every large city in the West is prevented from allowing the housing market to operate more closely to match supply with demand for all income brackets. What might be some realistic ways that governments can prevent the NIMBYists from vetoing housing market reform? Do you see any good examples of denser older cities that have been able to overcome the NIMBY problem?

EG: I think that there are two reasonable political paths against NIMBYism.  The first is top down.  Strong mayors often like building up, because of the construction jobs, property tax revenues and agglomeration effects.   Consequently, leaders like Michael Bloomberg, Richard Daley and Boston’s Marty Walsh have all fought for more permissive construction environments.   Generally, the smaller the jurisdiction, the less likely will political leadership see the upside in construction.  Part of the problem is that restrictions benefit current home owners at the expense of prospective external resident, and the smaller the jurisdiction the larger this problem will be.

The second path is the new YIMBY movement, which is a ground up swell supporting new development.  In a sense, that movement recognizes that incumbents, typically an older generation, has enriched itself through land use regulations at the expense of a younger generation.  We have yet to see the YIMBYists achieve significant change, but the movement is a really welcome addition in urban political discourse.

In terms of policies, the question becomes what level of polity is implementing the change.  At the local level, the easiest change is just to allow more as-of-right high-rise building rules.    As-of-right means less regulatory uncertainty.  If there are real externalities, we can certainly impose impact fees, but these should be a replacement for a lengthy permitting process.

At the state level, the government needs to encourage lower levels of government to permit more housing.  One approach, typified by Massachusetts, Chapter 40B is just to over-rule local land use controls and impose a more permissive state level building code.   A second approach, since in New Jersey’s post-Mt. Laurel system or Massachusetts 40R or 40S, is to provide financial incentives for localities to encourage more building.  State transfers, for example, could be tied to the level of local building.

***

[Continue reading part two here.]

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The New Amsterdam map on this page was sourced here, and the atlas image is from the 1891 Atlas of City of New York by GW Bromley & Co.

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