Debate: To Build Up or Build Out?

Opinion Columnists Conor Sen and Noah Smith

Cooling Home Prices 

Asking prices for homes are cooling off in some major US cities.

  • In March, median list prices fell 5.4 percent from a year earlier in San Antonio followed by Austin, with a 3.4 percent drop, and Honolulu, with a 1.4 percent decline, according to a new report from Trulia that focuses on 10 of the country’s 100 biggest housing markets.
  • Asking prices were little changed or only slightly higher in the other seven cities.
  • One thing nine of the 10 markets have in common is that listing inventories grew from a year earlier and that probably tamped down asking prices, according to Felipe Chacon, housing economist at the real estate website.
  • Supplies were down only in economically depressed Camden, New Jersey.

Economic geography is a hot topic among economists who look at how location, transit and distribution systems and spatial relationships figure in growth, land use and urbanization. Bloomberg Opinion columnists Conor Sen and Noah Smith met online recently to debate the merits of population concentration versus dispersion.

Smith: Lots of people are talking about the need to build more housing in big cities. There are two basic reasons why. First, living near to their jobs eases the expense and burden of public-transit commuting for working-class people. Second, research shows that having concentrations of smart people in a small area is good for productivity. Smart people exchange ideas as they work together and move from job to job, and they provide a pool of employees for knowledge industry companies in tech, media, biotech and finance. That raises productivity, and the extra money gets spent on local services, which provides income for the working class. Therefore, we should try to pack a lot of people into highly productive cities if we can.

What’s wrong with this logic?

Sen: The concern is that it’s trying to force what might be called “the demands of the economy” onto people, who in turn have very diverse housing preferences. The urbanist ideas that get the biggest microphone these days tend to be ones that suit the preferences of cosmopolitan, highly educated, childless people in their prime working years, who tend to want to congregate in cities and places that have the characteristics you talk about. Housing prices have risen in those places, and those places tend to restrict residential development, so there’s an obvious logic to why these issues get addressed. But most people in America are not cosmopolitan, highly educated, childless people in their prime working years, and they tend to have different housing preferences than the ones urbanists talk about. They might prefer living in the suburbs (many of which also restrict housing development), in midsized metro areas, or in areas other than coastal cities, and we don’t talk about them very often.

Crafting urban development policies that are good for the economy are obviously important, but we also need to discuss policies that are popular with people from all walks of life and can garner political support. Otherwise I fear we run the risk of urbanist discussions turning into a form of “SimCity policymaking” — something conceptual and fun that’s detached from reality and what’s politically possible.

Smith: Well, to be fair, the main policy people are suggesting to promote big-city urbanism is just to allow more housing in big cities. That’s hardly forcing anyone to do anything. Prices are going up in cities because people want to live there, but with constraints on supply they’re being kept out. Letting people move to cities doesn’t make life harder for people who like suburbs.

Now there is a real trade-off here, and it’s infrastructure. Suburbs are physically expensive, since they require building and maintenance of sprawling systems of roads, sewers, broadband and other support networks. Taxing city dwellers to subsidize suburbia seems like putting our thumb on the scale for the people with suburban preferences, doesn’t it? And diverting money from efficient urban infrastructure to costly suburban infrastructure doesn’t just hurt footloose high-skilled 20-somethings — it also hurts all the poor and working class people who live in cities. Although knowledge workers may be engines of urban productivity, poor and working-class people probably benefit a lot more from cheap transit, density and vibrant markets for low-end services.

So I guess what I’m asking here is, how do you think we should be more accommodating to the desires of people who like suburbs, and how do we do that in a way that avoids hurting poor city-dwellers?

Sen: This gets to the political constraints of the U.S. Property rights, homeownership and local control over zoning are sacred just about everywhere. These days at least, there’s not much willingness on the part of voters to make individual sacrifices in the name of some collective greater good. That’s not just an urbanism thing, though the negative effects may be strongest there. You and I can debate, and probably agree upon, various ways to make the suburbs more workable for those who want to live there — be it with transit expansion, higher residential density around transit stations, and the like — but in a way that avoids the bigger underlying issue.

And that is, to get any kind of significant movement on big housing or urbanism pushes, do we need what’s effectively a political revolution at the national level around land use, transit and the like? And if that’s unlikely in the near term, should urbanism goals be more modest in scope and realistic about what they’re able to accomplish?

Smith: I think it’s fine to push for a revolution around urbanism and transit, because even though it’s unlikely to happen, it’s good to get people focused on the issue. Let’s hope some positive marginal changes will come out of it.

And when the bills from depreciating, expensive-to-maintain suburban infrastructure increasingly come due, that focus on urbanism will hopefully make people realize that density isn’t just a way of catering to urbanites’ and would-be urbanites’ preferences — it’s also a way to save a lot of money. I don’t expect everyone to move to New York, but I think we could definitely see a lot more dense development in inner suburbs, including better transit, more mixed-use zoning, more multifamily units, taller buildings and walkable areas. In other words, I think some suburbs are going to start looking more city-like.

Do you think we have an alternative? Or do you think I’m overstating the cost problems associated with sprawl?

Sen: It’s reasonable to frame urbanism as aspirational and idealistic, but I think it’s important for people to see the difference — many of these policy ideas are probably unworkable in the short-term, but that doesn’t mean we should stop talking about them. Expectations are important so people don’t get too frustrated.

And I think your point about suburban infrastructure bills coming due is important. Rather than upzoning well-functioning suburbia, which means battling well-entrenched local interests, many parts of decaying suburbia will be slowly abandoned, just like some of the urban neighborhoods in the late 20th century that lost factories and people. Those suburban places will represent cheap land and a blank slate for redevelopment, without some of the political opposition we see in many highly desirable places today.

In the end, perhaps we’ll get what urbanists hope for — more dense, walkable, transit-friendly upzoned neighborhoods — only they might happen in places we’re not now focused on. But maybe opportunities will present themselves in suburban communities built decades ago that millennials haven’t shown an interest in.

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