In The Rent Is Too Damn High!, Matthew Yglesias makes a case against regulating population density in metropolitan areas. He argues convincingly that building higher in our cities will lower rents, raise disposable income, improve productivity, and provide considerable environmental benefits.
Where he loses me is in this sentence:
Balancing the different costs and benefits involved in denser building is, after all, precisely the sort of thing relatively free markets are good at.
This is unfortunately not true. If 70% of people prefer smooth peanut butter, and 30% percent of people prefer chunky peanut butter, the market will excel at providing 70% smooth, and 30% chunky. It will do that close to perfectly. Providing housing in an urban area is a different case.
If you move into a neighborhood with boarded up houses a new neighbor offers a positive externality to you. His spending will allow for more businesses and services to spring up in the neighborhood, and you can also use these services, so you benefit from his arrival. But after all the houses get filled up, and after the high-rises start rising, there comes a point when new neighbors start posing negative externalities (meaning they are creating costs for others than they don’t fully bear themselves.) The high-rises will block sunlight and views, traffic will become congested, architectural charm will be razed, air quality will decrease, and sidewalks will become a nightmare to navigate.
Imagine a city of a million people, where 70% of people prefer medium-density housing, and 30% prefer high-density housing. With zoning regulations, everybody can live in the neighborhood they prefer, although as Yglesias points out, they will certainly be paying a premium to do so. On the outskirts of this city are another couple of million people that have the same preferences in the same proportions, but just can’t afford to live in the city. It’s pretty clear what will happen: the outskirters will move in until the whole city is high-density, and medium-density housing will only be available in the outskirts. This might or might not be a preferable outcome from a policy perspective, but has the market truly weighed the costs and benefits? No. The costs are externalities. This is market failure. A policy that deregulates zoning restrictions would create a city that does not reflect the preferences of its denizens, or even its prospective denizens.
So the people who like medium-density have to move out to the outskirts, you say. What’s so wrong with that? Here’s Yglesias:
If people have strong feelings about not wanting to live on the same block as a tall building, they can move or they can pay what it costs to make it worth a neighboring property owner’s while to avoid building taller.
Ignore the plainly absurd suggestion that a protection racket is going to somehow preserve the quality of our neighborhoods. When Park Slope is built over by Forest Hills-type coop high-rises, why can’t the Brooklynites move to White Plains? Well, this building, this neighborhood -- it isn’t just ‘housing,’ a product like peanut butter that can be replaced if it’s inadequate -- it’s a home. It’s the scenery in the memories of people’s children; it’s a lifetime investment; it’s the nightly refuge of the overworked. It’s little wonder people want to protect this home, and believe that decisions about it should be trusted to a political rather than a purely market-driven economy. I know I would not want to live in a New York City where Greenwich Village and Chelsea became like Second Avenue... or the Upper West Side minus the pre-war architectural detail.
Live in New York for very long at all, and you will run into old timers bemoaning the destruction of the old Penn Station. You hear, you nod… but you don’t really quite get it. I came a little closer to getting it recently after seeing Stanley Kubrick’s Killer’s Kiss, which opens in that dramatic old palace of glass. It was like seeing a ghost; there once, now gone. To his credit, Yglesias makes a carve-out for certain structures of “significant historical value,” but he should realize that neighborhoods are gems in the exact way that old Penn Station was. They can be destroyed. And once they are, a little bit of our soul is gone forever. Maybe that loss is sometimes worth it, but the market alone cannot weigh that loss, because the logic of development is rigged in a single direction. The body politic has to participate in our cities’ fate.