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.

Are High-Rises More Expensive?

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One common argument against allowing the construction of taller apartment buildings is that tall buildings cost more to build, and thus are “overwhelmingly occupied by the wealthy.”  For example, tall buildings, unlike houses and walk-up buildings, require elevators.

But in fact, fairly tall buildings can be pretty cheap where demand is low and/or housing supply is high.  For example, in East Cleveland, a low-income suburb of Cleveland, one 24-story building rents one bedroom apartments for as little as $552 per month, despite the fact that the building contains extras such as a pool and a fitness center.   This means that (assuming rent should be no more than a quarter of income) someone earning less than $30,000 could afford this building. Even in nicer neighborhoods, older high-rises are not hugely expensive: for example, in midtown Atlanta, the Darlington’s apartments start at just over $700.

It could be argued that because these buildings were built decades ago, their costs are not relevant to those of newer buildings. Certainly, newer high-rises are more expensive than older ones- but the same is true for newer walk-ups.  To test this proposition, I focused on the outer boroughs of New York, using Zillow.com to focus on buildings built between 2010 and 2016.  The cheapest newer apartment in Brooklyn started at $1150 (about $350 more than the cheapest older listing); the cheapest new elevator building started at $1600 (and included a doorman, thus inflating the rent beyond the basic amount caused by elevators).  Similarly, in Queens the cheapest newer building rented for $1450 (over $600 more than the cheapest older listing), while the cheapest newer elevator building rented for $1550.

In sum, it seems to me that the difference in cost between the cheapest high-rises and the cheapest low-rises, although not nonexistent, are not huge either.

Comments

  1. I want to agree with the conclusion, but comparing rental prices (ie. cost to rent) doesn’t prove the point. Price is related to demand, not cost to produce (the cost we are interested in). If high rises and low rises are competing in the same housing market, as they do in most of NYC’s outer boroughs, then they will all have similar prices regardless of the cost to produce or maintain. Higher prices for high rises likely reflect amenities common even to older high rises that have value to consumers, such as doormen, views, or gyms. It’s harder to find, but unit construction costs are the measure you want to prove your point.

  2. I don’t see any actual research in your post about what the real world cost difference is between high rises and six foot stick built apartment buildings, so I don’t see how you can make any assumption either way.

    However, I know in Los Angeles, once you go beyond six stories – the costs dramatically rise and it took a long time before rents in residential high rises were high enough for high rises to be built in any quantity in DTLA. And our earthquake standards aren’t that different since many parts of the country can have quakes and do have tornadoes or hurricanes.

  3. I’m not sure I agree. The point I was trying to prove isn’t that construction costs are similar for high and low rises; rather, I am trying to argue that high rises don’t rent for much more, regardless of whether this fact is caused by supply and demand or by unit construction costs.

    Re Los Angeles- the most expensive high-rise I saw in Craigslist was about $1100, which doesn’t strike me as outrageous for a downtown in a pretty expensive city. But then again, I have never lived in Los Angeles so I feel uncomfortable opining about it.

  4. But for people who care about housing affordability, what matters is whether sufficient new construction can bring down rents below the current market rate. If construction costs of high rises are just a little bit below market rate, while construction costs of low rises are substantially below market rate, then this would mean that high rises can do very little to improve affordability, while low rises could do more.

    Let’s Go LA did a little article about these things a while back (focusing on purchase price per square foot, rather than rent price per unit) and found some substantial differences:

    https://letsgola.wordpress.com/2013/11/18/when-does-more-expensive-construction-make-sense/

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