Comments on: Height Limit Links

By: cherry jello shots

cherry jello shots — Mon, 24 Feb 2014 23:37:43 +0000

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By: Michael Pellegrino

Michael Pellegrino — Mon, 23 Apr 2012 15:14:00 +0000

All good points. I definitely think the economics of a height act relaxation (or outright repeal) are sound. I just think people should be wary of getting too caught up in using econ 101 perfect competition supply and demand models to make sensational claims about the wonders that the market will bring to bear. “Lower rents! Abundant housing!” Matt Yglesias is infuriating in this regard. It all sounds very nice, but it’s a hell of a lot more complex than that. Sometimes, people forget that economics isn’t an ideology but rather a science that we use to evaluate trade offs. We’re always trading something for another, and there’s no magic bullet that will definitely make DC beautiful, compact, and affordable.

By: Emily Washington

Emily Washington — Thu, 19 Apr 2012 23:56:00 +0000

I look forward to seeing that. I really like your posts that deal with social issues.

By: Emily Washington

Emily Washington — Thu, 19 Apr 2012 23:48:00 +0000

Yeah, and beyond selecting for neighborhoods with people of similar interests/demographics/lifestyles, I think people have a strong status quo bias for the built environment changing around them. So through path dependency, sprawl could breed sprawl since increasing density would require adapting to change.

By: awp

awp — Thu, 19 Apr 2012 23:46:00 +0000

“No, the most realistic scenario for a height act repeal is that we can expect less upward pressure on price in the long run.”I don’t think anybody here thinks that new buildings will appear instantaneously after the height act is repealed. Lower prices, than would have existed otherwise, in the future is the whole point.

“However, this ignores the fact that removing the height limit also drives up the underlying cost of the land.”
Underlying of cost would increase, where the height limit bounds, because you can build more housing on the land. Building more housing will lead to lower prices for housing.

” If developers build enough to create enough slack in supply to create actual downward pressure on price, financing will dry up and the supply will remain fixed again.”
If developers build enough to lower PROFIT below a certain amount then they will stop building. Prices can fall as long as quantity goes up, and profit can increase or remain the same. When quantity has gone up so much that the new lower market clearing price no longer allows developers to profit, then building will stop(this point is often what vacancy rates are used as a shortcut to determine).

“perfectly competitive equilibrium price (which is fantasy, particularly in a high fixed cost industry like real estate) is not necessarily an affordable price.”
No, but we could end up with either a higher quantity, a lower price, or most likely some mixture. Allowing move people to take advantage of of the benefits of linving in “DC (which will) remain a highly demanded commercial and residential locale with the one of the highest median incomes in the country”

By: Alon Levy

Alon Levy — Thu, 19 Apr 2012 22:54:00 +0000

I want to post on this later (may take a while with my current 1.5 times a week schedule…), but I think part of the issue is that social democracy tells people that they need to be able to cooperate and live with strangers, and most varieties of conservatism tell people to fear strangers who are different from them. Possibly it could also be a legacy of industrial unions in old cities – I’m not sure.

The libertarians fit into this depending on what kind of libertarians they are exactly. Most of the ones in the US are not like you or like Stephen, but are instead much more culturally conservative. This is true even for the supposedly urbane libertarians: the Manhattan Institute publishes racist articles, and Reason and Cato like suburbs and hate cities. Parties that adhere to an urbane classical liberalism, with an emphasis on internationalism and such, get more urban support – thus Tel Aviv voters supported Shinui and Geneva-area voters support the FDP.

By: Anonymous

Anonymous — Thu, 19 Apr 2012 21:40:00 +0000

I think it’s true that the underlying cost of (some) land might rise, but conversely, less well-situated land would fall in price (ie there’s less reason to build a subdivision on farmland two hours from the city, or even in a less-favored quarter of the city). And even though the potential for higher buildings might drive up the cost of the land, there is still a lot of land in a city that could be built higher, so the increase in cost is not likely to be that great, and in any case the cost of the land will be split over many, many apartments or offices, meaning that the cost for each individual user won’t be that great.

At least in my city, high land costs for skyscrapers seem to be supported by the fact that it’s really quite difficult to get approval for skyscraper construction, so there are practically guaranteed limits on how much competition can be expected.

By: Michael Pellegrino

Michael Pellegrino — Thu, 19 Apr 2012 21:03:00 +0000

Actually, it’s fairly unlikely rents would fall in the event of a height act repeal, and that is not a denial of the law of supply and demand. Look at it this way: supplies of housing and commercial real estate have been increasing steadily for more than a decade. The issue is that those supplies haven’t kept pace with increases in demand, hence the upward pressure on price. Removing the height limit allows supply to increase more quickly, which in theory should be an outward shift in the supply curve. However, this ignores the fact that removing the height limit also drives up the underlying cost of the land. Vertical supply increases, but horizontal supply is still fixed, so even though you can build a skyscraper now, the initial cost to purchase the land is higher. Add to that the fact that lenders for development tie financing to vacancy rates. If developers build enough to create enough slack in supply to create actual downward pressure on price, financing will dry up and the supply will remain fixed again. We know this because IT JUST HAPPENED IN HUGE PORTIONS OF THE COUNTRY. No, the most realistic scenario for a height act repeal is that we can expect less upward pressure on price in the long run, but in real terms, as long as DC remains a highly demanded commercial and residential locale with the one of the highest median incomes in the country, it’s going to be expensive to live here. There are no magic bullets in this market, and as an economist you should know that even a true, perfectly competitive equilibrium price (which is fantasy, particularly in a high fixed cost industry like real estate) is not necessarily an affordable price.