Review- Broken City

Often, opponents of the pro-housing YIMBY* movement either do not care about the negative results of high housing costs, or are simply careless with the facts.   Patrick Condon of the University of British Columbia is more interesting: he seems as concerned as anyone else about rising housing costs in the Anglosphere, but his solution for the problem is to tax and regulate development as much as possible.   Unlike other commentators, he focuses not just on housing per se but on the high and rising price of urban land.

He acknowledges that orthodox economists believe that the law of supply and demand affects housing, and that thus more housing should equal lower prices.  But in Broken City, he argues that new housing (or maybe just new infill housing) means higher land prices and thus to higher housing costs.  His focuses heavily on Vancouver, British Columbia: he writes that “Vancouver, despite tripling the number of housing units within city limits since 1960, has been rewarded for its effort with the third highest housing prices in the world.” (p. 65).  

But Vancouver is just one example: Condon doesn’t compare it with cheaper cities.  Canada has other larg-ish cities, including Edmonton, Calgary, Montreal and Toronto.  Did those cities add more or less housing than Vancouver?  Did housing prices rise more rapidly or more slowly than in Vancouver?  Condon doesn’t address these issues.  He does mention in passing that housing prices have risen in Houston (which was allowed more housing than most North American cities),** but I am not sure he answers the question that motivates most YIMBYs: why is Houston so much cheaper than New York or Vancouver?***

Moreover, Condon’s description of Vancouver overlooks the fact that housing markets are regional and not bound by municipal lines.  What was going on in Vancouver’s suburbs? Were they building at a Vancouver-like pace, or did growth control policies limit suburban pricing and thus create a regionwide housing shortage?  Condon doesn’t address this issue.

His theoretical logic is that “When the city authorizes a doubling of market density.. the residual land price goes up in response… [thus there is] no substantial decrease in the cost per square foot of new housing.” (p. 196).  But these imaginary numbers seem arbitrary.  If density increases by 100 percent, why would land price increase by 100 percent instead of 20 percent or 50 percent?  I am not sure I understand his argument here.

And if land prices were a function of more housing construction, we would find that land prices exploded in places with lots of housing construction, but were stable or declining in places where “Not In My Back Yard” sentiment impeded housing construction.  But even a casual look at the American Enterprise Institute land cost database suggests otherwise: over the past decade or two, land costs has risen in most metro areas: not just in places with lots of new housing such as Austin, but in less permissive areas (such as San Francisco and its suburbs).

Unlike less sophisticated opponents of YIMBYism, he doesn’t argue that new housing is all bad, and he is all for housing owned by government and nonprofits.  But he also argues in favor of programs that make housing less profitable, such as impact fees, rent controls, and inclusionary zoning.  Some (if not most) economists believe that these policies discourage housing construction- but Condon argues that they make housing cheaper by reducing land costs, suggesting that if an extra tax makes a project unworkable, “the price for the land will be renegotiated down” (p. 163).  He points out that California cities “have been less timid than most states” in imposing impact fees (p. 162).  But since land and housing costs in California have exploded in recent years, this fact doesn’t really support his argument.

 He also praises inclusionary zoning because it encourages the creation of nonmarket housing and “lower[s] the prices of developable parcels” (p. 165)- in other words, reduces the demand for land.   In particular, he praised Portland, Oregon’s expansion of inclusionary zoning.  But after Portland passed its inclusionary zoning ordinance in 2016, land costs in Multnomah County (which includes Portland) increased from $1.06 million per acre in 2016 to $1.56 million in 2022.     Meanwhile, building activity crawled to a halt.  In 2017, almost 6000 permits were issued for Portland buildings with five or more units.  In 2024, fewer than 1000 such permits were issued.

He also praises inclusionary zoning in Cambridge, Mass.- where inclusionary zoning has apparently been far less harmful. But Cambridge’s program is far less restrictive, because inclusionary zoning is part of an overlay district- which means that landlords have the option of proceeding either under inclusionary zoning (which allows more units in exchange for more “affordable” units) or proceeding under the prior zoning code.

Similarly, he argues for rent control on the ground that it “quell[s] the appetite of international [investors] for a city’s land” (p. 142)- in other words, makes people less interested in being landlords, which supposedly will reduce land prices.  In New York, where I live, the state government implemented vacancy control, where rents don’t go up even when a tenant leaves.  As a result, landlords have warehoused thousands of rent-stabilized apartments, apparently because they would have to spend money on renovations to comply with housing costs, and are not allowed to raise rents enough to pay for the renovations.  Rather than declining, the median asking rent in each of New York’s five boroughs has increased by 50 percent or more between 2019 and 2026.

And as a broader theoretical matter, his relationship with the law of supply and demand seems inconsistent: on the one hand, he argues that housing supply doesn’t make housing cheaper, but on the other hand he argues that extra taxes reduce the cost of land by reducing demand for land.   

*For those of you who have not read this blog, YIMBY means “Yes In My Back Yard”, a slogan adopted by those of us who support expanded housing supply.   

**One might ask: if YIMBYism works, why have housing prices risen in Houston? But this question is easily answered: Houston has gained population far more rapidly than high-cost cities, leading to a demand explosion.     But even with this demand explosion, rents have risen more slowly there than in cities that have allowed less housing.  Nominal rents in Houston are about 3.29 times their 1980s level,  while rents in metro New York are five times their 1980s level.  

***Condon hints at an answer in his historical discussion: he points out in Chapter 4 that as American densities nosedived in the mid-20^th century, land costs went down.  So perhaps he believes that sprawl equals low land costs and density equals high land costs.  But Condon admits that densities in the English-speaking world are still very low compared to middle-income countries (p. 93)- so why hasn’t low density continued to bring land costs down?