The Declining Benefits of Density

The housing affordability issue has become a debate between those who believe the solution is to impose more density on cities and those who believe the solution is to eliminate urban-growth boundaries and let people live at the densities they prefer. An op-ed in yesterday’s The Hill endorses the latter view.

Cities exist because people benefit from having resources and jobs in close proximity. But the benefits of that close proximity have decline in the past century with increasing transportation and telecommunications speeds. Nevertheless, many density advocates point to Harvard urban economist Edward Glaeser, who argues that face-to-face contacts are always more valuable than audio or video communications and so there continues to be a need for dense cities like New York. This is supposedly especially true in the finance industry, where New York excels.

If that were true, however, then why are so many finance industry jobs moving out of New York? In the 1990s, 30 percent of all jobs in the securities industry were in New York; today it is less than 20 percent. As Joel Kotkin recently noted, most of those jobs are moving to low-density sunbelt cities. Of course, face-to-face communications are still possible in cities even if they have only 3,000 people per square mile instead of the 70,000 found in Manhattan.
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If anything is keeping Manhattan dense, it is more electron-to-electron communications than face-to-face communications. Locating a trading office even across the Hudson River in New Jersey might add a few milliseconds to the time it takes to make a trade, and those few milliseconds can end up costing a firm tens of millions of dollars a year.

But not everyone in the finance industry is involved in making high-speed trades, especially considering the trades are actually made by computers. Since housing and other costs are lower in low-density cities, it makes sense for the industry to move those who aren’t essential to such trades to those cities. Moreover, the downsides of high-speed trading are significant enough that it might end up being regulated out of existence — thus ending the last justification for high-density cities.

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About The Antiplanner

The Antiplanner is a forester and economist with more than fifty years of experience critiquing government land-use and transportation plans.

6 Responses to The Declining Benefits of Density

  1. LazyReader says:

    Density brings with it many challenges …. cities are facing growing tax burdens, infrastructure deficits, violent crime. Every urban shithole in America has one thing in common, it’s run…..no run is a bad word, Ruled by the democratic party.

    – Detroit last elected a Republican mayor in 1957. It is now the model of urban failure – it’s recognized more for its poverty, crime, rot and bankruptcy than the cars it turned out. It is the poorest big city in the nation, with almost 40% of the population living below the poverty line; only 59% of students graduate high school, it’s parks and lighting is shuttered.
    – In typical political strategy, one trick is to attribute the blame for [insert problem] for failing on your political opponent. In Chicago’s case that trick is retired because there’s no political opposition. The Windy City’s last republican mayor was in 1927 and admittedly that guy was a corrupt douche. With some of the worst urban crime and violence ever witnessed…with 2,500 people shot and 700 killed; the city has become a place for newly graduated doctors worldwide to brush up on their trauma and surgical skills ill abundant anywhere else. The Army and Navy send nurses, medics and doctors to Chicago to practice techniques on the very injuries they’ll find overseas, gunshots, burns, stabbings, blunt force trauma. The city is so broke that its bonds are junk status, and Mayor Rahm Emanuel had to go hat in hand last week to the state capital, Springfield, for bailout money to pay the bills. Of course Illinois is in no position to bail out Chicago.
    – St. Louis has been electing democratic mayors since 1949…in 2014, it was labeled the 4th most violent and 6th impoverished.
    – Philadelphia’s last Republican mayor packed his bags in 1952….the city’s predicted to follow Detroit in inevitable bankruptcy.
    – Baltimore, my home town, is a paradoxical city with many a charming neighborhood, surrounded by block after block of urban blight. Since the 80’s they’ve done everything to bolster the cities reputation and for a while succeeded, but they never solved their horrible violent crime problem…which has peaked at over 300 murders last year. After years of fighting population decline and getting it back up…the city has lost 20,000 people since 2000.
    New York flip flops from GOP to DNC every decade or so, but it’s homicide rates grew with the city since 1940s…From 1966 to 1990, it went from 650 murders to 2,200!!!! Then in 1994 they put a republican in charge and murders dropped from 1,500 to 640…..
    Are republicans corrupt, yeah they can be. When Democrats are in control for generations at a time, cities tend to go soft on crime, reward cronies with public funds, establish hostile business environments, heavily tax the most productive citizens and set up fat pensions for their union friends. Crime rises when they adopt an anti-police rhetoric..I’m sure, if they pass just one more gun law, all this stuff will stop………..NOT!!

  2. rmsykes says:

    I couldn’t find a way to email you, so I putting this off-topic link to a European report regarding their fast train problems:

    https://reason.com/blog/2018/06/26/european-high-speed-rail-also-a-huge-boo

  3. CapitalistRoader says:

    …heavily tax the most productive citizens and set up fat pensions for their union friends.

    Yesterdays’ Janus v. American Federation of State, County, and Municipal Employees Supreme Court ruling will greatly diminish the influence unions have over politicians. The ruling should reduce the number of collective transit boondoggles taxpayers have to pay for because one leg of the corrupt transit triad (transportation employee unions/private developers and vendors/politicians and planners) just lost a great deal of their funding.

  4. C. P. Zilliacus says:

    CapitalistRoader posted:

    The ruling should reduce the number of collective transit boondoggles taxpayers have to pay for because one leg of the corrupt transit triad (transportation employee unions/private developers and vendors/politicians and planners) just lost a great deal of their funding.

    I respectfully disagree. While it is certainly true that transit agencies across the U.S. that run rail means that labor unions are rewarded with generously-compensated new members when a new or fixed-up rail line is opened, based on my observations, unions that represent hourly transit workers are not nearly the loudest advocates.

    Usually those advocates are anti-highway environmentalist groups; downtown real estate owners and developers and advocacy groups for same; and governments that include downtown areas; and consultants that sell their rail design services to transit agencies and local governments.

  5. CapitalistRoader says:

    C. P., check this out. Transit and construction union money gets shoveled over to left wing candidates who propose transit boondoggles. Union money also gets dumped into transit transit referendums. Quid pro quo. Just recently:

    Transportation, construction unions show support for Nashville’s transit referendum

  6. rws says:

    I’m fine with eliminating urban growth boundaries and letting people live at the densities they prefer. But where in America is a person allowed to live at the density they prefer, if that density is high? Excluding, of course, the old-growth neighborhoods that are now unaffordable in most places, due to their scarcity relative to demand.

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