Yes, there are many aspects of densification that serve to drive up prices. As Alex Steffen mentioned in his piece, density often brings benefits (in the form of walkability, viable transit, lower transportation and utility costs, urban aesthetics, a greater concentration of people instead of cars and surface parking lots) that result in greater demand.

It’s for this reason that you need to build that much more supply (density). Instead of building just enough supply to meet the demand at any particular point in time, anticipate that the density will indirectly increase demand as well. Saturate the market with excess supply – especially at the high end – to ensure that the remaining opportunities for developer profit lie at the middle and low end of the market.

How much density is Seattle really going to accomodate? Mabye, I’m just missing something.

* And would attracting rich immigrants be such a bad thing?

My first point was to suggest that density can actually drive up housing prices through means other than simply more purchasers chasing a fixed number of units, which Alex seems to imply as the only factor.

Regarding the second topic, I’m not so confident as you are that housing markets are as perfect or prices as elastic. While I certainly haven’t studied the economics of housing, it strikes me that housing markets would be quite clunky (unusually imperfect)—people are willing to live only in a limited number of neighborhoods and in limited type of units creating multiple sub-market ‘islands’. Plus, new units come online extremely slowly, and people are usually compelled to make a housing commitment within a fixed time window. The market for bottled beer would be quite opposite.

I’m a density proponent, but I am sensitive to two things within the dialogue. One is that density proponents seem heavily focused on the dense end of densification, which leads me to suspect a cultural dimension. The more important, though, is that I notice consistent echoes of Milton Friedman and the ‘free’ market theology that has brought us a long list of ills, including excessive energy consumption and sprawl. It feels quite completely wrong to hear density-enviros asking us to trust and to liberalize markets. But, as I said, I haven’t studied the housing market.

1. To say that people criticizing urban renewal projects and the “density-is-best” discourse “misunderstand reality” is quite a demagogical statement and cannot serve to better our collective understanding of urban dynamics.

2. You give the example of San Francisco to serve as an illustration of the negative effects of “lack of new housing projects”. You could also look to Vancouver (British-Columbia) to serve as a contrary example. Densification is a prime policy objective of Vancouver and it has been accompanied by an outrageous increase in property values. Today, average housing-related costs per household are equal to 76% of household median income in Vancouver. You can imagine the impact this has on lower-income household who make under-median income.

3. Density in itself, seen in a vacuum, cannot be said to drive property values up or down. One needs to consider where density is being added, whether buildings are being replaced, whether we are talking of a green field or brown field development, etc. A very summary research in academic journals should be sufficient to convince you that most “urban renewal” projects are generally accompanied by gentrification trends to the detriment of present dwellers. Density is generally but one aspect of these projects whose aim is, more generally, to revitalize working class neighborhoods, to attract new dwellers, to pimp property tax revenues for municipalities, to create profitable sites of investment for real estate promoters and speculators, etc. The question should not be “Is density good or bad?”, but rather “In what CONTEXT is density desirable and in what context is it undesirable?”

4. You speak of the inevitable laws of capitalism while speaking of “supply and demand”. Another essential aspect of capitalism which we should consider is that of “speculation” or the absolute necessity of finding new sites of investment for capital, “accumulation for accumulation’s sake”. In this context, rising housing values is an absolute pre-requisite to urban densification. No investor would want to deal with the hassles of re-building city centers if he were not guaranteed that he would make a generous profit. No investor would embark in densification projects if housing values were to remain stable. In other words, if supply in housing increases, decreasing the long-term value of housing, investment in densification projects will naturally cease. You can thus imagine that this scenario will be fought against by real estate density promoters. If anything, rising housing values are driving the social acceptability of densification, at least on the part of city officials, promoters and bankers, and not the other way around. As such, densification does serve to bolster the continued increase in property values, which is actually an admitted objective of most municipalities (who often depend on property tax for financing).

5. Density should be understood, beyond sustainability, as being related to investment. If an investor is allowed to build more and more floors in a context of rising housing values, it is an excellent way for him to maximize his profit margin.

6. Density also calls for large scale real estate investment, “capital-intensive investment”. In a general context where the middle and working classes are loosing more and more purchasing power, to privilege capital-intensive investment in urban projects serves to bolster inequalities in wealth.

7. My personal conclusion is that we need to find ways in which we could drive up density (for all the environmental benefits that we agree on) and limit urban sprawl while also keeping city centers affordable and accessible to all. That means finding alternative ways to finance housing projects and urban renewal projects (ex: “bangruppen” in Germany, land trusts in San Francisco, “auto-promotion” in Strasbourg) where smaller investors can participate in the development of the city. It also means that we might have to start considering “housing” as an essential need which cannot be exposed to financial speculation.

“Building high-end or even middle-income units isn’t going to address low-end affordability.” Sure it is. Every additional home in a city means one more household can afford to live there. They don’t move into the shiny new places, they move into the places that the upwardly mobile just moved out of. Coincidentally, these older homes almost always used to be high-end or middle-income units.

“the increased costs of transportation are less than the decreased costs of housing” I think that’s a fair argument. Although people are extremely first-cost sensitive. A long-distance commuter can waste $500k, spread out over the life of a mortgage.