Big Cities are Running Out of Space

Cities are starting to run out of space, according to a report on Bloomberg. Especially space-constrained cities like New York have started to run out of room for builders, leading them to move to city-center areas where high-density building is allowed, and charging much higher prices for it.

Bloomberg notes that historically, cities expanded outward, but as land ran out, builders moved outside the city. Cities like Dallas saw new home sales decrease within a 30-mile radius of the city, but increase outside that radius. The same trend has played out to varying degrees in Phoenix, Atlanta, and San Antonio, among other cities. Meanwhile, more expensive cities like New York have seen the opposite trend.

Unlike Dallas, cities like New York have run out of space to expand, leaving builders to move their construction focus toward downtown areas with high-density construction. Builders must utilize sparse lots plagued by land price increases in order to build inside the existing boundaries. This means builders focus more on high end apartments with better profit margins, leaving only the wealthiest residents as the ones who can buy.

“As long as these cities continue to do well economically, you’re going see poorer folks replaced by richer folks,” said Issi Romem, chief economist at BuildZoom. “You’re going to read stories about teachers not being able to find place to live.”

What happens next depends on whether voters and their elected officials rewrite zoning rules to allow denser construction, said Romem, particularly in neighborhoods currently limited to single-family homes. “Under current rules,” he said, “it’s unlikely new housing will get built at affordable prices, pushing city-dwellers into a game of musical chairs rigged to favor the rich.”