In 1962, in response to the outcry over the razing of the original Pennsylvania Station, which was beautiful and much beloved, Mayor Robert Wagner established the Landmarks Preservation Commission. In 1965, despite vigorous opposition from the real-estate industry, the commission became permanent. Initially, this seemed like a small sop to preservationists. The number of buildings landmarked in the commission’s first year, 1,634, was modest, and the commission’s power was checked by the city council, which could veto its decisions.
Yet, like entropy, the reach of governmental agencies often expands over time, so that a mild, almost symbolic group can come to influence vast swaths of a city. By 2008, more than 15 percent of Manhattan’s non-park land south of 96th Street was in a historic district, where every external change must be approved by the commission. By the end of 2010, the commission had jurisdiction over 27,000 landmarked buildings and 101 historic districts.
In 2006, the developer Aby Rosen proposed putting a glass tower of more than 20 stories atop the old Sotheby Parke-Bernet building at 980 Madison Avenue, in the Upper East Side Historic District. Rosen and his Pritzker Prize–winning architect, Lord Norman Foster, wanted to erect the tower above the original building, much as the MetLife Building (formerly the Pan Am Building) rises above Grand Central Terminal. The building was not itself landmarked, but well-connected neighbors didn’t like the idea of more height, and they complained to the commission. Tom Wolfe, who has written brilliantly about the caprices of both New York City and the real-estate industry, wrote a 3,500-word op-ed in The New York Times warning the landmarks commission against approving the project. Wolfe & Company won. In response to his critics in the 980 Madison Avenue case, of whom I was one, Wolfe was quoted in The Village Voice as saying:
To take [Glaeser’s] theory to its logical conclusion would be to develop Central Park … When you consider the thousands and thousands of people who could be housed in Central Park if they would only allow them to build it up, boy, the problem is on the way to being solved!
But one of the advantages of building up in already dense neighborhoods is that you don’t have to build in green areas, whether in Central Park or somewhere far from an urban center. From the preservationist perspective, building up in one area reduces the pressure to take down other, older buildings. One could quite plausibly argue that if members of the landmarks commission have decided that a building can be razed, then they should demand that its replacement be as tall as possible.
The cost of restricting development is that protected areas have become more expensive and more exclusive. In 2000, people who lived in historic districts in Manhattan were on average almost 74 percent wealthier than people who lived outside such areas. Almost three-quarters of the adults living in historic districts had college degrees, as opposed to 54 percent outside them. People living in historic districts were 20 percent more likely to be white. The well-heeled historic-district denizens who persuade the landmarks commission to prohibit taller structures have become the urban equivalent of those restrictive suburbanites who want to mandate five-acre lot sizes to keep out the riffraff. It’s not that poorer people could ever afford 980 Madison Avenue, but restricting new supply anywhere makes it more difficult for the city to accommodate demand, and that pushes up prices everywhere.
Again, the basic economics of housing prices are pretty simple—supply and demand. New York and Mumbai and London all face increasing demand for their housing, but how that demand affects prices depends on supply. Building enough homes eases the impact of rising demand and makes cities more affordable. That’s the lesson of both Houston today and New York in the 1920s. In the post-war boom years between 1955 and 1964, Manhattan issued permits for an average of more than 11,000 new housing units each year. Between 1980 and ’99, when the city’s prices were soaring, Manhattan approved an average of 3,100 new units per year. Fewer new homes meant higher prices; between 1970 and 2000, the median price of a Manhattan housing unit increased by 284 percent in constant dollars.
The other key factor in housing economics is the cost of building a home. The cheapest way to deliver new housing is in the form of mass-produced two-story homes, which typically cost only about $84 a square foot to erect. That low cost explains why Atlanta and Dallas and Houston are able to supply so much new housing at low prices, and why so many Americans have ended up buying affordable homes in those places.
Building up is more costly, especially when elevators start getting involved. And erecting a skyscraper in New York City involves additional costs (site preparation, legal fees, a fancy architect) that can push the price even higher. But many of these are fixed costs that don’t increase with the height of the building. In fact, once you’ve reached the seventh floor or so, building up has its own economic logic, since those fixed costs can be spread over more apartments. Just as the cost of a big factory can be covered by a sufficiently large production run, the cost of site preparation and a hotshot architect can be covered by building up. The actual marginal cost of adding an extra square foot of living space at the top of a skyscraper in New York is typically less than $400. Prices do rise substantially in ultra-tall buildings—say, over 50 stories—but for ordinary skyscrapers, it doesn’t cost more than $500,000 to put up a nice 1,200-square-foot apartment. The land costs something, but in a 40-story building with one 1,200-square-foot unit per floor, each unit is using only 30 square feet of Manhattan—less than a thousandth of an acre. At those heights, the land costs become pretty small. If there were no restrictions on new construction, then prices would eventually come down to somewhere near construction costs, about $500,000 for a new apartment. That’s a lot more than the $210,000 that it costs to put up a 2,500-square-foot house in Houston—but a lot less than the $1 million or more that such an apartment often costs in Manhattan.
Land is also pretty limited in Chicago’s Gold Coast, on the shores of Lake Michigan. Demand may not be the same as in Manhattan, but it’s still pretty high. Yet you can buy a beautiful condominium with a lake view for roughly half the cost of a similar unit in Manhattan. Building in Chicago is cheaper than in New York—but it’s not twice as cheap. The big cost difference is that Chicago’s leadership has always encouraged new construction more than New York’s (at least before the Bloomberg administration). The forest of cranes along Lake Michigan keeps Chicago affordable.
Most people who fight to stop a new development think of themselves as heroes, not villains. After all, a plan to put up a new building on Madison Avenue clearly bugs a lot of people, and preventing one building isn’t going to make much difference to the city as a whole. The problem is that all those independent decisions to prohibit construction add up. Zoning rules, air rights, height restrictions, and landmarks boards together form a web of regulation that has made building more and more difficult. The increasing wave of regulations was, until the Bloomberg administration, making New York shorter. In a sample of condominium buildings, I found that more than 80 percent of Manhattan’s residential buildings built in the 1970s had more than 20 stories. But less than 40 percent of the buildings put up in the 1990s were that tall. The elevator and the steel-framed skyscraper made it possible to get vast amounts of living space onto tiny amounts of land, but New York’s building rules were limiting that potential.
The growth in housing supply determines not only prices but the number of people in a city. The statistical relationship between new building and population growth within a given area is almost perfect, so that when an area increases its housing stock by 1 percent, its population rises by almost exactly that proportion. As a result, when New York or Boston or Paris restricts construction, its population will be smaller. If the restrictions become strong enough, then a city can even lose population, despite rising demand, as wealthier, smaller families replace poorer, larger ones.
Jane Jacobs’s insights into the pleasures and strengths of older, shorter urban neighborhoods were certainly correct, but she had too little faith in the strengths of even-higher density levels. I was born a year before Jacobs left New York for Toronto, and I lived in Manhattan for the next 17 years. Yet my neighborhood looked nothing like low-rise Greenwich Village. I grew up surrounded by white glazed towers built after World War II to provide affordable housing for middle-income people like my parents. The neighborhood may not have been as charming as Greenwich Village, but it had plenty of fun restaurants, quirky stores, and even-quirkier pedestrians. The streets were reasonably safe. It was certainly a functioning, vibrant urban space, albeit one with plenty of skyscrapers.