Why packing more people into our cities won’t be so bad

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The guru of urban economists, Edward Glaeser, of Harvard, famously pronounced that “great cities are not static; they constantly change and take the world along with them”.

What he means by that, I think, is that great cities grow, and as they grow, they change. They grow not just because the nation’s population grows, but because businesses want to be based in big cities, near other businesses. Workers flock to big cities because that’s where the good jobs are.

Economists call this “the economies of agglomeration” – the material benefits derived from everyone packing together.

Sydney’s inner suburbs have lower density than those in Melbourne and Brisbane, let alone cities such as Manhattan, the inner boroughs of London, and most districts of Paris.Credit: Sam Mooy

The question is how our big cities change as they grow. What comes naturally is for cities to sprawl as they grow. Trouble is, this is the expensive way to grow. It means you have to keep extending your infrastructure of roads, public transport, power and water networks, schools, shopping centres and police stations.

Another problem is that most people prefer to live near the centre of the city. That’s because it’s where the jobs are, and also where the amenities are: the beach or the river, the centres of spectator sport and entertainment.

But the people who already live near the centre and the amenities like their detached, single-story low-density lifestyle. They vote for local and state politicians who will resist pressures for “infill” – turning factories and warehouses into medium-rise or high-rise housing.

They resist the building of high-rise apartments close to train stations and so getting people to and from work in the centre of town without long commute times. Nor is there great expenditure on extending transport and utility networks.

You may think that the inner suburbs of Sydney and Melbourne are already pretty high density, but it’s not true. According to calculations by the NSW Productivity Commission, Sydney’s inner suburbs have lower density than those in Melbourne and Brisbane, let alone cities such as Manhattan, the inner boroughs of London and most districts of Paris.

What’s more, the commission finds, quality of life doesn’t have to be sacrificed for greater density. Cities with similar-sized populations but smaller in area than Melbourne and Sydney – such as Vancouver, Toronto and Vienna – are ranked more highly on quality of life measures.

“While some aspects of density can detract from quality of life (such as air quality and noise levels), others may actually increase it (for instance, through improved access to services, and social and cultural amenities that increase with population),” it says.

Obviously, we’re talking about a lot more apartments. And the great advantage of apartments is that they allow a lot more homes to be built where people most want to live.

How do we know so many people would like to live in well-located apartments? Because they’re willing to pay a lot more there than they are elsewhere. So, apartments do most to satisfy unmet demand for housing.

It’s the strong demand for apartments in well-located areas that makes their building commercially possible in a way that wouldn’t be possible in less desirable locations.

The great advantage of apartments is that they allow a lot more homes to be built where people most want to live.Credit: James Alcock

So, you build apartments in areas where there are fewer homes than there are would-be occupants. Obviously, all these extra occupants are willing to live with less space in return for living somewhere they prefer.

To an economist, the fact that people are prepared to pay a lot more than the cost of construction of an apartment tells you the demand for these places greatly exceeds their present availability.

Those who speak in support of high rise and infill are often accused of being in league with property developers. That may be true in some cases, but it doesn’t have to be.

As the commission – and many economists – assert, there are good community-benefiting arguments for denser cities. This remains true even though some developer somewhere will make a buck from bringing it about. In a market economy, many people make a good living from producing things that many people want to buy.

In a capitalist democracy, everyone’s entitled to pursue their self-interest – even those whose self-interest lies in urging governments to keep the most desirable parts of the city low density.

This is the first-in-best-dressed brigade urging governments to use the powers that the rest of us have given our leaders to preserve their privileged positions at the expense of more recent arrivals, who should be pushed to the less desirable outskirts of the city.

The secret to good governance is for politicians to put the interests of the many ahead of the interests of the privileged few.

Ross Gittins is the economics editor.

Ross Gittins unpacks the economy in an exclusive subscriber-only newsletter every Tuesday evening. Sign up to receive it here.

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