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The Growing Divide Between America's Expensive And Expansive Cities

The unsustainable prices in some of America's cities is down to a refusal to grow outward or upward. But can they retain their place if no one can afford to live in them?

  • <p>Between 1980 and 2010, Atlanta's footprint grew by more than 200% and home values (adjusted for inflation) rose by 14%.</p>
  • <p>In the San Francisco-San Jose area, on the other hand, the amount of available land expanded only by 30%, and prices surged by almost 200%.</p>
  • <p>By contrast, cities like Atlanta, Austin, and Raleigh, North Carolina, added ample new housing by expanding outwards.</p>
  • 01 /08

    The increasing un-affordability of housing in cities like San Francisco, New York, and Boston is because these cities have stopped expanding.

  • 02 /08

    There's a growing divide between cities that have stopped growing and building new homes, and cities which continue to sprawl, but keep prices low.

  • 03 /08

    Between 1980 and 2010, Atlanta's footprint grew by more than 200% and home values (adjusted for inflation) rose by 14%.

  • 04 /08

    In the San Francisco-San Jose area, on the other hand, the amount of available land expanded only by 30%, and prices surged by almost 200%.

  • 05 /08

    Between 1980 and 2000, San Francisco added only about 2,000 units per year. It would have needed to add 5,000 new units a year to stay in line with national price increases.

  • 06 /08

    By contrast, cities like Atlanta, Austin, and Raleigh, North Carolina, added ample new housing by expanding outwards.

  • 07 /08

    The question is whether the "expensive cities" eventually lose their luster because there's so few affordable places to live...

  • 08 /08

    ...and whether the expansive cities will benefit because of it.

The increasing un-affordability of housing in cities like San Francisco, New York, and Boston is partly down to their economic success: People want to move to these cities, which drives up prices. But that doesn't explain the $5,000-a-month rents entirely: It's also because these cities have stopped expanding.

A new analysis finds a growing divide between cities like San Francisco, which have stopped growing geographically and building new homes, and cities like Atlanta, which continue to sprawl, but have managed to keep prices under check. Between 1980 and 2010, Atlanta's footprint grew by more than 200% and home values (adjusted for inflation) rose by 14%. In the San Francisco-San Jose area, on the other hand, the amount of available land expanded only by 30%, and prices surged by almost 200%.

"The Bay Area belongs to a group of cities in which a strong economy coincides with a constrained supply of housing," says Issi Romem, chief economist at BuildZoom, a recommendation site for building contractors. "The failure of rising prices to spur new construction stems from a combination of natural geography and land use policy."

Between 1980 and 2000, San Francisco added only about 2,000 units per year. It would have needed to add 5,000 new units a year to stay in line with national price increases, according to a city report.

By contrast, cities like Atlanta, Austin, and Raleigh, North Carolina, added ample new housing by expanding outwards, as you can see from the graph in the slide show above that plots prices against housing area. "The expansive cities’ housing supply is elastic, meaning that developers respond even to minor increases in property values by building a large number of new homes," Romem says. "Expansive cities are often located on plains or rolling hills that do not encumber development, and compared to the expensive cities ... their land use policies tend to be less restrictive."

The question is whether the "expensive cities" eventually lose their luster because there's so few affordable places to live, and whether the expansive cities will benefit because of it. Unless cities like San Francisco can build more units—say, by building upwards and "densifying"—logic says it must happen. Even if their economies keep creating jobs, there's surely a point at which reality snaps back and curtails growth.

Cover Photo: Kevin Young via Unsplash

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