This assumes that a) rents don't increase for the new residents (which is false) and b) people only move within a city and there's no high demand from people outside to move into the city (which is false too).

Low cost _desirable_ areas.

You don't become a millionaire just because the paper value estimate of your house becomes larger.

A low-income person who scraped by to buy a modest home in a cheap area doesn't become any less low-income just because suddenly the demographics change and rich people move in. Forcing them out of their home where they have built their life just so one more rich newcomer can get in, is not fair. For example, East Palo Alto.

I suspect there is a big difference between the long term wealth implications of buying a house vs buying an apartment. There are never going to be more houses in outer-inner-suburbs. There is going to be a constant supply of new apartments as we move towards higher density living.

People who have wealthy parents are in the best position to make better housing investments.

Greed is bad in this situation because you can make more money of luxury apartments than those suitable for people who are somewhere between the poverty line and upper middle class. Hence new apartments in major cities tend to be more and more expensive to satisfy the demand of wealthier people. Greed is also bad when existing apartments are made much more expensive, thereby forcing senior citizens who have been living there for decades and who are barely able to afford the rent to basically leave town, family and friends.

So both remain in balance, prices don't increase and you get little or no financial benefits. Also, a house surrounded by high rises in a very busy street has far less relative value than a house in a quiet street where your kids can play around. Cities bring strangers, crime, pollution, noise, etc.

But if you increase job density without increasing housing density, then you reap massive financial benefits from increasing housing prices.

Lets take your theory to be true.

Even if this is the case, it would still effectively cause housing prices to decrease, relative to the amount of money that people are making.

So, if density causes people's income to double, by having all these awesome and cool jobs, but housing prices only go up by 50%, this is still a massive win for the residents.

Yes, it is cheaper to live where fewer people want to live.

But, usually, there are reasons fewer people want to live there.

I live in New York. Nobody moves here because they want to live in a nice building that happens to be in New York. They move to New York and then find housing. Demand is largely unaffected by new supply in large cities. Also, I live in the Flatiron neighbourhood. A bunch of new development has held my rent flat for 3 years now. My building tried raising rents; I met a potential tenant looking at a unit on my floor. She went to the new luxury building down the street for his $50 more. My building, facing the new competition, dropped their ask by $100.

The cost of housing is dependent on job density * quality only to the point what people are able to pay, and then rest is what they are willing to pay. A lot of people buy/rent slightly above their means if they are willing to pay it. Housing price is like an auction house so willing to pay is a bigger factor than able to.

Artificially reducing number of available houses comes in a lot of reasons/pretense but in the end its just a result of people seeing/forced to see their house as an asset; You acquired your house at price X at auction. A local urban developer want to build 100 more units close to you, from prediction of demand and would be profitable at price X (or even <X), so you passively/actively work against that proposal, tell the developer that he can build up to 90 more units, so price of your estate increase X+N. Now the next 90 buyers that bought the house have a reason to keep the price of estate above X+N, tell the developer that he can only make 80 units. Rinse and repeat.

Which is why house prices in Manhattan and Paris are so low?

> Property values start going down

So you're saying that because it's so desirable, property values go down?

New Yorker here. Bunch of luxury buildings came up in my neighbourhood. The highest-income renters in my building decamped. As a result, my landlord reduced rents.

Keep in mind that lots of present-day middle-class housing (e.g. Harlem) was once luxury housing.

I'm not sure how true this is. If you're on a fixed income, for example, an increase in the value of your property doesn't do you much good unless you sell it. You could take out a mortgage... but then it's just a matter of time before you have to sell. Meanwhile the overall cost of living in your area is increasing due to the influx of wealthy residents.

EDIT: I think that if I were retired and found myself living in a neighbourhood which I could no longer afford, I would sell my house and buy a nice place in the countryside with the profits. But I can understand why some people might resist moving.

Those are actually the same problem. The wealthy can buy housing faster, more decisively than the less wealthy. They may also push out the less wealthy, simply by offering them an above market price. And as the wealthy start to buy up housing in an area, the prices start to go up, and soon become high enough that only the wealthy can buy.

Rich enough to feel they’re above a mere apartment[1], not rich enough to afford a condo.

[1] american also seem obsessed with the idea that houses are for owning and apartments are for renting. Having grown up in buildings full of people/families owning their apartments and sharing costs of building upkeep, I never understood this. Maybe the co-op approach is a remnant of socialism and I’m the weird one.

Personally I’d much prefer to own a nice flat downtown than to waste my life commuting.

Sharing space with the hoi polloi is half the fun of living in a city anyway. Gives your neighborhood some character, interesting people to talk to and to see out and about.

Nothing worse than a neighborhood full of your average middle class suburbanite to drain all the life out of a place. I’ll never forget how utterly terrible living in Menlo Park was. shudder

Edit: sorry that is probably offtopic. My initial point was that real estate is actually more expensive closer to city centers. Maybe “the rich” aren’t so rich after all.

This is about as far from true as it can get.

Ordinary working class people who just happened to buy a cheap house in a place that many decades later became a hot-spot of real estate development.. are still ordinary working class people. Often very poor, even.

Dense housing is more expensive. Dense living massively less so.

In any case, someone moving into a high-end home means they left some other less high-end home available for someone else.