Increased Housing Supply Through Density Emerges as Key to Affordability Despite Higher Tall Building Costs

Former Vancouver City Councillor Michael Wiebe recently addressed a common misconception surrounding housing affordability, arguing that increased density, often achieved through taller apartment buildings, is crucial for improving housing affordability despite potentially higher per-square-foot construction costs. In a social media post, Wiebe highlighted that "prices are set by supply and demand" and that "density increases supply," underscoring a fundamental economic principle in the housing market. His insights challenge the notion that expensive high-rise construction automatically leads to unaffordable housing.

The global housing crisis has put immense pressure on urban centers, with many grappling with soaring property values and rents. A frequent point of contention in these discussions is the cost of building upwards; constructing taller residential buildings often involves specialized foundations, robust structural engineering, advanced mechanical systems, and stringent fire safety regulations, leading to elevated per-square-foot expenses compared to low-rise developments. These factors can make individual units in dense buildings seem more costly to build.

However, economic research consistently supports the argument that increasing overall housing supply is a primary driver of improved affordability. A National Bureau of Economic Research (NBER) study, for instance, indicated that a 10% increase in the housing stock can lead to a 1% to 2% decrease in rents for existing residents, including those in lower-income neighborhoods. This "filtering" effect suggests that new market-rate housing frees up older, more affordable units, benefiting a broad spectrum of income levels.

The Urban Institute and HUD User further affirm that building more housing, irrespective of initial market-rate status, alleviates competition and reduces pressure on existing housing stock. While the per-square-foot construction cost of a high-rise might be higher, the ability to build a significantly greater number of units on a smaller land footprint effectively reduces the land cost per unit. This maximization of land use in expensive urban areas can offset the elevated construction expenses, making the overall project more viable for increasing supply.

Michael Wiebe, known for his advocacy for increased housing supply and density during his tenure on the Vancouver City Council, aligns with this economic consensus. His tweet emphasizes that the broader market impact of increased supply, facilitated by density, ultimately outweighs the micro-level construction cost variations of individual building types. This perspective highlights the importance of urban planning policies that prioritize density to effectively tackle housing affordability challenges.