Building the Skyline

The Birth & Growth of Manhattan's Skyscrapers

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Why Has Gotham Been in a “Housing Emergency” for 80 Years? (Part II)

Jason M. Barr                March 6, 2025

Note: This post is the second of two on the drivers of Gotham’s historically low vacancy rates. You can read Part I here.

New York’s rental housing vacancy rate is 1.4%—the lowest since 1969. The lack of available housing means that Gotham remains in a “housing emergency”—defined, by law, when the vacancy rate is below 5%.

By this metric, the city has been in a continual emergency since 1943, when rent controls were first enacted. This fact begs the question: Why has the city’s vacancy rate never risen above 5% in over 80 years, and what will it take for New York to free itself from this emergency?

The Theory of Vacancy

Before we analyze New York’s vacancy rates, it’s important to lay out basic concepts. “Vacancy” is defined as the total number of occupiable units minus the total number of units that households occupy. This means that vacancy is determined by the total supply of rental housing relative to the total demand. All else equal, things that raise the number of units will drive up vacancy, while things that increase demand will drive it downward.

Of course, supply and demand are not independent since they are both affected by the price of housing. When prices rise, we expect more supply to be brought online since developers can reap higher returns from new construction. Higher prices will also reduce the demand for units through people living in larger households or by leaving the city altogether (or, implicitly, by not entering).

Over time, when vacancy rates fall below a certain threshold (say 5%), economic forces should create more housing and increase vacancies to a more natural level. We see this phenomenon across the U.S., where average rental vacancy rates have been about 7% since 1956 (across New York State, the average vacancy has been 5.4% since 1986).  When vacancies fail to move above 5%, it suggests barriers to new construction.

Housing Supply

The total housing stock is given by the number of new units added to last year’s stock, minus the number of units lost, through demolitions, conversions, or combining units. So, what drives a net growth in the housing stock?

First is the economic climate. When inflation and interest rates are low, more units will be built since housing is cheaper to construct. On the other hand, when construction costs are high—either locally through expensive labor and materials or nationally through supply chain problems or high interest rates—developers are incentivized to provide less housing, all else equal.

The other element is operating costs, which include taxes and maintenance. Again, as these costs rise, it becomes more expensive to provide housing. As a result, current properties are allowed to decline in quality (and some are eventually torn down), warehoused, or switched out of the rental sector, and developers add less new housing because of lower profits.

Rent Regulations and Supply

Additionally, there are building regulations. The more stringent they are, the lower the new housing supply will be because they reduce the return on investment or produce the fear that if market-rate housing is built today, there is no guarantee that the state won’t impose new regulations down the line.

One of these barriers is limits on rent increases. Price caps on units, in and of themselves, reduce vacancy since the lower prices mean building owners are incentivized to provide less housing. At the same time, consumers seek to have more of it–either by staying in apartments that are too big for their current needs and/or by staying in their units longer than they would otherwise so as not to give up their good deal.

The “lost years”—from 1977 to 1991, when cumulative net housing construction was negative—were driven, in part, by the severe limits on landlords’ ability to raise rents while costs, such as property taxes, were rising. Landlords were squeezed on both ends, and the result was abandonment (and rampant arson).

Zoning

But rent regulations are not the only game in town.  In 1961, the city was massively downzoned. These regulations disincentivized developers and landlords from producing the units needed to keep prices and vacancies in check. Had looser codes been in place, it’s likely the city would have eventually built itself out of a crisis.

Housing Demand

The number of units demanded by households, independent of the price, is driven by population growth, household size, and income. Large population influxes and increasing incomes due to rapid job growth will increase the number of units (and square footage) people want while falling household sizes will also increase the number of units needed.

For example, in the 1970s, even as the population of New York was falling, the number of households was increasing as people were more likely to live by themselves or in pairs. As a result, the demand for housing remained relatively constant during the decade. Even during the lost years, demand fell but not through the floor since household sizes were also dropping. The low vacancy rates were not being driven by hyper-demand but by demographic shifts (and abandonment).  Today, low vacancy rates are being driven by rising incomes, global demand to be in the city, and falling death rates.

Avg. Vacancy Rates Across New York City Zip Codes, 2015-2019. Note: the citywide average during the period was 3.6%. Source: American Community Survey.

A View of Vacancy: A Look at the Data

So, with these economic theories in mind, let’s turn to the data to get clues on the key question: Why has New York’s rental housing vacancy not risen above 5% in 80 Years?

I have assembled two types of data sets to understand the drivers of vacancy rates in New York. The first is annual vacancy rates from 1909 to 2023 and the factors likely to them. The second is a data set with average vacancy rates across zip codes from 2015-2019 and related data that likely drive vacancy across space. (Data sources and results here).

Time Series

Looking at the drivers of vacancy rates over time is good at showing how vacancy is driven by a series of “credits” and “debits”—the respective, economic, demographic, and policy forces that raise or lower vacancy. This analysis demonstrates how the city can use statistical models as guide to adjust the policy levers as vacancies fall. Fluctuations in vacancy are not random. They follow a pattern that can be predicted and, in principle, anticipated.

Of course, economic crises tend to be random, but their impacts are not. In this sense, the City can create an “alert index.” When the economic and demographic forces push the index to a specific value, the government should automatically trigger policies to increase supply, by increasing construction cost subsidies or by relaxing building regulations to get additional housing more rapidly.

The statistical results also provide strong evidence that there are two mechanisms—one direct and the other indirect—by which vacancy is reduced. The direct mechanism are those things that reduce housing availability, while the indirect mechanism is through the forces that affect new construction, which then, in turn, affects vacancy.

The Direct Mechanism

Net housing supply matters. The statistical results show that, all else equal, a rise in supply of 1% (10 net units per 1000) leads to an increase in vacancy rates by 0.65% – 0.75%. This means that if we start with a 3.4% rate, which has been typical in the 21st century, to get to 5% from new construction, we’d need to raise the annual housing additions rate by four times its annual amount, all else equal. In other words, the city must return to producing new housing at rates similar to the non-Great-Depression or War years in the 20th century.

The rent control years were also bad for vacancy. All else equal, vacancy rates were about five percentage points lower than they would be otherwise. I find a smaller–though still negative–effect of the rent stabilization years (since 1969) on vacancy rates relative to years with no regulations (why this requires further study). When I look at the role of real estate tax rates, I found that as tax rates rise, vacancy falls, suggesting that higher taxes are also causing landlords to reduce the amount of housing they provide.

Just as important is the duel with economic and population growth. For example, I found that each 1% increase in GDP per capita in a given year reduces housing vacancy by 1.6 percentage points, all else equal. In other words, given New York’s place in the national economy, New York feels the housing pinch when times are flush.

Estimated Rental Vacancy Rates for New York City, 1909-2023. Note that citywide vacancy has not been above 5% since 1940. The blue dots are actual data points. The red line are interpolated values. Sources: here.

The Indirect Effect

Since new construction affects vacancy, what drives new construction? I find that costs matter—when construction costs rise, supply is curtailed. For example, a one-percent increase in building materials inflation reduces the rate of net new units by 1.2 percentage points.

Just as important, the evidence suggests that the 1961 zoning codes have been quite harmful to new supply, reducing the net new housing rate by about 0.7 percentage points (consider that since 2000, the average net new supply rate has been 0.5%). And based on my estimates, the rules indirectly reduced vacancy by about 0.5 percent points lower each year than it would have been if zoning regulations had been more lenient.

Interestingly, I don’t see an effect of rent control and rent stabilization on new construction rates. This is likely partly because new units have traditionally been market-rate units or gained subsidies to offset the loss of income from rent stabilization. In short, the evidence here suggests that rent regulations mostly work to reduce the stock of housing by incentivizing building owners to provide fewer units (or to convert or abandon them).

Death by a Thousand Paper Cuts

Taken together, the statistical results demonstrate what might be called the death-by-a-thousand-paper-cuts method of keeping vacancy low. First, economic growth and falling household size mean vacancy is constantly being pushed downward. Then, when inflation hits, raising construction or operating costs further increases vacancy. But these economic “downward” forces are not being met by an equal reaction on the supply side.

Rent and zoning regulations have worked in roughly equal measure over time to keep the housing supply from responding quickly to economic changes. The rent control years were particularly bad, but today, the main policy effects are coming from relatively higher real estate taxes on apartment buildings and stringent zoning limits across the city.

Estimated Annual Citywide Rent Vacancy Rates vs. Net New Housing Supply Rates (two year lag). The green dots are from the years 1930 to 1940, during the Great Depression (when vacancy was high and new construction low). The blue dots are from the rest of years between 1909 and 2023. Note the strong correlation between vacancy rates and net housing supply over time (i.e., supply matters!). Source: here.

Across Zip Codes

To investigate the question from another angle, I looked at the drivers of average vacancy rates from 2015 to 2019 across New York’s zip codes. This type of analysis is good for examining how zoning and new construction impact vacancy rates, holding demographic factors constant.

The results of this analysis support the conclusions from the time series analysis. Holding population and number of households content, more construction and less stringent zoning raise vacancy rates. But again, both income and population matter. Lower-income districts have lower vacancy rates because there is less construction there and because of lower household turnover.

Interestingly, I did not find a connection between the number of rent-stabilized buildings in a zip code and vacancy rates. This suggests that the drivers of vacancy are more closely linked to income, housing supply, and zoning regulations.

I find that all else equal, a one-point increase in the average allowable floor area ratio in a district yields a 0.7 percentage point increase in vacancy. If this appears low, it is. The reason is because, the data show, that the zoning increases need to be quite generous before they have an impact on vacancy. Based on my findings, the average allowable FAR doesn’t significantly improve vacancy until it hits a FAR of at least five—meaning, a district needs to allow buildings between 6 to 11 floors, on average, to have a meaningful impact on vacancy rates.

Zip Code Vacancy Rates vs. Median Household Income and Avg. Allowable Residential Floor Area Ratio, respectively. Each color is a different borough, but the trend line is for entire city. Note how lower income neighborhoods have lower vacancy and higher FAR districts have higher vacancies. Note State Island is omitted from the graphs. Sources: here.

What are the Solutions?

Let me begin this section with a key point and one that is strongly supported by the data.  The New York City housing market is, like any market, affected by the ebbs and flows of supply and demand. Supply matters, but it must be added to the city at a meaningful rate—and in neighborhoods where it is most needed—particularly in lower-income neighborhoods.

If low rental vacancy is the cause of the emergency, then increasing vacancy should be the focus of the solution.  The most important thing the government can do is target neighborhood vacancy rates. Looking at the map above, we see the communities most in need are in the “red zones”—particularly northern Manhattan, the South Bronx, and southern Brooklyn and Queens. In these neighborhoods, the government should employ a combined strategy of providing generous construction subsidies, enacting significant upzoning, and potentially involving itself directly in new housing construction.

There should also be an increase in vacancy decontrol. As vacancies rise through targeted new construction, people will be more likely to leave their old units for the new housing, which will free up lots to be redeveloped or incentivize landlords to upgrade these units or cease warehousing them.

Finally, the City needs to create a master plan that improves transportation, parks, and services as neighborhood populations increase. Giving people confidence that densification will not harm residents’ quality of life is key in getting buy-in to making housing more affordable.

It was Supposed to be Temporary

It’s important to recall that in 1943, when rent control was imposed, it was seen as a temporary expedient to help renters harmed by the dislocations from World War II. Price controls were never meant to be a long-term policy, and the on-going housing affordability problem shows the long-term harm they can cause. It’s time that Gotham builds its way out of a “housing emergency.”

You can read Part I of this post series here.

 

by Jason Barr 2 Comments

Why Do We Build Cities in the Sky?

Jason M. Barr             May 7, 2024

On May 14, my book Cities in the Sky: The Quest to Build the World’s Tallest Building was released by Scribner Books. You can order a copy and sign up for my email list here.

Cities in the Sky tours the world’s greatest cities, from Chicago to New York to London and then to Asian metropolises, to see why they are building their skylines. Along the way, the book busts myths and misconceptions about skyscrapers. Cities in the Sky addresses the good, bad, and ugly for cities that have embraced vertical skylines, offering a glimpse into the future to see whether cities around the world will continue their journey upward.

“With a global view and his eyes cast skyward, Barr provides an enjoyable, expansive study of a subject he loves.” —Kirkus Reviews

Ever Upward

Skyscrapers remain controversial in the 21st century, yet they’re becoming more numerous and taller. Since 2000, seven times more skyscrapers (150 m/492 ft. or taller) have been completed worldwide than in the entire 20th century.

The Empire State Building, the world’s tallest structure for 40 years, is now ranked 53rd. The Willis (Sears) Tower was the record holder from 1974 to 1998, but today, it ranks a mere 25th. The Burj Khalifa, the current world’s tallest, is twice as tall as the Empire State Building, at 828 meters (one-half mile).

We are climbing our way to the heavens.

Why Do We Build Upward?

But why do we build upward? The short answer is that the humans of Planet Earth have been getting wealthier. In 1960, per capita gross domestic product (GDP) was $3,600. Today it’s over $11,000. Intimately tied to this economic growth is the corresponding rise in urbanization. In 1960, the world population was three billion, with two out of three people living in rural areas. Today, the world population is eight billion, and nearly 60% of us live in urban areas. In other words, six decades ago, the world’s cities housed one billion people. Today, they hold nearly five times that amount. Urbanized living is our present and future.

And why do these cities exist? Because they are our economic, social, and cultural engines. Manhattan alone—a mere 23 square miles—generates 3.3% of the United States Gross Domestic Product (GDP). Shanghai accounts for 3.7% of China’s GDP, while London generates a whopping 20% of the U.K.’s GDP.

Book Cover for Cities in the Sky by Jason Barr. To be released by Scribner Books on May 14, 2024. Pre-order here.

The Ecosystem

People move to the cities for jobs but stay for socializing, education, and consumption. In this way, vibrant cities generate positive feedback loops. Companies set up shop and hire workers, who then spend their income on food, clothing, shelter, and fun. Their money circulates locally, creating more jobs, and so on. Vibrant economies attract more people and companies, and the economic growth continues. Density also creates a whole host of positive spillovers—people learn from each other and become more productive, and cities can offer a wider variety of goods and services than otherwise.

But what is a city? It’s fundamentally an ecosystem—a place where people live and work, along with the institutions that support them: buildings, transportation, access to goods and services, social networks, governmental services, and so on. If we want to understand why so many skyscrapers are rising, we must see them as one component of the urban ecosystem.

Since cities are dense clusters of humans who frequently want to be at the same place at the same time because of a location’s convenience to other people or amenities, the only way to accommodate this demand is to go upward. To take an example, a quarter-acre (1,012 m2) lot can reasonably shelter 25 people. But if the location is in high demand, then stacking those shelters by creating 20 “lots” (i.e., floors) on top of each other can hold 500 souls. The skyscraper pinches geography by producing land in the sky.

Lower Manhattan Skyline. Photo by Jason Barr.

Cities in the Sky

Chicago, 1885

In Cities in the Sky, I take a global view to put the skyscraper in a larger historical context. In Part I, I begin with the birth and growth of the tall building in the late 19th century and early 20th century. First, we visit Chicago in the 1880s to see if the Windy City was really the birthplace of the skyscraper, as the conventional wisdom would have you believe. The answer is not so clear—New York and Chicago were each developing the technologies at about the same time.

But what is definitely true is that the Home Insurance Building (1885), designed by William Le Baron Jenney, was NOT the first skyscraper. Instead, its designation as such resulted from a public relations campaign by the Chicago School architects who decided to circle the wagons around Jenney because they wanted to box out other claimants.

New York,  the Roaring Twenties

Then, from Chicago, it’s off to Roaring Twenties Gotham, where we visit the Empire State Building and chronicle its rise to become the world’s tallest building. Though the building was half empty during the Depression and was labeled the “Empty State Building,” the truth is that the building has been very profitable over the long run. The skyscraper was not so much a vision of grandeur but rather a grander vision that benefited Gotham and has served as an inspiration to the rest of the world.

Just as crucial for skyscraper history was New York’s implementation of zoning regulations, which paved the way for cities to find a balance between the benefits of tall buildings and regulating some of their downsides, like shadows and congestion. The 1916 codes incentivized the wedding cake style because skyscrapers had to be set back as they rose to allow more sunlight on the street. The regulations inspired the Art Deco aesthetic, the second modernist movement after the Chicago School of Architecture.

In 1961, New York implemented a new set of codes by regulating the so-called Floor Area Ratio (FAR), which limited the amount of floor area that could be built on each lot. The FAR was popular, and today, it is arguably the most important skyscraper regulation worldwide. By regulating building bulk, the FAR encouraged the third modernist architectural style, the International Style glass box tower.

Post-War America

Then, we visit post-war America. The real “hero” of the skyscraper after World War II was the computer. For the first time in human history, computers could be used to work out the physics of tall buildings. They allowed architects and engineers to devise strategies to go taller for lower costs. The computer thus led to what I call the Second Skyscraper Revolution, a new suite of technologies and design methods that gave rise to the next crop of the world’s tallest buildings, the Twin Towers (1972/3) in New York City and the Sears (Willis) Tower (1974) in Chicago.

And just as important for world history, America demonstrated that growing cities needed tall buildings to house their companies and to signal their economic might. By the late 1990s, the skyscraper spread like a wave across the rest of the planet. In Part II of the book, we take a grand global tour.

The London Skyline. From left: The Walkie-Talkie, the Cheesegrater, and the Gherkin. Source: Wikipedia.

London: From No to Yes

The next stop is London, which provides a fascinating case study regarding tall buildings. In 1894, just as all the technologies needed to produce skyscrapers became available, London banned them by instituting a height cap of 80 feet. If you ask architectural historians why this is so, they will invariably say that the conservative London architects, who sought to preserve the U.K.’s imperial tradition of classical buildings, would not deign to build new-fangled towers like their Yankee upstarts across the pond.

While this is true to a degree, when we drill down into the economics of London’s business district, we see it had something New York did not have: space. The City of London was able to accommodate its business growth because it had more land. The conservatives and anti-skyscraperists were able to hold sway because the economic pressures were never as intense as in Lower Manhattan or Chicago’s Loop.

Then, during the 20th century, after the Blitz Bombing, much of London’s building stock was destroyed, and the city could be rebuilt without supertall towers. But all that changed in the 21st century. London was running out of space, and the answer was to go upward with iconic skyscrapers—the Gherkin, the Cheesegrater, the Shard, and the Walkie-Talkie, to name a few.

Living Densely in Hong Kong

The next stop is Hong Kong, where we see how it became the densest city on the planet with the highest concentration of skyscrapers anywhere. The reason is due to is combination of land shortages, its history as a British-controlled Chinese city, and its unique land ownership system.

Hong Kong was always “land poor”—being mostly hilly territory. When mainland turmoil hit, Chinese residents flooded the colony, seeking employment and refuge. After World War II, British officials realized the only way to accommodate the deluges and to keep the colony profitable was to build upward. The process began with public housing, which, unlike in the U.S., has proved an enduring success. Officials then invested in mass transit and horizontal connectivity to make Hong Kong truly a 3D city.

China: Skyscraper Fever

Then off to mainland China, which has undertaken the largest skyscraper construction project in human history. There is no way else to put this except to say that China has “Skyscraper Fever.” The massive urbanization that has unfolded since the economic reforms initiated in 1978, combined with its particular method of governance, has led China to embrace the tall building bling like no other country.

But its love of the skyscraper has come with a cost. Today, China’s real estate market is in desperate straits because of the overbuilding. Leaders are scrambling to contain the damage. And in 2020, the Community Party banned buildings taller than 500 meters (1,640 feet), and dramatically reduced the number of buildings above 150 meters (492 feet). But if there is one key lesson in skyscraper history, it’s that gluts eventually lead to shortages and shortages back to booms. Stay tuned…

Arabian Heights

After China, we head to the Arabian Peninsula to visit the world’s tallest building, the Burj Khalifa, at 828 meters (0.5 miles) tall. While most people see this building as an example of the craving for spectacle and egos gone wild, the truth is a bit more complex. Yes, the structure was built during a real estate boom, but its construction was meant to help put Dubai on the map as a business and tourist destination.

When we look at the economics of the project, we can see that it represents the same kind of maniacal genius that gave rise to the Empire State Building. Seventy percent of the tower’s residential units sold out before the crash; the observatory is a cash cow, and the surrounding properties with a Burj view are worth thousands of dollars more because of that view.

The tower’s success has not been lost on Saudi Arabia, which realizes it must move quickly to wean itself off its oil addiction. The crown prince, Mohammed bin Salman, is using mega projects to lift the country by its bootstraps. In 2010, the nation started to build the world’s tallest building, the Jeddah Tower, but then political turmoil led to its halt. If restarted, it will be the world’s tallest tower at one kilometer (0.62 miles).

In the meantime, the kingdom is building other mega projects like The Line, which is proposed to be 500 meters (1640 feet) high, 200 meters (656 feet) wide, and 170 kilometers (106 miles) long to house nine million people! Will Saudi Arabia succeed in this unbelievable project? It’s hard to say, but the truth is that great cities typically spring from the ground up and not from the spire downward.

The Burj Khalifa, Dubai. Source: Wikipedia.

A Global View

In Part III, we take a step back to look at the good, bad, and ugly of tall buildings, asking why we are building them, how they should be regulated, and what’s in store for the future.

The reason tall buildings are growing worldwide is the benefits they provide. They allow us to more easily enjoy the fruits of the city, and provide amazing views. But why is the idea of stacking people—the creation of high-rises—so controversial?  One claim—particularly in Western cities—is that they seem to generate gentrification, displacement, and inequality. There is some truth to this, but the real story is more complex and nuanced.

Gentrification and luxury condos must be understood within the larger economic context. Income inequality, for example, should be addressed by making tax rates much more progressive and improving employment opportunities for those at the bottom of the economic ladder. Housing affordability needs to be improved by building abundant housing for everyone—across the income spectrum and entire metropolitan regions.

If more housing is built in the suburbs and that lowered land values in the center, we might get fewer tall buildings there. And that’s perfectly good and right. While new supply everywhere helps, it’s more critical to build affordable housing where it’s most needed. Similarly with CO2 production, yes tall buildings emit a lot of CO2, but overly stringent regulations that cap heights, for example, generate sprawl, which is even more carbon intensive. Policies need to tax carbon for all producers and subsidize clean energy production.

The Future

Over the long run, however, as technology has progressed, we can erect buildings that are not only taller but are also more functional—and for lower costs. The improved supply conditions combined with the rising tide of urbanization means that taller and taller buildings will continue to be brought forth in the world’s greatest cities. But at the end of the day, cities succeed when they bring us together and make us more productive.  If designed well and built in the right locations, skyscrapers can help us achieve that goal.

You can order Cities in the Sky: The Quest to Build the World’s Tallest Skyscrapers here.

 

by Jason Barr 4 Comments

Does Upzoning Work?

Jason M. Barr                       August 14, 2023

Many cities around the world have severe housing affordability problems. One reason is overly restrictive zoning regulations. Zoning—the rules that dictate what can be built on each lot—was initially designed to control urban problems, including congestion, pollution, and shadows.

Over time, however, planners made common cause with property owners to tighten the rules. Planners did not like urban density and were all too happy to reduce it. Property owners realized that stricter codes could preserve their property values and exclude the poor and minorities from their neighborhoods.

By the middle of the 20th century, the most popular zoning rule was limits on the so-called Floor Area Ratio (FAR)—the permitted maximum floor area stated as a ratio to the lot size. For example, a maximum FAR of 1 means a one-story structure can cover the entire lot or a two-story structure can be built on half the lot. FAR caps and plot coverage maximums guarantee much lower population densities.

A Bridge too FAR?

The decades of downzonings—reductions in allowable FARs—after World War II, however, did not affect housing prices all that much since large industrial centers were emptying out, and the suburbs still had plenty of land on which to build. But then, in the 1990s, these places began to rebound. A recent wave of research, particularly in economics, has documented the unintended consequences of stringent zoning regulations, including higher housing prices, increased segregation, urban sprawl, and greater greenhouse gas emissions.

If the 20th century was the Age of Downzoning, then the 21st century is gearing up to be the Era of Upzoning. Cities worldwide have initiated loosening building regulations. Logically speaking, if downzoning has reduced construction, then upzoning should produce more housing. Or does it? Does simply turning on the spigot cause the water to flow?

Let there be Housing?

To answer this question is not so simple, however. One must be able to see clearly through the fog of urban change. Expensive cities are dynamic places: people constantly move in and out, and businesses grow and shrink. Housing affordability seems to worsen no matter what new policy or subsidy the government adds.

The typical observer sees the tall cranes erecting luxury condos while urban life gets more expensive. It must logically follow that those cranes are “causing” higher prices. However, demand and supply are in a constant wrestling match. When the demand side wins, prices rise, no matter how much new construction there might be.

The Scientific Method

To separate supply from demand and cause from effect requires some effort. Researchers must create a scientific setup—a treatment and control framework—especially concerning changes to the zoning rules. If particularly hot neighborhoods are targeted for upzonings, there needs to be a way to identify the demand (the hotness) from the upzoning impacts (more supply).

For example, when testing a new pill that aims to lower cholesterol, it’s best to compare a group of people with similar characteristics. The ideal experiment is to enroll in a study, say 100 men, who are very similar—in their 50s, overweight, and don’t regularly exercise. Half are randomly assigned the pill, while the rest are given a placebo. If the men who took the pill have lower cholesterol, on average, it strongly suggests that the pill works.

Zoning as Treatment

Recent studies on upzoning, discussed below, use this logic, although, unlike medical doctors, researchers can’t control the experiment to such a fine degree. Instead, they need a way to locate a reasonable control group similar to the “treated,” or upzoned, lots before the upzoning was enacted.

Several studies use the so-called border method. They compare blocks in the upzoned area to those just on the other side. Presumably, two blocks across the street are very similar otherwise. Another approach uses time as the difference. When areas are rezoned randomly at different times, one can compare neighborhoods before and after the rezoning. Finally, another method is to use a statistical algorithm to match upzoned parcels to similar non-upzoned parcels elsewhere in the city.[1]

With this in mind, we now turn to the findings.

Upzoning in Seattle (left) and rezoning in São Paulo (right). Source: Krimmel and Wang 2023) and Anagol et al. (2023). Note: “BAR” is Building Area Ratio (same as Floor Area Ratio).

Upzonings Around the World

New York

New York City, under Mayor Michael Bloomberg, from 2004 to 2013 rezoned nearly 40% of the city’s residential land. Central areas of Manhattan, Brooklyn, and western Queens, which had underutilized industrial sites, waterfront blocks, and transit-accessible neighborhoods, were upzoned by increasing the maximum allowable FAR for residential use.

Hsi-Ling Liao, in her 2023 paper, “The Effect of Rezoning on Local Housing Supply and Demand: Evidence from New York City,” compares upzoned parcels to those that were not upzoned but were within 1000 feet (305 m) of the boundary. She concludes that in the upzoned districts, “…the number of residential units increased by more than 4 percent seven years after upzoning. The parcels that are more intensively treated and receive a stronger boost in allowed residential capacity experience an 8 percent increase in housing supply.”

A very similar study was conducted by Xuequan Elsie Peng in her 2023 paper, “The Dynamics of Urban Development: Evidence from Land Use Reform in New York.”  She compares the new housing units in the upzoned blocks to those that are within 650 meters away (0.4 miles). Her findings echo those of Liao’s—in the upzoned areas after six years, the number of units increased by about 4%, while after 12 years, the number of units increased by about 8%, relative to the blocks that were not upzoned.

Peng also studies treatment intensities by investigating if more generous FAR allowances lead to more housing. She finds that in the low upzoning case (FAR increases of less than 30%), there was about 2% more housing, on average, after ten years relative to the non-upzoned blocks. In the high upzoning case (FAR increases greater than 92%), she finds that these neighborhoods added about 8% more housing, on average, after ten years than non-treated blocks.

Portland

Hongwei Dong, in his 2021 paper, “Exploring the Impacts of Zoning and Upzoning on Housing Development: A Quasi-experimental Analysis at the Parcel Level,” studies the case of Portland. He focuses on parcels that were upzoned between 2001 and 2002 in southwestern Portland.  In this case, the rezonings were primarily in suburban neighborhoods, where a majority of lots contained low-density, single-family homes.

After matching upzoned parcels to similar non-upzoned ones, Dong concludes that upzoned parcels were about two times more likely to be developed fifteen years after upzoning and that “further analysis suggests that the 111 upzoned parcels produced 240 dwelling on 33.8 acres of land. The density is 7.1 units per acre. The fifty-eight control parcels produced eight dwelling units on 18.6 acres of land. The density is 4.3 units per acre. These findings suggest that upzoning not only sped up housing developments but also increased housing production.”

Seattle

Jacob Krimmel and Betty Wang study the case of rezonings in Seattle in their 2023 paper, “Upzoning with Strings Attached: Evidence from Seattle’s Affordable Housing Mandate.” Unlike New York and Portland, Seattle took a different approach. In 2019, select neighborhoods were upzoned to allow more floor area, but this benefit came with a “tax”—a mandatory housing affordability (MHA) requirement for developers to either include affordable units or pay into a fund for the city to spend on affordable units elsewhere. The authors write, “The reform combines two policy levers that some economists consider to conflict with one another: Increasing development capacity through upzoning and requiring private development to create income-restricted affordable housing.”

The MHA areas were applied to areas already zoned for multifamily, commercial, or high-density single-family homes (such as townhouses). However, the upzoning was relatively mild, amounting to one additional floor than otherwise, on average. Comparing blocks that were in MHA areas to those that had no change, they conclude that the program, in fact, backfired in that it drove new construction away from the MHA areas. They find

strong evidence of developers strategically siting projects away from MHA-zoned plots – despite their upzoning – and instead to nearby blocks and parcels not subject to the program’s affordability requirements. The differential reduction from MHA to non-MHA zones could be as large as 70% of average permitting activity at the border.

They further find that:

Worryingly, most of the drop in the number of units in MHA zones is coming from the multifamily segment of the market, where most of the housing products are 3- and 4-story townhouses and duplexes. This is of particular note because lowrise and small multifamily homes are seen as a more affordable alternative to luxury apartments for low- and moderate-income renters.

Chicago

In “Upzoning Chicago: Impacts of a Zoning Reform on Property Values and Housing Construction” (2019), Yonah Freemark explores the case of Chicago. Under Mayor Rahm Emanuel, Chicago undertook two rounds of upzonings. The first, in 2013, upzoned neighborhoods between 600 feet (183 m) and 1,200 feet (366 m) of metro and commuter rail line stops to encourage transit-oriented development (TOD). The second round, in 2015, expanded the upzoned areas to a half mile within the stops.

The rezonings involved two types of changes. The first was an increase in the allowable FAR, which in 2013 amounted to 17%, on average, while the 2015 rules increased the FAR from before 2013 to 33%, on average. Additionally, in both years, rules on on-site parking were made less stringent, allowing developers to provide fewer spots.

Freemark first compares parcels upzoned in 2013 to those left unzoned but were later upzoned in 2015. He then compares the parcels upzoned in 2015 to neighboring blocks just outside. For the 2013 upzonings, Freemark does not find evidence that they led to an increase in housing supply, as measured by new building permits.

However, this finding is likely due to three factors. First, the upzonings applied to both high- and low-income areas. Upzoning low-income areas is less likely to be effective if the income there is not high enough to compensate for the cost of new construction. Second, the period of investigation was from late-2013 to late-2015, a very short period to analyze the impacts of upzoning. Lastly, the average upzoning of 17% was rather small to have a meaningful impact, as other studies have shown.

However, in his analysis of the impact of the more generous 2015 upzonings, he finds (weak) evidence that the combined relaxation of parking and FAR rules increased the number of residential building permits in the nearly-three-year period after the rules changed (about 25 more permits in the upzoned areas versus the non-upzoned areas between September 2015 and June 2018).

Zurich

In their 2023 paper, “Making Housing Affordable? The Local Effects of Relaxing Land-Use Regulation,” Simon Büchler and Elena Lutz investigate the Canton of Zurich in Switzerland from 1995 to 2020. The canton contains 168 municipalities with a population of 1.52 million. Each municipality separately undertakes rezoning approximately every 15 years.

The authors exploit the independent and random timing of the rezonings to explore how increases in the FAR before and after the rezonings impact housing construction in 100-meter (328 feet) by 100-meter grid cells. For each cell, they measure the total floor area in five-year intervals and then track when the upzonings occurred. Thus, the treatment is the cell after upzoning, and the control is the cell before upzoning.

Their conclusion: “We find that large upzonings of more than 50% significantly increase the living space and housing units by 9-18% on upzoned parcels compared to non-treated parcels in the subsequent six to 15 years….In contrast, small upzonings, of 0-50%, do not incite a strong reaction from developers.”

Auckland

In their 2023 paper, “The Impact of Upzoning on Housing Construction in Auckland,” Ryan Greenaway-McGrevy and Peter Phillips study upzoning in Auckland, the largest city in New Zealand, with about 1.57 million residents. In 2016, the metropolis upzoned nearly three-quarters of its residential land.

The authors’ approach is to look at new building permits inside the upzoned areas versus those just outside. Studying the relative changes in annual building permits issued for new dwelling units, they conclude,

The response to the zoning change is immediate: The estimated treatment effects increase every year after implementation. By 2021, five years after the policy was introduced, some 23.06 additional permits are issued, on average, in upzoned areas compared to non-upzoned areas in each of the 479 Sas [Statistical areas, similar to census tracts]. This would correspond to 11,044 permits across the city. Cumulating the corresponding figures for 2016 through 2021 yields 34,614 additional permits in upzoned areas compared to non-upzoned areas. Treatment effects for attached dwellings exceed detached from 2019 onwards. By 2021, the estimated treatment effect for attached is 17.96 permits, while for detached it is 5.09.

São Paulo

Finally, in their 2023 paper, “Estimating the Economic Value of Zoning Reform,” Santosh Anagol, Fernando Ferreira, and Jonah Rexer study the case of São Paulo, the world’s fourth largest city, with 21 million residents in its metro area. The city undertook a rezoning in 2016. Similar to the other studies, they explore how raising the Floor Area Ratio—what they call the Built Area Ratio (BAR)—impacted new construction. On average, they found that the upzoning increased the allowable BAR by 36%, and more than half the city’s blocks received an increase.

The authors explore new housing permitting in upzoned blocks compared to non-upzoned blocks on the other side of the border. Their conclusion:

We find that the 1.4-point max BAR increase at the cut-off causes an increase of .003 multi-family dwelling permits filed per block per quarter, which is a sixty six percent increase in permits per unit of max BAR in treated relative to nearby control blocks. The differences in permitting activity between treatment and control blocks emerge just one year after the zoning reform was passed and increase thereafter, which is plausible given the time it likely takes for developers to create project plans, acquire land, and so on.

Upzoning and Housing Prices

Several studies also look at the impact of upzonings on real estate prices. Here the findings are mixed. However, interpreting price impacts is more complex. When rezonings occur, several processes are at work. The first is that upzoned parcel has the future opportunity—the so-called option value—to be redeveloped more densely and generate more revenue. A forward-looking market naturally means that upzoned parcels will sell at a premium, even if there is no redevelopment in the short run.

Second, upzoned neighborhoods typically mean more density, which means more Starbucks and other urban amenities, which raises local housing prices. There’s also the possibility of the opposite effect, where density causes more traffic congestion, street noise, crime, or trash—a so-called negative amenity effect—which will reduce prices (however, I sense is this is less of an issue today).

Then there is the supply effect: more housing will reduce prices, all else equal. However, when upzonings are small and take a long time to yield fruit, the supply effect may be swamped by the option value and amenity benefits.

The Findings

Liao’s study of New York City looks at the sale prices of buildings built before 2004 and thus excludes any buildings completed after the rezonings. She finds no statistically significant changes in housing prices in the upzoned areas, suggesting that the supply effect balanced out the amenity and option value effect.

Freemark’s study of Chicago found that after the upzonings in 2013,  density bonuses increased prices by about 16%, on average, vis a vis the non-upzoned parcels. But focusing on location, he finds that the result was likely driven by price rises only in Downtown, with no increases in other neighborhoods. And zooming in only on condo sales, he finds that prices increased by 12%, on average. Since the period of his analysis was short, it suggests that Downtown condo buyers had higher expectations for their neighborhood that showed up quickly in the sale prices but were not offset by more supply.

Büchler and Lutz’s study of Zurich looks at average rental listing prices. They found that rental prices in upzoned cells typically saw no price changes over time. Again, the supply effects of lower rents were evidently matched by the amenities benefit.

Anagol et al. look at neighborhood housing prices for São Paulo and find that areas with larger BAR increases had greater increases in the number of home sale listings, where a 1-point increase in the maximum BAR was associated with a 10.9% increase in listings growth, on average. And just as importantly, with more listings and supply, they found that each one-point increase in maximum allowable BAR was associated with a 5.7 percentage point reduction in home prices.

All told, these studies suggest that price impacts hang in the balance between the different supply and demand forces, but they also demonstrate that price increases are not a foregone conclusion.

Upzoning Effects: Each graph shows the rise in housing supply after upzonings (on the right half of each graph). Upper left: Büchler and Lutz (2023) for Zurich, middle left: Peng (2023) for NYC, upper right: Liao (2023) for NYC, bottom right: Anagol et al. (2023) for São Paulo, bottom left from Greenaway-McGrevy and Phillips (2023) for Auckland.

Does Upzoning Work?

This research shows that, yes, upzoning works. Of the seven studies reviewed here (excluding the Krimmel and Wang study), all but one found a statistically significant uptick in new housing permits, completed units, or residential floor areas after upzonings—and because of the upzonings.

But, of course, there are nuances and caveats. The studies reveal that the units materialize only after several years, and their impacts are relatively modest. But they do show that if strategically managed, upzonings can be effective.

What are the key lessons from these studies?

Scale

The first is that scale matters—the greater the allowable floor area increases, the greater the impact the upzoning will have. For example, Liao and Peng found that small FAR increases yielded much less housing for New York than larger FAR increases. Büchler and Lutz found no effect in the Canton of Zurich for upzoning of less than 50% but saw about a 10% increase after ten years for large upzonings. In Chicago, upzonings of 33% seemed more effective than of 17%. And Krimmel and Wang show that mild upzonings with additional costs can backfire by diverting construction away from these areas.

Scope and Location

While these studies do not directly investigate the amount of total upzoning versus total new supply, the evidence suggests that broader is better because of housing supply’s connection with demand. In central neighborhoods, a new high-rise can trigger an upward price spiral because of the national or international demand.

Outside of the center, where demand is more tempered, and land values are lower, new supply will be more easily felt because the new tenants are less likely to trigger an upward price cycle. On the other hand, in locations where the cost of new construction is too high relative to the expected rents or incomes, upzonings may have little effect. Districts with high owner-occupied and single-family homes will likely also see slower impacts because redevelopment can only occur once owners decide to move, which can take several years.

These studies focus only on upzonings. But many cities downzoned some neighborhoods simultaneously with their upzonings. As a result, rezonings can wind up shifting supply rather than boosting it citywide. And if rezonings push construction from the periphery to the center, price relief may not result.

An Affordable Future

Upzoning is necessary for a healthy city to grow and accommodate more residents, but it is not sufficient to solve the affordability problem. Older, denser cities still have a host of other barriers or frictions that make new construction difficult and slow, particularly in neighborhoods where it’s needed most.

Parcels must be assembled, buildings must be emptied, and other building regulations must still be followed—producing a steep mountain to climb.

Greasing the Wheels

In other blog posts, I have discussed steps that cities can take, but let me highlight a few that can help grease the wheels:

  • Link upzonings to neighborhood housing vacancy rates. The lower the vacancy rates, the more generous the increases in the FAR. This will ensure that upzoning is applied where it’s needed most.
  • Construction subsidies should be the greatest in the middle- and moderate-income neighborhoods. Abundant affordable housing comes from the construction of middle-income housing outside the center. Lower-income residents will gain through the so-called filtering process, where the older housing becomes more affordable, and people move into the new middle-income housing.
  • Homeowners should have much more flexibility to add Accessory Dwelling Units (ADUs), such as converting a garage to an apartment, adding a “granny flat” in the yard, or subdividing their house to add an apartment. These new units, which don’t require demolitions or evictions, are a relatively easy way to provide affordable units and generate extra income for homeowners in the suburbs.
  • A land value insurance program can insure homeowners against reduced land values if rezonings should cause neighborhoods to become less valuable. This will reduce (though not eliminate) NIMBYism since residents have some economic protection against change.

Leadership

The real problem of housing affordability, however, is not economics, it’s politics. Upzonings are contentious because people see them as generating higher housing prices and bringing changes to their neighborhoods. As a result, they elect leaders who either enact NIMBY policies or merely tiptoe through the garden of affordability.

True affordable housing comes from expansive citywide policies. The only way to do this is for leaders to form coalitions, seek compromise, create carrot-and-stick programs, and compensate those harmed to prevent them from stopping reforms.

Our cities cannot afford the delay.

 

Works Discussed

Anagol, S., Ferreira, F. V., and Rexer, J. M. (2023). “Estimating the Economic Value of Zoning Reform.” National Bureau of Economic Research, Working Paper No. w29440.

Büchler, S., and Lutz, E. C. (2023). “The Local Effects of Relaxing Land Use Regulation on Housing Supply and Rents.” Working Paper (July).

Dong, H. (2021). “Exploring the Impacts of Zoning and Upzoning on Housing Development: A Quasi-experimental Analysis at the Parcel Level. Journal of Planning Education and Research.

Freemark, Y. (2020). “Upzoning Chicago: Impacts of a Zoning Reform on Property Values and Housing Construction.” Urban Affairs Review, 56(3), 758-789.

Greenaway-McGrevy, R., and Phillips, P. C. (2023). “The Impact of Zoning on Housing Construction in Auckland.” Journal of Urban Economics, 136, 103555.

Krimmel, J. and Wang, B. X. (2023). “Upzoning With Strings Attached: Evidence from Seattle’s Affordable Housing Mandate.” Working Paper (July) and summary in Cityscape (2023).

Liao, H-L (2023). “The Effect of Rezoning on Local Housing Supply and Demand: Evidence from New York City.” Working Paper (July).

Peng, X. E. (2023). “The Dynamics of Urban Development: Evidence from Land Use Reform in New York.” Job Market Paper (January).

 

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[1] The matching method used by Dong is called propensity score matching. The rest of the papers used what is called Difference-in-Difference (DiD) regressions.

by Jason Barr 1 Comment

Exciting versus Boring Skylines: Which Countries Build Up?

Jason M. Barr and Remi Jedwab                    May 9, 2023

When we think of skyscrapers, we think of the tales of ego-drenched developers engaging in height competitions to claim the prize of “tallest building.” We recall the three-way height race during the Roaring Twenties between the Chrysler Building, the Bank of Manhattan Building, and the Empire State Building.

But despite the tendency to telescope on supertalls and record breakers, they are–statistically speaking–rare. The world record has been broken only 12 times since 1890 and only twice in the 21st century. Hardly a perennial gladiator competition.

For that matter, there are over 44,000 buildings around the world that are 100 meters (~25 floors) or taller. Of those, two out of three are shorter than 132 meters (~34 stories); and 90% are shorter than 170 meters. If you use 55 meters (~14 stories) as a cut-off, 83% are less than 100 meters. In short, the vast majority of the world’s tall buildings are between 14 and 30 stories.

Measuring Skyscraperness

And where are these buildings distributed across the planet? To most people, the answer is obvious. China, the United States, and the United Arab Emirates are the clear winners. Hong Kong is the ultimate skyscraper city. New York and Chicago started the Skyscraper Revolution at the end of the 19th century. And Dubai, with the Burj Khalifa, is the world’s “Blingiest City” –Vegas-on-the-Gulf.

But how much do our perceptions capture what is happening globally? Rich and urbanized countries tend to have more skyscrapers because the economic conditions would favor them. In urban centers where land values are the greatest, developers are incentivized to build tall to make “the land pay.” Businesses prefer to be in their downtown clusters, while residents are eager to live in high-rise apartments near work, amenities, and fun.

So, the strong correlation between an economy’s urbanization and gross domestic product (GDP) and the heights of its tall buildings does not say much about which countries are more pro tall than others. New York, Hong Kong, and Dubai are among the world’s wealthiest cities, so the underlying economics would suggest they “should” have more tall buildings.

Thus, we need to measure the degree to which cities and countries build up, not because of the size of their respective economies but rather despite it.

Record Breaking Skyscrapers. From Left: The Chrysler Building (1930), The Empire State Building (1931), The Taipei 101 (2004), The Burj Khalifa (2010). Sources: Wikipedia.

Countries and Skyscrapers

To answer these questions, we have investigated a data set containing nearly all the world’s buildings that are 55 meters or taller.[1] As a first, raw measure of “skyscraperness,” we added up the total heights of all these buildings for each country and divided them by their respective urban populations. This gives the number of kilometers of building height per million urban residents.

When we do this, the densest tall building country is, in fact, South Korea, with Hong Kong second. Singapore, Panama, and the United Arab Emirates come in third, fourth, and fifth, respectively. (The full rankings are here).

Skyscraperness around the World. Left: Total kilometers of building height (55 m+) per million urban residents for the top 15 ranked countries around the world. Right: Total kilometers (000) of building height (55 m+) for the top 15 countries around the world. Note that South Korea ranks #1 in both categories. When diving by urban population size, China and the U.S. no longer rank very highly. Source: Barr and Jedwab (2023).

The result of this exercise is that the countries that contain the most “exciting” skylines are not necessarily the highest ranked. South Korea “wins” because it focuses on high-rises rather than skyscrapers, though it does have one supertall, the Lotte World Tower at 123 stories, the 5th tallest building in the world.

Where is the United States? It’s ranked 19th. The reason is that while New York and Chicago do much of the “heavy lifting,” most cities house their populations in one-family homes. Simultaneously, suburban office parks are just as common, if not more so, than central city office skyscrapers. States like California and Texas are like countries on their own, but their cities have relatively few tall buildings.

Mainland China ranks 43. Ironically, despite China’s love of tall buildings, the data suggest that it does not “overbuild” relative to its urban population.

A Skyscraper Index

But again, this may not be the right measure. A better indicator is to create an index of skyscraperness based on how much cities build up after controlling for their population, income, and other factors that might directly affect their supply.

The result of this exercise—what we call the Skyline Index—preserves South Korea’s top ranking, but, after that, the rankings change quite a bit. In fact, the second most “tall building” nation is Mongolia, followed by Slovenia and Israel. These countries have more tall buildings than they “should,” given the size of their economies. The big players, like China, the UAE, Hong Kong, and the United States, are nowhere to be found.

The Skyline Index. This graph shows the top 15 countries that “overbuild” tall buildings relative to their population size and gross domestic products. Source: Barr and Jedwab (2023).

By Region

Scaling up to regions, we can look at the 19 United Nations (U.N.) Subregions to get a sense of regional skyscraperness. Regional analysis lets us look for broad patterns by grouping countries with similar cultural and economic backgrounds. When we rank regions by how much they overbuild or underbuild, we find that, in fact, the highest-ranking regions are South America, Eastern Europe and Southeast Asia.

Within Asia, Southeast Asia (which includes Indonesia, Vietnam, and Malaysia), not East Asia (which includes China, Japan, and South Korea), is the highest ranked. In contrast, West Asia, which includes the Gulf nations, is not highly ranked. Within Africa, East Africa (e.g., Kenya and Uganda) and Southern Africa are at the top. For example, Bangkok, Jakarta, Nairobi, and Johannesburg contain many tall buildings given their population size and income level.

Regional Skyline Index. This graphs shows the relative degree to which regions build up or not, after controlling for their populations and GDPs. South America is the top-ranked region. Source: Barr and Jedwab (2023).

Skyline Typologies

What drives such regional differences? To investigate this, we compared relative building stocks in small cities versus large ones; central areas versus peripheral ones; cities’ construction of high-rises (55 – 99 m) versus skyscrapers (100 m+); and the construction of office versus residential structures.

We then created skyline typologies by examining how countries build in these categories. Cities that mostly have office or luxury condo skyscrapers in central districts are defined as capital-oriented central district (CD) skylines—these are the exciting skylines of the world, like Manhattan and Dubai. Cities with residential and high-rise buildings in peripheral districts are defined as population-oriented peripheral district (PD) skylines. These are the boring skylines like Bogota and Rio de Janeiro.

Capital-oriented CD and Population-Oriented PDs make up the majority of the world’s skylines. But this analysis also demonstrates a key point: the most impressive skylines are not necessarily the ones with the densest tall-building stocks. For example, regions like South America and Eastern Europe make up in high-rise volume what they lose in supertall skyscrapers.

Skyline Typologies. This graphs shows the types of skyscrapers that are most predominate for the 19 UN Subregions. Population Oriented (PO)=mostly residential high-rises. Capital-oriented (CO)=mostly offices or luxury condos. PD=Tall buildings mostly in peripheral districts. CD=tall buildings mostly in central districts. Most of the world’s skylines are other POPD or COCD. Source: Barr and Jedwab (2023).

Explaining the Variation

But what might be driving cities to have one typology over another? We believe there are four possibilities.

The first is land-use regulations. Many cities regulate building height in the name of reducing the negative “externalities,” such as traffic congestion and shadows. Another form of regulation is historic preservation, as residents may demand the protection of their historical buildings or height limits outside of these neighborhoods to preserve sight lines.

Another possibility is the nature of land ownership. In many older, more developed nations, land ownership can be highly dispersed among many owners of small lots. On the other hand, across China, municipal governments own vast tracts of underdeveloped land that they sell to high-rise developers to generate large housing estates. In developing nations, land assembly, particularly in regions with weak property rights, might hinder tall building construction because ownership claims are vague or diffused.

Lastly is the preference for high-rise living. Some societies may have a cultural preference for living in structures with few stories or individual houses, such as the U.S., where a free-standing house is seen as the norm. On the other hand, residents in Asian countries such as China, South Korea, and Japan see high-rise living as the norm and most desirable.

Typology Drivers. Left: Skyscraper Index values versus average maximum floor area ratio for 19 U.N. Subregions. Right:  Skyscraper Index values versus share of tall buildings that are residential. The positive correlations found in both graphs suggests that regions that build up have less stringent zoning regulations and prefer high-rise living. Preferences and zoning regulations appear to be the most important determinants of why skyline types vary around the world. Source: Barr and Jedwab (2023).

Findings

To this end, we use collected data to evaluate these four theories. We looked at the relative ages of cities and the number of world heritage sites, to gauge the difficulty of amassing lots (more historical cities would presumably have more diffused ownership) and the desire for preservation, respectively. We also looked at the average allowable floor area ratios (FARs) across regions, which measure how much building space can be provided and thus indicate the stringency of regulations. Finally, we also looked at the share of residential structures as a measure of the preferences for high-rise living.

The two most important determinants of why regions build upward or not are their FAR stringencies and their preference for residential high-rises. Likely the two things are not independent in that when citizens want to live in tall buildings, local regulations are likely to be less stringent.

The Boring Truth

When looking at global skyline characteristics, focusing on exciting skylines is misleading. About 70% and 80% of tall building heights in the world come from high-rises below 100 meters (not skyscrapers) and residential towers (not office buildings), respectively. Thus, many skylines visually appear more prominent internationally than they are after controlling for standard demand and supply variables. Hence, boring skylines are more numerous worldwide, despite suffering from a visibility problem.

So when you look up at the Empire State Building or the Burj Khalifa, remember that their heights don’t represent what’s actually happening on the ground.

 

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[1] Information about the dataset and the analysis can be found in our 2023 paper, “Exciting, boring, and nonexistent skylines: Vertical building gaps in global perspective” in published in Real Estate Economics.

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Credits

The New Amsterdam map on this page was sourced here, and the atlas image is from the 1891 Atlas of City of New York by GW Bromley & Co.

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