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5 ways in which you’ve got it wrong when it comes to cities

About a month ago, a reader of ATC and friend of mine suggested that I write a post on some of the common misconceptions that people hold about cities. I immediately thought it was a good idea and so I started a draft post with some of my initial thoughts.

Over the past couple of weeks I’ve been collecting fallacies as they came to me, waiting until I reached a nice round number like 5. Well today, I reached that number. So here are 5 misconceptions that I think people often hold about cities. If you have any others, or if you disagree, please share your thoughts in the comment section below.

1. Adding more lanes will solve traffic congestion

There’s a saying I read somewhere: Adding more lanes to solve traffic congestion is like loosening your belt to deal with obesity. I can’t remember where I read it, but I like it a lot because it gets at the heart of this fallacy: Trying to build our way out of traffic congestion has proven time and time again to be a losing battle. In fact, it has been shown to make traffic even worse as a result of “induced demand.” The more roads you build, the more people drive.

2. A suburban home is always cheaper

While it is true that the direct cost of a suburban home is usually less than one in the center of a city, many people often neglect to factor in the indirect costs of a home purchase – the biggest of which is usually transportation costs.

As you move out from the center of a city and home prices start to fall, I like to think of it as transfer from housing costs to transportation costs. In other words, what you save on the price of your home, simply gets used to pay for a car (or perhaps a second car), as well as the additional time you’re going to spend traveling.

So how much is an hour of your time worth? Have you ever attached a value to it and added it to the price of your home? Because if you factor in transportation costs and your time, you might find that your suburban home is actually more expensive.

3. Opposing new development and advocating for affordable housing is a responsible way to build cities

Community opposition is a big part of the development game. But what a lot of people don’t think about is that when you oppose or stop new development (let’s say it’s residential), the demand for that housing doesn’t go away. 

In fact, all it does is create more pressure on the housing stock that does exist and foster an environment where the rich will starting outbidding the poor for housing. More simply, you end up creating a supply constrained market and that drives up home prices. Demand > supply. So in reality, opposing new development and, at the same time, advocating for more affordable housing is a contradiction.

As a comparative example, let’s think about another basic human need: water.

Imagine that you could only buy water from stores (it didn’t come out of taps). But that every time the delivery people were trying to bring more water to these stores, that there was a group of people who fought and opposed them. These opposers already had enough water for themselves and they didn’t want additional water being sold as it would bring new customers into their local grocery store and disrupt their way of life.

This, of course, caused the price of water to rise as the rich people started offering more for the water. This in turn made it difficult for the poorer folk to afford any water at all. But instead of allowing the delivery people to simply deliver more water, it was decided that out of the water that they have, that some of it should be earmarked as “affordable water” and priced accordingly. That would guarantee that the poorer folk could still have some.

Does that sound like a sensible solution to you?

4. Developers don’t want to build big apartments

Here in Toronto there’s a somewhat pervasive belief that developers don’t want to build big condo and apartment units. The thought is that small units are more profitable and so developers are doing everything they can to squeeze people into small units. But I’ve argued before that this isn’t the case. It’s far more nuanced than that.

To illustrate this point, imagine you’re a developer debating between building two 500 square foot condo units or one 1,000 square foot condo unit. If you build the two 500 square foot condo units you’ll need 2 x kitchens, 2 x entry doors, 2 x separate color selection appointments, 2 x separate PDI appointments, and you’ll have to pay development charges on two 1 bedroom units (to name only a few things).

On the other hand, if you build one 1,000 square foot condo unit you’re only going to need 1 of each of the items listed above and you’ll be paying development charges on only one 2 bedroom condo unit (which currently works out to be less than what you’d be paying for the two 1 bedroom units – it’s not quite double).

Which one do you think would be cheaper to build?

5. Technology is going to make cities irrelevant

Lastly, during the dot com era there was a growing belief that technology and the internet were going to make cities and real estate irrelevant. Capital was flowing out of real estate and into tech companies, because that was seen as the future. Bricks and mortar were passé.

But since then we’ve learned that it’s actually the opposite. Paradoxically, technology has made cities even more important. The returns to being smart and talented are huge in the right place. So much so that our biggest concern shouldn’t be whether cities are going to become irrelevant, but whether we’re concentrating too much wealth and talent in only a select few.

So there you have it, 5 misconceptions about cities. I’m sure there are many others, so I’d love to hear from you in the comment section below.

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