If you're trying to figure out how to make housing more affordable, it should be fairly obvious that it's probably a good idea to actually understand the costs associated with building new housing. That is, more or less, the title of this recent series by Brookings about innovation in design and construction. The four-part series is based on the findings of a report that was written by Hannah Hoyt and published by Harvard's Joint Center of Housing Studies and NeighborWorks America.

Now, costs vary by geography. Each city has its own nuances when it comes to development. And this should not be construed as a silver bullet. But what they are trying to do is identify design and construction savings to help the overall equation. Part of their argument is that building typology matters. Build smaller -- hopefully out of wood -- and you can bring your hard costs down. The problem with this thinking is that the trend lines are moving in the opposite direction.

Here is a chart from the same Brookings article:

In 2000, about 23%, or almost a quarter, of all multifamily units completed in the US were in a building with fewer than 10 units. As of 2018, that number had dropped to somewhere around 5%. At the same time, the number of completed units in buildings with 50 or more units has gone from 14% in 2000 to about 61% in 2018. Things got a little wonky after the global financial crisis, but generally the trend lines are pretty clear.

Some of this likely has to do with our "return to cities." But I think the bigger part of this story is that development cost structures are pushing the market in this direction. For more on this topic, check out: Demystifying the development pro forma.

Last week's general election in the UK was yet another example of the urban-rural divide that we are all seeing emerge around the world. Taking a look at this chart from the Centre for Towns, it's pretty clear that the type of community someone lives in (i.e. how urban), says a lot about the way in which they probably voted. In big cities, the vote share was 49% Labour. And in villages, communities, and small towns, the vote share was about 48-58% Conservative.

But what does this stem from? According to John Burns Murdoch of the Financial Times, the biggest predictor (for constituencies) of a swing vote over to the Conservatives during this last election was the share of the population in a blue collar job. Here is a graph from John's article. Circles with a black outline are constituencies that changed hands last week. Note Great Grimsby, which I wrote about here, in the top right corner.

These facts probably aren't all that surprising to most of you. But it is an important reminder of how concentrated the new economy is becoming in big -- or perhaps I should say, certain -- cities. The Brookings Institution recently referred to this as "a crisis of regional imbalance." Because it's not just a case of urban vs. rural. Brookings found that from 2005 to 2017, more than 90% of innovation sector growth in the US could be traced back to just five metro areas. (You'll be able to guess most of the five. Only one stood out for me.)

This is the world we live in.

The below figure shows the taxing authority of US cities by state. In some cases there’s a city or two with additional taxing authority. New York City, for instance, has been authorized by the state to levy property, sales, and income taxes, whereas other cities in the state can only levy property and sales taxes.

The figure is from a recent report by Brookings called, City budgets in an era of increased uncertainty. In addition to revenue sources, the report also covers spending limits and tax structure alignment. 

The report concludes that cities generally have a stronger fiscal position when their tax structure aligns with their economy. For example, cities such as Las Vegas that have lower than average property values and are only authorized to collect property taxes, do not score well.

One thing that the above figure does not get across is that more money now comes in from non-tax revenues, user fees, and other charges. According to 2012 census data, 37% of all municipal revenue in the United States came from these sorts of charges.

To download a PDF of the full report, click here.