Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.

I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.

Moving chains work generally as follows:

• A household moves into a newly constructed home

• Their previous home becomes vacant

• Another household moves into this vacant unit, leaving their previous home vacant

• And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)

The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.

Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.

The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:

New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.

New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.

Cover photo by Henrique Ferreira on Unsplash

Chart from "Country-wide effects of new housing supply: Evidence from moving chains."

Whether it's said out loud or not, invariably something like this comes up when talking about new housing development:

“There’s another solution,” says Lucas, mulling over the housing shortage. “I’m not saying I know what it is. Maybe the city’s full. What’s wrong with Windsor instead? Or Cornwall? A hundred years ago, manufacturing and employment were spread out way better than they are now. Everybody needing to be in Toronto and Vancouver is killing us.”

So, is Toronto full? Do we need to return our urban economies to what they were a century ago? To use rough whole numbers, let's consider that Toronto's average population density (in the city proper) is upwards of 5,000 per km2. It's much higher in the downtown core, but our low-density inner suburbs bring down the average.

Now, let's consider Paris, as we often do on this blog. Paris proper has roughly 1/6th the footprint of Toronto (again, the city proper boundary) and roughly 4x the population density (upward of 20,000 people per km2). So, if Toronto is full, what the hell is going on with Paris?

Even Paris is nowhere near full. The opportunities for intensification in central neighborhoods may not be as obvious as they are in Toronto, but urban Paris continues to grow through small-scale projects, office conversions, and, most notably, through ambitious transit projects and mixed-use developments designed to stitch together the greater urban region.

Cities do, of course, face constraints, but they're never technically "full." "Full" is generally shorthand for, "I already live here and I like the way things are, and so I would prefer no one else come and disrupt what I've presently got going on."

Because if this weren't the case, then I suppose you might hear more people say, "I really wanted to move to Toronto, but it was quite literally full. Like, absolutely no physical room for me. I couldn't do it. I would have had to sleep on the streets." Nope. We've got a space allocation for you. In fact, if you're in the market for a new home, give me a call.

Importantly, this is different from a city being, maybe, too expensive. That is not the same as not having any more room. But the two are interconnected: saying a city is full and then blocking housing because of said fullness creates a self-fulfilling prophecy of artificial scarcity. This drives up prices and can then create a false sense of being full.

Of course, in this scenario, you aren't out of land; you're out of permission to use the land differently. "Full" is a funny thing.

Cover photo by Julian Gentile on Unsplash

Last month, we talked about how even "luxury" housing can improve overall housing affordability in a market. In that post, we spoke about a recent study that looked at the downstream effects of a new condominium tower in Honolulu. Today, let's look at Switzerland.

I stumbled upon this working paper on Twitter. The authors are Lukas Hauck and Frédéric Kluser, both from the University of Bern. In it, they look at the country-wide effects of new residential housing supply in Switzerland and, more specifically, the "moving chain" that new supply produces.

Moving chains work generally as follows:

• A household moves into a newly constructed home

• Their previous home becomes vacant

• Another household moves into this vacant unit, leaving their previous home vacant

• And the process continues, until someone breaks the chain (which can happen by way of a new household being formed or someone moving in from out of the market)

The authors found that these moving chains are relatively short in Switzerland. Approximately 75% of them terminate within three migration rounds. But this doesn't mean that these chains aren't critical for the market.

Importantly, they found that every new market-rate unit typically results in 0.75 moves for households with below-median incomes. So, that is 75 moves for every 100 new homes constructed.

The reason why new supply ends up also benefiting lower-income households is because there's a clear income and rent gradient across the moving chain:

New housing (migration round 1) is typically priced at the highest end of the market. This makes sense because we know that development happens on the margin. But by migration rounds 2 and 3, median rents fall off noticeably, creating housing opportunities for other people.

New market-rate housing is sometimes criticized for only serving one segment of the market. But once again, we see evidence that it helps to ease overall housing pressures. There are other indirect benefits that shouldn't be ignored.

Cover photo by Henrique Ferreira on Unsplash

Chart from "Country-wide effects of new housing supply: Evidence from moving chains."

Whether it's said out loud or not, invariably something like this comes up when talking about new housing development:

“There’s another solution,” says Lucas, mulling over the housing shortage. “I’m not saying I know what it is. Maybe the city’s full. What’s wrong with Windsor instead? Or Cornwall? A hundred years ago, manufacturing and employment were spread out way better than they are now. Everybody needing to be in Toronto and Vancouver is killing us.”

So, is Toronto full? Do we need to return our urban economies to what they were a century ago? To use rough whole numbers, let's consider that Toronto's average population density (in the city proper) is upwards of 5,000 per km2. It's much higher in the downtown core, but our low-density inner suburbs bring down the average.

Now, let's consider Paris, as we often do on this blog. Paris proper has roughly 1/6th the footprint of Toronto (again, the city proper boundary) and roughly 4x the population density (upward of 20,000 people per km2). So, if Toronto is full, what the hell is going on with Paris?

Even Paris is nowhere near full. The opportunities for intensification in central neighborhoods may not be as obvious as they are in Toronto, but urban Paris continues to grow through small-scale projects, office conversions, and, most notably, through ambitious transit projects and mixed-use developments designed to stitch together the greater urban region.

Cities do, of course, face constraints, but they're never technically "full." "Full" is generally shorthand for, "I already live here and I like the way things are, and so I would prefer no one else come and disrupt what I've presently got going on."

Because if this weren't the case, then I suppose you might hear more people say, "I really wanted to move to Toronto, but it was quite literally full. Like, absolutely no physical room for me. I couldn't do it. I would have had to sleep on the streets." Nope. We've got a space allocation for you. In fact, if you're in the market for a new home, give me a call.

Importantly, this is different from a city being, maybe, too expensive. That is not the same as not having any more room. But the two are interconnected: saying a city is full and then blocking housing because of said fullness creates a self-fulfilling prophecy of artificial scarcity. This drives up prices and can then create a false sense of being full.

Of course, in this scenario, you aren't out of land; you're out of permission to use the land differently. "Full" is a funny thing.

Cover photo by Julian Gentile on Unsplash