One of the big housing stories of this year was that Austin has built a lot of new apartments and it is now causing rents to fall precipitously — by as much as 22%. The market is working.
But as we also talk about on this blog, the benefits of new "luxury" housing don't just apply to those who can afford it. Since real estate development happens on the margin — in other words, it's based on the feasibility of the next unit of housing supply, not an average for the market — new market-rate housing typically needs to cater to the top end of the market. Otherwise, it wouldn't be economically feasible to build it.
However, study after study also shows that the delivery of any new housing in a city broadly tempers rents, including in a city's oldest housing stock. This is true in virtually all cities:
One of the big housing stories of this year was that Austin has built a lot of new apartments and it is now causing rents to fall precipitously — by as much as 22%. The market is working.
But as we also talk about on this blog, the benefits of new "luxury" housing don't just apply to those who can afford it. Since real estate development happens on the margin — in other words, it's based on the feasibility of the next unit of housing supply, not an average for the market — new market-rate housing typically needs to cater to the top end of the market. Otherwise, it wouldn't be economically feasible to build it.
However, study after study also shows that the delivery of any new housing in a city broadly tempers rents, including in a city's oldest housing stock. This is true in virtually all cities:
The above chart is from this recent Bloomberg article, talking about how "luxury apartments are bringing rents down." But if you look closely, there is one city on this chart that appears to be an outlier: Miami.
Despite adding a respectable number of homes, rents have not fallen as much as you might expect given the figures for the other cities on this list. The intuitive explanation is likely that Miami is in the midst of experiencing an extraordinary wealth transfer.
For the five-year period through to 2022, it was estimated that some 30,000 New Yorkers with combined annual incomes of $9.2 billion moved to Miami-Dade and Palm Beach counties. It's also an important capital safe haven for Latin America.
I vividly remember looking at condo listings in Miami in 2008 and thinking, "Damn, this is cheap!" I even tried to find a job there after grad school, but at that time, it was no place for a new real estate developer. My best bet would have been something in loan workouts.
Who could have predicted such an incredible transformation? It isn't the third most important global city in the US according to the numbers, but it certainly has a lot of momentum right now. In this instance, new supply does not appear to be more than offsetting demand.
The UN’s 2025 World Urbanization Prospects report has reshuffled the global rankings, placing Jakarta at the top
It's not always as straightforward as it may seem to measure the size of a city or urban region.
There's the problem of which urban boundary to use. And then once you've landed on that, there's the additional problem of estimating how many people live within it. This can be particularly challenging when it comes to informal settlements, where there isn't reliable population data.
The most common approach is to use the continuous built-up area as the urban agglomeration, as opposed to any sort of "city proper" boundaries. And this is exactly what the United Nations has done in its latest World Urbanization Prospects report.
Here, they have fundamentally revised their measurement methodology by using a new, so-called harmonized geospatial approach. If you'd like to nerd out on the specifics, you can do that here.
Previously, Tokyo was thought to be the world's most populous megacity, but it has dropped down to 3rd in this new report. And by 2050, it is forecasted to drop even further to 7th place:
As we spoke about yesterday, the world's economic center of gravity is rapidly shifting toward Asia. And that shows up in these charts.
I have a strong desire to visit the largest cities in the world. It's fascinating to see how such large urban clusters manage to organize themselves. There are always systems that naturally emerge to make things work, even if it feels chaotic on the surface.
I've only been to 3 cities from the 2025 chart, so I have my work cut out for me.
Canadian geographer Mario Polèse's book, The Wealth and Poverty of Regions: Why Cities Matter, is not new. It was originally published in 2010. But it's perhaps a good follow-up to yesterday's post about the untethering of wealth. Here's an excerpt from a review of the book by Jeb Brugmann:
All cities, Polèse explains, share the same basic economic causes and effects. These are economies of localization (i.e., locating activities close together) and of urbanization (i.e., clustering lots of diverse activities together at scale). Polèse shows how these urban economies—usefully distinguished and defined in detail as economies of scale, proximity, diversity and concentration—combine with unique natural features and resource endowments, technology and infrastructure investments, national boundaries and market controls, and historical events to create quintessentially local and unique places. Every time he explains the status of another place—New York, London, Chicago, Paris, Montreal, the northern Mexico border, the North American west coast—he demonstrates again how the source code of geography combines with specific local and historical conditions to create a momentum of wealth or poverty.
The rich may have the means to tax-optimize through physical mobility, but the draw to established urban clusters remains strong, which is why it can be a challenge to stay away from them for more than 183 days. There is a "stickiness" to established cities that is the result of momentum and compounding over centuries.
Still, nothing is guaranteed, and there's only so much that can be done if you're swimming against a global landscape that is shifting away from you. Geography does matter. And today, the world's economic center of gravity is rapidly shifting toward Asia. This is good for some cities and bad for others.
The above chart is from this recent Bloomberg article, talking about how "luxury apartments are bringing rents down." But if you look closely, there is one city on this chart that appears to be an outlier: Miami.
Despite adding a respectable number of homes, rents have not fallen as much as you might expect given the figures for the other cities on this list. The intuitive explanation is likely that Miami is in the midst of experiencing an extraordinary wealth transfer.
For the five-year period through to 2022, it was estimated that some 30,000 New Yorkers with combined annual incomes of $9.2 billion moved to Miami-Dade and Palm Beach counties. It's also an important capital safe haven for Latin America.
I vividly remember looking at condo listings in Miami in 2008 and thinking, "Damn, this is cheap!" I even tried to find a job there after grad school, but at that time, it was no place for a new real estate developer. My best bet would have been something in loan workouts.
Who could have predicted such an incredible transformation? It isn't the third most important global city in the US according to the numbers, but it certainly has a lot of momentum right now. In this instance, new supply does not appear to be more than offsetting demand.
The UN’s 2025 World Urbanization Prospects report has reshuffled the global rankings, placing Jakarta at the top
It's not always as straightforward as it may seem to measure the size of a city or urban region.
There's the problem of which urban boundary to use. And then once you've landed on that, there's the additional problem of estimating how many people live within it. This can be particularly challenging when it comes to informal settlements, where there isn't reliable population data.
The most common approach is to use the continuous built-up area as the urban agglomeration, as opposed to any sort of "city proper" boundaries. And this is exactly what the United Nations has done in its latest World Urbanization Prospects report.
Here, they have fundamentally revised their measurement methodology by using a new, so-called harmonized geospatial approach. If you'd like to nerd out on the specifics, you can do that here.
Previously, Tokyo was thought to be the world's most populous megacity, but it has dropped down to 3rd in this new report. And by 2050, it is forecasted to drop even further to 7th place:
As we spoke about yesterday, the world's economic center of gravity is rapidly shifting toward Asia. And that shows up in these charts.
I have a strong desire to visit the largest cities in the world. It's fascinating to see how such large urban clusters manage to organize themselves. There are always systems that naturally emerge to make things work, even if it feels chaotic on the surface.
I've only been to 3 cities from the 2025 chart, so I have my work cut out for me.
Canadian geographer Mario Polèse's book, The Wealth and Poverty of Regions: Why Cities Matter, is not new. It was originally published in 2010. But it's perhaps a good follow-up to yesterday's post about the untethering of wealth. Here's an excerpt from a review of the book by Jeb Brugmann:
All cities, Polèse explains, share the same basic economic causes and effects. These are economies of localization (i.e., locating activities close together) and of urbanization (i.e., clustering lots of diverse activities together at scale). Polèse shows how these urban economies—usefully distinguished and defined in detail as economies of scale, proximity, diversity and concentration—combine with unique natural features and resource endowments, technology and infrastructure investments, national boundaries and market controls, and historical events to create quintessentially local and unique places. Every time he explains the status of another place—New York, London, Chicago, Paris, Montreal, the northern Mexico border, the North American west coast—he demonstrates again how the source code of geography combines with specific local and historical conditions to create a momentum of wealth or poverty.
The rich may have the means to tax-optimize through physical mobility, but the draw to established urban clusters remains strong, which is why it can be a challenge to stay away from them for more than 183 days. There is a "stickiness" to established cities that is the result of momentum and compounding over centuries.
Still, nothing is guaranteed, and there's only so much that can be done if you're swimming against a global landscape that is shifting away from you. Geography does matter. And today, the world's economic center of gravity is rapidly shifting toward Asia. This is good for some cities and bad for others.