Gabriel M. Ahlfeldt, Nathaniel Baum-Snow, Remi Jedwab
Abstract: Tall buildings make up over 20% of real estate by value in the world’s largest cities. Nonetheless, many governments constrain tall building construction, hindering urbanization and growth. Quantification for all cities worldwide using a canonical land use model disciplined with reduced form elasticity estimates indicates that eliminating existing height constraints would generate a welfare gain of 3.7% in developing economies. Aggregate land values would decline by 3.9%, incentivizing landowners to support height restrictions. Estimated elasticities of city population and built area with respect to aggregate city building heights are 0.13 and-0.16, reinforcing the quantitative evidence that tall buildings facilitate urban growth and compactness. Interactions between static demand factors and the geography of bedrock isolate 1975-2015 tall building construction driven by technology-induced reductions in the cost of height. Using indirect inference, we estimate a (congestion) elasticity of consumer welfare to urban density of-0.11.
Keywords: Urban Density; Tall Buildings; Sustainable Urbanization; Urban Growth; Commercial Real Estate; Housing Supply; Urban Sprawl; Land Savings; Housing Affordability; Geographic Constraints
JEL codes: R11, R12, R14, R31, R33, O18, O13