Have a rental crunch? Don’t be dense!

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Scarce and increasingly expensive rental properties in Calgary have been making the news lately. Mayor Nenshi took advantage of the issue to ignore basic supply and demand principles while trying to label Calgary landlords as being greedy and gouging.

It is no secret that Naheed Nenshi is a very ideologically dedicated to increasing urban density within Calgary by any means possible such as Calgary’s virtual suburban development freeze. While hindering and freezing outward growth in a city will indeed lead to increased urban density it will also inevitably lead to a higher cost of living, particularly in the rental market. This makes it understandable as to why Nenshi wants to distract people from the consequences of his development policies with a baseless and divisive attack on landlords within Calgary. It would be rather difficult for Nenshi to sell his density mantra if more people realized just how hard those density policies end up impacting low and middle income Calgarians.

The vast majority of people simply do not want to live in crowded downtown situations. That is why when the market is allowed to develop naturally, cities will grow outward to fill demand and it will keep real-estate and rental properties within the bounds of proper market price. When outward growth is hindered by obstacles such as an ocean or ideological city council, higher urban density along with greatly inflated housing costs soon follow.

Don’t just take my word for it though. The numbers tell the tale and the very direct correlation between urban density and high rent is very easy to see.

Below I have listed American cities in order of declining density based on people per mile square and then have the average monthly rent for a one bedroom apartment in US dollars next to it.

New York City   27,778 people per sq. mile       Average rent: $2,933

San Francisco 17,867 people per sq. mile         Average rent: $3,413

Boston  13,340 people per sq. mile                    Average rent: $2,080

Chicago 11,864 people per sq. mile                   Average rent: $1,628

Miami    11,765 people per sq. mile                    Average rent: $2,049

Seattle  7,774 people per sq. mile                      Average rent: $1,402

Cleveland 5,107 people per sq. mile                  Average rent: $635

Portland Oregon 4,375 people per sq. mile       Average rent: $1,106

Houston 3,662 people per sq. mile                    Average rent: $1,191

Dallas 3,645 people per sq. mile                        Average rent: $1,090

Phoenix 2,797 people per sq. mile                     Average rent: $776

Las Vegas 1,659 people per sq. mile                 Average rent $766

The pattern is pretty stark. While variables such as local economy, taxes and desirable real-estate have an effect, it is clear that the higher the urban density you have, the higher the rent.

Even with a strong economy and an incredible landscape, the hipster’s Mecca of Portland Oregon keeps rents reasonable through outward growth and low urban density.

Houston and Dallas are commonly demonized by density proponents for their evil “sprawl” but they clearly offer a great standard of living as they both have strong economies and low rents. Phoenix and Vegas have all sorts of space to grow outwards and it shows with their very low density and their associated low rents. Calgary has plenty of room to grow outward too if we would just allow it.

Keep these numbers in mind as Mayor Nenshi continues to promote high urban density and constant tax increases. While Nenshi may indeed create his high-density utopia but it will come at a very heavy price for people with low or fixed incomes as rents inevitably continue to rise quickly. High density and low rent simply does not happen in the developed world.

 

 

 

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4 thoughts on “Have a rental crunch? Don’t be dense!

  1. I saw this post on the Midfield Mobile Home Park – Fighting Back face book page, could this be part of the reason taxes need to be raised? Midfield posted “As the Budget (tax hike) talks begin, taxpayers need to be made aware of this: Calgary City Council approved a Bylaw to borrow $36MIL to purchase land at 800-84 St NE for the development of the new mobile home park named East Hills Estates, Midfield homeowners were to be relocated to this new park(aka Go Forward Strategy). The land was purchased 2 March 2010. (The newly elected Mayor and Council of Oct 2010 also re-approved the project).The Midfield/East Hills Estates project is funded through self supported debt, and thus no impact on the tax payers. The initial principal borrowed is based on a five year bulleted term. This means that the Principal can only be paid at the end of the 5 year term in 2015.
    That borrowing Bylaw proposal states: The City shall pay the principal and the interest from the sales and revenues generated from the project. In the event of any deficiency, The city shall levy and raise municipal taxes sufficient to pay the indebtedness.
    * The Midfield/East Hills Estates project was cancelled by City Council after the land was purchased, thus there is no money from sales and revenues (lot rent) coming from this project – it is no longer a self supported debt.
    – March 2015 the $36Mil principal payment for this project is due
    – November 2014 – City Council announces tax increase. Coincidence? “

  2. Pingback: Have a rental crunch? Don’t be dense! | Castle Downs is a beautiful area in North West Edmonton that consists of eleven distinct neighbourhoods.

  3. You state that cities will naturally grow outwards if allowed to. The reality is that Calgary is subsidizing the growth of those suburbs by not charging developers a high enough fee to connect to city services. As a result, everyone who lives in the inner city is in fact subsidizing the growth of suburbs.

    An increasing number of people in fact do want to live in the inner city and not in far-flung suburbs where they face 2-hour commutes to work every day. You have only to look at what’s happening in neighbourhoods like Mount Pleasant where tiny bungalows on large lots are being replaced by new duplex units. This is happening as developers respond to demand, not in response to any so-called social engineering project by City Hall.

    One of the main reasons why rents are high in Calgary is, again, not because City Hall is increasing density, but rather because 50,000 people a year are moving here in search of jobs. Those people are looking for rental accommodations. I suspect that many of these people want or need access to public transit, and they cannot afford the cost of driving to and from far-flung suburbs.

  4. “The vast majority of people simply do not want to live in crowded downtown situations.” – are there statistics to back this statement up? This is your opinion – do not assume others feel the same as you. Furthermore, there is hardly a “crowded downtown” in Calgary compared to most of the world. Travel more and educate yourself.

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