Affordability or amenity?

Rowan Moore reads the new enormobook 'Living in the Endless City' and fishes out a good quote:

Suketu Mehta, on Mumbai, articulates the fundamental dilemma of urban improvement. No matter how appalling the overcrowding and squalor might seem, the city will continue to attract yet more people because it still offers things, such as freedoms and opportunities, that the countryside cannot. And, therefore, according to a planner quoted by Mehta, "the nicer you make the city, the larger the number of people that will come to live there".

Now, on the one hand, that's extremely obvious. But on the other hand I'm not sure we always think through the implications.

Over the past few decades city centres in richer countries have generally become better places to live, as crime has fallen and dirty industries are either priced or regulated out [1]. So demand to live in city centres has also gone up. Faced with higher demand, cities can choose to increase supply (by building more housing and offices) or to keep things as they are.

If you increase supply you are changing the environment that people have come to value. People being risk-averse, it's not surprising that they tend to resist. But not increasing supply (or, more commonly, not increasing it enough to match rising demand) means that over time, improved quality of life feeds into higher prices for housing and commercial space. Which is exactly what we have seen happen in Manhattan, and what I think is happening in London.

So cities with improving environments have a decision to make: if they try to keep their city affordable, they need to make some big changes to its built environment just as people start attaching a greater value to the status quo. Economists sometimes act like this is a no-brainer, but it really isn't. I think that people become more resistant to change in the built environment (i.e. to new housing or office supply) as its amenity value increases, and you can see why. But the implications for the long-term affordability of city centres are very serious.

[1] These two trends are two sides of the same coin, if you buy the argument that falling lead pollution caused falling crime rates - and I think I do.