By far the overriding thing keeping Manhattan real estate prices high is housing regulation.
I'd argue it's actualy the proximity to wealth. Hamptons is not regulated, and look at their prices. Finance, Law, medicine, and Media are all either pyramid pay or actual legal monopoly businesses. The rest is made on inside information, that stems from access that wealth brings to political, academic, and philanthropic circles. Not that there is anything wrong with that, its just how the 'world works' in many ways.
In any event, real estate is the ante to play the game. The proximity to power breeds value for two reasons: lust (in those who lack power) and practicalities (for those who have power, and want to keep it). Its worth noting that owning real-estate is about excluding other people from using it. High real estate prices force out competitors that migh otherwise use the assets to create a competing culture.
That's a plausible explanation, but I'm not sure I totally buy it. Chicago is the #2 financial center in the country, arguably the #2 legal center, home to major pharma companies, and just chock full of old industrial money. Yet, real estate in the Northside is a lot cheaper than many cities that are far less dominated by finance/law/medicine money. Houston is full of oil and CEO money and is also quite cheap. What's the difference between Chicago/Houston and say Seattle? Wealth? Or housing regulation?
Yeah, it's always appeared to me that the main driver is geography. And housing regulation is pretty much the same thing—having more high-rise housing on Manhattan would keep prices down in the same way that being able to build further and further out does for DFW.
I'm very interested to see what DFW looks like in a couple of decades if it keeps growing rapidly. Will it be a sort of sprawl of still-low-density suburbia for over a hundred miles E/W or N/S? Will a significant density increase in the core eventually come after hitting some kind of "maximum suburb distance" for most people? Currently it's at about half the number of people as the LA area in a similar footprint, but unlike LA it's not surrounded by mountains and ocean and could keep growing outward forever.
I wouldn't say regulation is the same as geography. For one, it's self-imposed. Second, it costs a lot less to build up than to build out. Note that Chicago has a very densely built core, even though it has no real barriers to sprawl to the north, west, or south. That's the result of (lack of) regulation plus good urban planning.
This is another fair point, but consider the land is massively more expensive. The dynamic is relative scarcity and bargaing power. The more scarcity, the more the economics look like monopoly on the underlying asset. At that stage, the cost of building out is sort of second order.
The other examples, such as London, Geneva, and SF have a combination of massive wealth (in both flow and assets stocks) combined with constraints on the ability to build due to geography/history/etc.
I agree some of ths (like greenbelt and listed buildings in london) is by way of law, but most rent control follows from the combination of scarcity/wealt co-existing prior to legislative means to "provide access". In other words, those laws follow the sort of self-evident understanding that if left unchecked, the dynamic of quasi-monopoly rents being extracted from the real-estate market will lead to all kinds of bad things down the road (social tension, and its variants, primarily).
The other counter-example perhaps to chicago or LA is tokyo (which is pretty spread out). But again, there is a social dynamic of scarcity (JP is very hiercarchial/aristocratic society) and Tokyo is both the financial/business and political capital of JP. Even in the 80's the somewhat absurd cost/ft did not hinder people from needing to be in Tokyo for their careers. Rather, the all just gave up having more than 1 kid to afford the astronomical cost of living. A generation later, the population growth is almost not feasible given the entrnched cost structure of real-estate and the need for the few young (workers) to support the many old (retired).
After the 3/11 quake, I did a lot of thinking about what would happen if Tokyo became unlivable .. It, basically, freaked me out. There's a lot of Japan stuck in just one spot..
Right, I overstated the equivalency, I should've said something like "plays a similar role."
But, does it still cost less to build up than out, in a city with nearby land for the cheap, taking into account that you have to build your upward development in a way to be competitive with 2000+ square foot houses and yards? There's definitely some upwards building being done in the cores of the cities in Texas, but a whole lot more building out. Overcoming the lack of urban planning in the past is where it would get pricey, and need a lot of buy-in.
Would you say the relative cheapness of housing in a lot of Chicago compared to more mountain- or water-locked cities has more to do with the planning/regulatory environment or with the open geography on the non-lake sides?
I guess my point is there is more to it than just geography. Clearly the availability of cheap land lowers the price of housing, but Chicago is more densely built than say Seattle or Portland while also being cheaper. The downtown core is comparably dense to San Francisco but much cheaper.
There's only so much Manhattan land, whereas Chicago is enormous and spreads out for hundreds of miles. Same goes for Houston and Seattle, but more importantly is the distance from New York or Los Angeles.
I'd argue it's actualy the proximity to wealth. Hamptons is not regulated, and look at their prices. Finance, Law, medicine, and Media are all either pyramid pay or actual legal monopoly businesses. The rest is made on inside information, that stems from access that wealth brings to political, academic, and philanthropic circles. Not that there is anything wrong with that, its just how the 'world works' in many ways.
In any event, real estate is the ante to play the game. The proximity to power breeds value for two reasons: lust (in those who lack power) and practicalities (for those who have power, and want to keep it). Its worth noting that owning real-estate is about excluding other people from using it. High real estate prices force out competitors that migh otherwise use the assets to create a competing culture.