Fear of heights: absent zoning, would all constructions be high-rises?

One of the common fears of people when we talk of relaxing zoning is the fear that very tall buildings will come to their neighborhoods, which will dominate them, hiding the sun during parts of the day and making it harder to protect their privacy as people high up will be able to see them in their backyard.

Why is there that fear? Often, the problem is that this is often the form that density takes up in many North American cities, like New York, Toronto and Vancouver. So some people come to believe that this is what density means and that any relaxing of zoning will lead to very tall condo towers.

However, I think it's best to reassure them. Without zoning, these very tall condo towers would not likely be very common. In fact, the reason why they are such a huge part of the new dense constructions in cities is essentially the fault of zoning. So let's consider high-rises and why they will never dominate housing unless we really have no choice but build them...

High rises don't make economic sense as long as you can satisfy demand with low-rise and mid-rise buildings

There are two main components to the cost of housing: the price of land and the cost of construction. The main advantage of building higher is lowering the price of land per housing unit. For instance, if there's a lot in a city worth 200 000$ and you want to build housing on it, and the lot is only big enough to have 1 unit per floor. If you build only 1 story, then that unit will have to include in its price the full 200 000$ price tag of the lot. But if you build 2 stories, then that price falls to 100 000$ per unit. If you build 4 stories, then that cost is down to 50 000$ per unit, etc...

However, the law of diminishing returns is in full swing here. The taller you build, the less an additional story will reduce the price. If you start with one story and add another, then you halve the effective price of land per unit. But if you start with 4 stories and add another, you reduce the price by only 20%. Graphically, it gives this neat curve:

The cost of land per unit depending on the number of stories of a building

You can see that the cost plateaus around 10 stories, but even past 6 stories, there is little to gain by adding a few stories.

Meanwhile, the taller you build, the more expensive the building gets. That's because low-rise constructions, up to 4 stories, can be built with wood frames and can be walk-ups, meaning with stairs leading to the different floors. The construction norms are also more lax. Meanwhile, taller buildings require elevators, which are expensive to build and maintain, they also require steel or concrete frames, and must be able to withstand a lot more weight and stress, resulting in the need for more structural engineering. All else being equal, wind and earthquakes will affect taller buildings much more than smaller ones.

All these elements add up to the cost of high-rises. How much so? Estimates I've seen says that a low-rise building can cost 150 to 200$ per square foot to build, but high-rises add 80 to 300$ per square foot to those costs, depending on how tall they get. I am lucky to have an empirical test of it. Where I live, there were a few recent constructions both of low-rise and high-rise condos, built within a few hundred meters of each other with similar standards of construction.

Lasalle 14-story condo towers

Lasalle new 3-story condos

So I went ahead and searched on real estate sites for the prices and sizes of condos of the two types, and got interesting results. Here is the graph of all the listings I found, the red squares are low-rise condos, the blue diamonds are high-rise condos.

Price ($) vs size (square feet), low-rise in red, high-rise in blue

Overall, each square foot of a low-rise condo costs 262$, while each square foot of an high-rise condo costs 366$, a whopping 104$ more. This is near a subway station by the way, the terminus of a line, but still, land should be pretty expensive nonetheless.

So economically speaking, if you can add the same amount of units by either building 3- or 4-story buildings or building 10+-story buildings, the smaller buildings are likely to be much more economically efficient. If you still try to build tall towers, competitors could significantly undercut you by building low-rise or mid-rise condos instead. The only time that high-rises really become economical is when you already are maxed out of low-rise and mid-rise buildings and need to build more units, at which time the only way to do so is to build higher, and then you may have to build very high to compensate the higher construction costs with lower land prices.

Of course, this assumes that people do not care whether they live on the second floor or on the twentieth floor, which is not true, and it's a nice segue to the next point.

People tend to prefer low-rises over high-rises

Everything I've seen confirms this. If you ask people, most of them prefer to live closer to the ground, and if they can have a door that opens right on the street, the better. People feel less isolated and getting in and out of their home is much easier. If they have kids, it is easier to keep an eye on them when they're outside if you're on a second floor balcony instead of a tenth floor balcony. In a way, high-rises are a bit like vertical culs-de-sac.

Now, that isn't to say there aren't some people who crave the isolation and calm of high-rise apartments, of the panorama they offer, of the security of controlled accesses to the building, or the amenities of big condo towers. Some people do like this, and may be ready to pay the price for it, or accept smaller accommodations in order to afford it. But most people, if offered the exact same unit for the exact same price, but one high up in a tower and the other a mere stairway away from the street, will tend to prefer the one close to the street.

Combine that with the cost advantage of the low-rise and mid-rise, and you realize that the conditions aren't there for a multiplication of high-rise housing, even without zoning. You'd still get a few in certain situations, in the downtown area or in a few scenic places for people who actually are ready to pay more for this type of housing, but it's a niche housing market.

So since the demand for it is low, there is little incentive to build a lot of it.

So why are they building so many tall condo towers in certain cities?

Good question, me. The reason is paradoxical. The reason why they build condo towers so tall is that they restrict heights too much.

Yes, I did choose the most convoluted way to say that.

It's about zoning, again. The reality is that in a lot of cities in North America, the vast majority of the land is zoned for very low density housing like single-family homes, and building even low-rise condos is illegal in most places. So adding a lot of housing units by building low-rise and mid-rise buildings is just not possible, unless zoning were changed. Changing the zoning would also risk running into a lot of opposition and be costly for developers, so fighting for a zoning change to build 3-story condos instead of 2-story houses isn't really worth it.

At the same time, these areas are all built up, there is little or no vacant lot left, and people still want housing to come live there. So the only solution to provide these people with housing is to exploit to their full extent the few places where it is legal to build high buildings, and where local residents don't care if another tower sprouts up in the neighborhood. Since the demand for housing is so great and the opportunities to build new housing so few, every opportunity leads to very, very high condo towers. There is simply no alternative as things stand.

This essentially is a shortage of land for new constructions, caused by zoning. Even if there is an upzoning "creep", with zones allowing mid-rise and low-rise constructions slowly taking over lesser density zoning adjacent to them, the slow creep keeps the land in shortage conditions, and thus prices are artificially high.

So the reason why many North American cities keep building huge condo towers is because they make it way too hard to build low-rise and mid-rise housing in their lower density neighborhoods. High-rises aren't to fear if zoning was relaxed, if anything, I think the pressure to build more high-rises would actually weaken and less of them would actually be built.

Now, none of this is about my opinion on whether or not building high-rises is good or not, I was merely judging them on their objective merits and people's housing preferences. My opinion on height limits and the like will come later.