Executive Summary

For decades, urban policy has focused on troubled cities—those losing population and advertisement activity. Yet in countless cities, the era of decrease is over; today, we room seeing the appearance of prosperous, financially dynamic cities, regularly located ~ above America’s coasts. This “superstar cities”—New York, Los Angeles, the san Francisco only Area, Boston, Washington, and Seattle—are among America’s largest, most fertile urban regions. They have actually well-above-average per-capita GDP and incomes and serve together the home bases the high-value sectors prefer finance (New York) and high tech (San Francisco). 

Despite their high incomes, these urban are growing slowly—or even, in the case of brand-new York, shrinking—because of extremely high real estate prices and also overburdened infrastructure. In short, the superstars space suffering the difficulties of success, not failure. 

There space a variety of reasons the these cities room unable to increase their real estate supply and infrastructure:

Regulatory accretion and also changes in society attitudes A lose of civic capacity to prosper in the wake of prolonged era that shrinkage—after years of stagnation or decline, these cities room no much longer organized to assistance growth

A belief, on the component of ordinary existing residents, the there are few far-ranging marginal benefits to growth, or that the an adverse effects of growth, together as climbing congestion, outweigh any kind of benefits America’s superstar cities need to think choose high-growth cities again, or the national economy will lose access to high-productivity locations. Staying clear of this outcome will require far-ranging liberalization the land-use regimes come permit an ext and denser housing advancement near transit lines and areas v the many jobs, as well as expansion that the metropolitan footprint top top the suburban edge.

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Because neighborhood resident perceptions militate against growth, states should consider preempting regional land-use regulate in a targeted way that balances expansion with other community goods. Also with preemption, local leaders need to plainly articulate and sell to their existing citizens the services of becoming a larger city.

In addition, these regions need to develop credible plan to increase their infrastructure, specifically transit and also airports, to support the significant new levels of expansion that a liberalized land-regulation regimen would enable. 

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Introduction

Much of classic urban policy has actually been came to with difficulties of public failure, together as population and task loss, poverty, low-quality housing, and crime. However today, countless urban problems are the an outcome of urban success. This includes, for example, high real estate prices and the resulting concerns about gentrification. These problems are specifically acute in the superstar cities.

The ax “superstar cities” was popularized by Joseph Gyourko, Christopher Mayer, and also Todd Sinai in your 2006 NBER paper of the exact same title.<1> They characterized a superstar city in state of real estate: high need (determined by price and also quantity growth) and inelastic it is provided (a high proportion of price to amount growth). This cities knowledgeable rising housing prices relative to mean incomes and income sorting toward a higher-income resides base.

The ax has acquired popularity and also now refers typically to viewed “elite” urban on the coasts. Resources vary regarding which cities they consider superstars, but most lists encompass the adhering to urban regions:

BostonGreater Los Angeles/Southern CaliforniaGreater brand-new YorkSan Francisco bay AreaSeattleWashington, D.C.

The four superstar urban that appear on virtually every perform are brand-new York, Los Angeles, the mountain Francisco only Area, and Washington, D.C. 

Today’s more comprehensive concept of a superstar city includes not only higher housing prices but also higher economic productivity and incomes. For objectives of this paper, I specify as a superstar city a metro area with genuine GDP every capita greater than 120% the the national average and also a per-capita income better than 130% that the national average. This selects every the urban regions on the list above, other than greater Los Angeles / southern California. Additionally, it includes the tiny metro regions of Boulder, Colorado, and Midland, Texas, both of i m sorry are an extremely successful in their own right.<2> These details GDP and income thresholds space illustrative and also demonstrate the cities generally referred to as superstar regions do outperform the remainder of the country in financial output and also incomes.

The vital industries and also institutions shaping the nation and the world—finance, technology, media and also entertainment, and also government—are concentrated in superstar cities. Superstar areas account because that 85% of every venture-capital dollars invest in the united States.<3> Amazon, based in superstar Seattle, at first chose brand-new York<4> and Washington for its new “HQ2” offices.<5> In the web era, media has end up being even an ext concentrated in superstar cities. Follow to one report, 73% of web publishing jobs<6> room in the Northeast Corridor (Washington to new York come Boston) or on the West Coast.<7> and 62% the Harvard’s course of 2018 moved to the claims that contain most superstar cities: new York, California, Massachusetts, or the ar of Columbia.<8> together Charles Murray the the American enterprise Institute observed:


t is difficult to host a nationally prominent job in politics, public policy, finance, business, academia, info technology, or the media and also not live in the areas surrounding brand-new York, Washington, Los Angeles, or mountain Francisco. In a couple of cases, it deserve to be excellent by living in Boston, Chicago, Atlanta, Seattle, Dallas, or Houston—and Bentonville, Arkansas—but not plenty of other places.<9>

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Housing prices likewise remain high in superstar cities. The Demographia International real estate Affordability Survey<10> classifies metropolitan-area residence affordability by average multiple, a price-to-income ratio in i m sorry the median home price is split by the median family members income in a region. A ratio exceeding 3 is thought about unaffordable. As presented in Table 1, the superstar cities much exceed that, other than for Washington, D.C.

Notably, these are greatly very huge regions. Ordinarily, the city statistical area (MSA) is the best means to measure metropolitan regions; but for some of these cities, MSA does not reflect the true location of the region. This is especially true in the mountain Francisco only Area, i beg your pardon is consisted of of two major metropolitan areas. The populations in Table 2 therefore utilize the larger linked statistical area (CSA) or modified CSA to administer a truer snapshot of the complete scope of these superstar regions. Hereafter, all references to superstar cities or areas will describe the areas in Table 2.

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Notably, the superstars encompass five that the six largest CSAs in the U.S., excluding just Chicago, sometimes considered a semi-superstar. Seattle is the only superstar not amongst America’s an extremely largest cities.

The difficulty of Scaling Superstar Cities

While countless civic obstacles in superstar cities could be analyzed, this report concentrates on the difficulties of growth and also scaling.

The native “scale” suggests economic situations of scale. Economic climates of scale are reduce in typical unit expense as output grows. That is, suppliers become more efficient at production as they get larger. Yet the concept also applies come cities. Return municipal federal governments may no operate more efficiently together cities thrive larger, vital efficiencies deserve to be obtained in the all at once urban system. For example, researcher at the Santa Fe Institute uncovered that, for every doubling of a city’s population, much of its physical infrastructure—for example, the number of gas stations—grows just 85%.<11> The very same is true because that many species of infrastructure, including pipes, roads, and electrical wires.<12> 

Other, non-cost-efficiency benefits from scale are specifically relevant in the era of the expertise economy. Cities space labor markets, and larger cities have actually thicker labor markets—that is, a larger number of employers and employees. Thicker sectors are an ext attractive for workers as well as firms. Follow to economist Enrico Moretti: “In the instance of job markets, as in numerous other facets of life, size does matter.”<13> huge markets especially have an advantage in today’s era that two-career households, in which both pair must have the ability to find suitable employment. Economic experts Dora Costa and also Matthew Kahn uncovered that couples in which both spouses have actually college degrees have been increasingly concentrating in metro areas with a populace of an ext than 2 million people.<14>

Larger cities likewise benefit from understanding spillover and also other agglomeration effects. While physical infrastructure scales sublinearly with population, factors such together social interactions scale superlinearly. For example, once the population of a city doubles, its variety of patents increases, top top average, through 115%. The exact same is true because that a number of other indicators, such together GDP and also income.

How urban Scale

The background of brand-new York City, America’s largest municipality and largest city region, demonstrates the importance of do the ideal decisions about development and also infrastructure because that a city that desires to grow. It climbed from a municipal population of 49,401 in America’s very first census in 1790 to more than 8 million in 2018, perpetually preserving its standing as America’s largest municipality and also urban region.

Though brand-new York was very early adopter the zoning and building regulations, these were targeted towards legitimate public-policy involves such as access to light and ventilation for apartments, or to ensure that sunlight would certainly reach the streets. This routine allowed big increases in the quantity of occurred land, as well as high densities that development, permitting the building and construction of a significant amount of housing over an extensive period.

During civilization War II, things changed. Brand-new York began implementing a regime of rent regulation. And also in 1960, it implemented a new zoning password that efficiently imposed a “population cap” by limiting the developed capacity that the city. Prior to the new zoning code, brand-new York City’s populace had grown from around 3.5 million in 1900 come 7.8 million in 1960. Subsequently, its population has grown to 8,398,748, boost of only 7.9% over nearly 60 years, despite really high real estate prices indicating robust demand.

Additionally, new York frequently implemented large infrastructure transforms to support growth. Few of them are highlighted in Table 3.

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Table 3 highlights only major events and also is not exhaustive. Countless of these solution were constructed over the course of decades and also involved a collection of major investments—some by government, rather by personal firms. There room also major infrastructural investments the may have actually been an essential for the financial success of new York however were no specifically regarded the scaling the the city (e.g., the Erie Canal).

New York is no the just city the made these types of investments. For example, many large cities carried out legendary and also controversial water-supply projects. Los Angeles acquired water from far watersheds, as famously depicted in the film Chinatown. Chicago reversed the circulation of the Chicago River. Mountain Francisco controversially dammed the Hetch Hetchy sink in Yosemite nationwide Park because that its reservoir.

The finish of Rescaling

New York scaled by permitting the market to administer much-needed housing and commercial room and by do the facilities investments required to support that growth. As detailed above, significant intrusions right into the industry for actual estate—particularly, rent control and also the new zoning law—dramatically curtailed the capability of the city to rise its building stock. Effects of these plans were surprise for many years since they were enforced when America’s big cities were experiencing declining demand. However today, the aftermath are completely visible, as cities like brand-new York struggle and fail to develop enough housing at center prices.

Similarly, the era of successful significant infrastructural change largely came to an finish with the completion of the interstate highway mechanism (approximately 1975–80), through the exception of the mainly invisible construction of fiber-optic and wireless call networks. Infrastructural growth today takes place incrementally, not on a grand range (e.g., present freeways room expanded, but new urban freeways are not built).

Factors underlying the failure to Scale

Why have cities shed the ability to range today? This report identifies three factors:

Regulatory accretion and social changeLoss of civic capacity to grow during the years of weak metropolitan demandPerceived lack of significant marginal services to expansion by ordinary present residents (and even the perception of an unfavorable effects of growth, together as rising congestion)

Regulatory Accretion and Social Change

The climb of modern zoning laws—and, in the instance of new York City and San Francisco, rent regulation—is only one variable constraining housing construction. Various other legal and social transforms significantly boosted the complexity and degree of challenge in undertaking significant infrastructure projects. In 1970, the National ecological Policy plot (NEPA) take it effect, which forced Environmental influence Statements (EIS) former to building of significant infrastructure. The EIS procedure took roughly two year in the 1970s, however has constantly get an impressive since, reaching about eight years by 2011.<15> NEPA also noted a new legal mechanism for enemies to protect against infrastructural tasks through litigation. Longer project timelines make for an ext political risk, together the planning process would now generally span numerous electoral cycles. Because that example, a proposed brand-new York–New Jersey tunnel project, which had been agreed come by various parties in the two states, was canceled by chris Christie when he was chosen governor of new Jersey.<16>

A 2nd legal readjust was the growth of historical preservation regulations. There had long been a preservation movement in the U.S., yet it gained expansive legit teeth v the National historic Preservation plot of 1966, as well as local ordinances, which came in the wake of the widely decried demolition that Penn terminal in new York City in 1963. By 2014, 27% the the lots, comprising practically 20% of the floor area, in Manhattan were protected under historical preservation laws.<17> These policies restrict or complicated infrastructure advance and curtail extreme redevelopment in historical areas, which room disproportionately located in central city areas.

These legal transforms reflected, in part, cultural change. In particular, the building and construction of urban freeways catalyzed a protest activity that became part of broader upheavals in the 1960s. Building freeways in already-developed areas of a city compelled large-scale eminent domain, demolition of currently structures, and also residential and commercial displacement. In ~ the same time, eminent domain and also demolition were put to controversial use in the company of urban renewal and also “slum clearance” efforts.

Today, countless of these tasks are perceived as mistakes. They created a far-ranging and understandable publicly backlash. Among the most famous freeway revolts associated the proposed reduced Manhattan Expressway in brand-new York, which would have forced large-scale demolitions in Greenwich Village.<18> by the finish of the 1970s, building and construction of new freeways through developed urban locations had largely ended in the unified States. 

These protest movements might seem favor things that the past, but their results linger today. The protests assisted lead to the institutional structures, and increased political capacity in neighborhoods, that inhibit real-estate development. They helped develop an environment in which regulation, and also political work to manipulate that regulatory environment, has sustained rising housing prices as building-stock development fails to store up through demand.

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Loss of public Capacity come Grow

America’s superstars should remember just how to think prefer cities that are still in their development phase. Countless of lock experienced populace loss during the era that suburbanization and also the “urban crisis.” mountain Francisco lost populace for three straight decades. These regions focused on accommodating suburban growth, and also then fell to a slow-growth plateau. As soon as their metropolitan centers started revitalizing in the 1980s and also 1990s, they had excess housing, transit, and also infrastructure capacity because they had previously seen far-reaching population and also job declines. Together they regrew, they can simply reuse this spare capacity without much brand-new building.