The High Price of Short Buildings

Dion Haynes writes for the Post that office rents in downtown Washington, DC are now higher than in Manhattan. Normally what happens when you get high rents is that people respond with bigger buildings. Which is why Manhattan has such big office buildings. DC office buildings, by contrast, are quite short. So are developers working on responding to the high demand by building taller buildings? Of course not! Taller buildings are illegal in Washington DC.

Consequently, instead of building up real estate developers in the DC area build “out,” putting more and more jobs in the suburbs.

I know many people enjoy the aesthetic results of this policy. I disagree, but leaving that aside I think few supporters of the short buildings policy really appreciate the extent of the costs involved. Leave ecological issues aside. If a higher proportion of the area’s office workers were in DC rather than the suburbs, then the volume of retail sales in the city would go up. That’s more service-sector jobs for low-skill DC residents. That, in turn, means less demand for social service expenditures. It also means higher sales and income tax revenue. All of which means that social services could be more generous to those in need, with somewhat lower sales and income tax rates. The lower tax rates would make the city a more attractive place to live or do business, raising property values across the board.

It all sounds good to me. More generally, governments of growing municipalities need to understand that urban space is a hugely valuable commodity. Rules which mandate that the space be used inefficiently are extremely costly. Sometimes it’s a price worth paying — you wouldn’t want a city with zero parks — but there are limits to how much it makes sense to sacrifice for aesthetics.