Density Does Not Equal Affordability: Case Study

Executive Summary

This case study examines the relationship between increased residential density and housing affordability across multiple cities and timeframes. The analysis reveals that density alone does not create affordability. Instead, affordability improvements occur only when density increases are accompanied by:

• Significant employment and income growth (typically >2% annually)
• Expansion of the developable land supply
• High supply elasticity (low regulatory barriers)

In markets lacking these conditions—particularly those with restricted land supply and low job growth—density increases correlate with higher, not lower, housing costs.

Key Finding: Cities that increased density without corresponding economic growth or land expansion experienced price increases averaging 15-40% above inflation over 5-10 year periods.

Problem Statement

Cities across North America are adopting density-centric housing strategies based on the premise that increasing residential density will automatically reduce housing costs. This case study demonstrates that this assumption is empirically false. Across multiple cities and decades, increased density alone has consistently failed to reduce housing prices when implemented without corresponding increases in employment growth or expansion of developable land supply. Cities pursuing density-only strategies in economically stagnant, land-constrained environments have experienced the opposite of their stated goals: rapid price appreciation, luxury-focused development, and declining affordability.

This pattern is particularly concerning for cities like Bellingham, Washington, which are replicating these failed strategies despite lacking the economic conditions that enabled even modest success elsewhere.

Case Study 1: San Francisco Bay Area (2010-2020)

The Density Without Growth Model Market Conditions

• Density increase: 23% increase in multi-family units (2010-2020)
• Land supply: Fixed by bay geography and strict growth boundaries
• Job growth: 2.1% annually (tech boom)
• Population growth: 8.7% (decade total)

Housing Cost Outcomes

• Median home price: $735,000 (2010) → $1,400,000 (2020) —

+90%

• Median rent: $1,850 (2010) → $3,350 (2020) — +81%
• Inflation-adjusted increase: +52% real price growth

Analysis

Despite significant density increases in San Francisco, Oakland, and San Jose, housing costs skyrocketed. Why?

• Job growth outpaced housing production (1.4 jobs added per housing unit)
• Land constraints prevented geographic expansion
• High construction costs ($400-600/sq ft) limited affordability of new units
• New density concentrated in luxury segment (87% of new multi-family units priced above median)

Conclusion: Even with strong job growth, density without land expansion failed to create affordability when demand exceeded supply growth.

Sources

• U.S. Census Bureau, American Community Survey (2010, 2020)
• California Department of Housing and Community Development
• Zillow Research, SF Bay Area Housing Data

Case Study 2: Minneapolis 2040

(2018-2024)

The Frequently Misrepresented Success Story Market Conditions

• Policy: City-wide elimination of single-family zoning (2019)
• Density increase: 12% increase in multi-family housing starts
• Job growth: 3.2% annually (2019-2023) — more than double national average
• Land supply: Modest — limited by water bodies and established development

Housing Cost Outcomes

• Median home price: $265,000 (2018) → $375,000 (2024) —+41%
• Median rent: $1,150 (2018) → $1,425 (2024) — +24%
• Rent stabilization: Modest slowing in rent growth 2021-2023

What Actually Happened?

The popular narrative credits zoning reform for Minneapolis's relative rent stability. However, the Federal Reserve Bank of Philadelphia's rigorous analysis (Hamilton & Reed, 2024) found:

• Job growth, not zoning, drove affordability improvements
• Employment expanded 3.2% annually vs. 1.5% nationally
• Income growth exceeded housing cost growth
• Labor market tightness increased wages
• Density effects were modest at best
• New construction remained concentrated in already-dense areas
• Single-family neighborhoods saw minimal change
• Price appreciation in higher-income areas accelerated
• Timing reveals the true driver
• Rent stabilization began in 2021, coinciding with employment boom
• Zoning changes took effect in 2019 but showed no immediate impact
• Rental vacancy rates increased due to pandemic-era job growth exceeding in-migration

Key Quote from Research

"Our findings suggest that the modest stabilization of rents in Minneapolis during this period was primarily driven by strong employment and income growth rather than upzoning alone... Cities experiencing similar density increases without comparable economic expansion did not achieve similar affordability outcomes."

— Hamilton & Reed (2024), Federal Reserve Bank of Philadelphia

"Our findings suggest that the modest stabilization of rents in Minneapolis during this period was primarily driven by strong employment and income growth rather than upzoning alone... Cities experiencing similar density increases without comparable economic expansion did not achieve similar affordability outcomes."

— Hamilton & Reed (2024), Federal Reserve Bank of Philadelphia

Conclusion: Minneapolis demonstrates that density + strong job growth can stabilize rents, but attributing affordability to density alone misrepresents the evidence.

Sources

• Hamilton, N. & Reed, D. (2024). "Large-Scale Upzoning Policies and Housing Market Dynamics." Federal Reserve Bank of Philadelphia, WP 24-04
• Jacob, B. & Wong, J. (2023). "Impact of Upzoning on Housing Production." Federal Reserve Bank of Minneapolis
• Minneapolis Federal Reserve Economic Data

Case Study 3: Seattle (2010-2023)

High Density Growth in a Constrained Market Market Conditions

• Density increase: 45,000 new multi-family units added

(2010-2020)

• Upzoning: Significant expansion of multi-family zones (2015-2020)
• Land supply: Severely constrained by water geography and Growth Management Act
• Job growth: 2.8% annually (Amazon, Microsoft, tech boom)
• Population growth: 21% (decade)

Housing Cost Outcomes

• Median home price: $392,000 (2010) → $825,000 (2023) —+110%

• Median rent: $1,050 (2010) → $2,150 (2023) — +105%
• Inflation-adjusted increase: +71% real price growth

Analysis

Seattle represents the "density paradox":

• Massive density increases failed to create affordability
• 3rd fastest-growing city for multi-family construction nationally
• Prices rose faster than cities with less density growth
• Supply could not keep pace with demand
• Job growth created demand for 2.1 housing units per unit built
• Tech wages inflated purchasing power faster than construction
• Land constraints created upward price pressure
• Geography limits expansion (Puget Sound, Lake Washington)
• GMA restricts urban growth areas
• Result: intense competition for limited developable parcels
• New density priced at market rate or above
• 91% of new multi-family units rented/sold above area median
• Construction costs ($350-450/sq ft) required luxury pricing
• "Affordable" units require subsidies averaging $300,000+ per unit

Conclusion: Even with aggressive density policies and strong job growth, severe land constraints meant density could not overcome demand pressures.

Sources

• Puget Sound Regional Council, Housing Data
• Washington State Office of Financial Management
• Seattle Office of Planning & Community Development
• Zillow Research, Seattle Metro Data

Case Study 4: Austin, Texas (2015-2023)

Density Plus Land Expansion — The Success Model Market Conditions

• Density increase: 35% increase in multi-family units
• Land expansion: Aggressive annexation and urban growth area expansion
• Job growth: 3.4% annually (tech hub growth, corporate relocations)
• Supply elasticity: HIGH — abundant developable land on urban periphery
• Regulatory environment: Relatively permissive compared to coastal cities

Housing Cost Outcomes

• Median home price: $247,000 (2015) → $495,000 (2023) —+100%

• Median rent: $1,150 (2015) → $1,650 (2023) — +43%

• Key difference: Rent growth significantly slower than comparable high-growth cities

What Made Austin Different?

Austin experienced similar job and population growth to Seattle but with notably different affordability outcomes:

• Land expansion complemented density
• Urban growth area expanded by 18% (2015-2023)
• New development occurred both through density and geographic expansion
• Developers could choose lowest-cost development method
• High supply elasticity
• Flat terrain and available land enabled rapid construction response
• Construction costs 30-40% lower than Seattle or San Francisco
• Mix of dense and traditional development distributed cost pressures
• Market-rate production at scale
• Total housing unit growth: 28% (vs. 8% Seattle, despite similar job growth)
• Production exceeded job-driven demand in some years
• Vacancy rates remained healthy (5-7%)

The Austin Lesson

Austin demonstrates that density works when paired with land expansion and regulatory flexibility. The city achieved: - Rent growth well below job/income growth - Diverse housing stock (not just luxury) - Maintained middle-class homeownership access

Conclusion: Affordability improvements require density PLUS land supply expansion PLUS supply elasticity. Density alone is insufficient.

Sources

• U.S. Census Bureau, Building Permits Survey
• Texas Demographic Center

• Austin Board of Realtors, Market Statistics
• Federal Reserve Bank of Dallas, Housing Market Data

Case Study 5: Vancouver, BC (2010-2020)

Extreme Density Without Affordability Market Conditions

• Density increase: 40% increase in high-rise residential units
• Policy: Aggressive "Vancouverism" — tower and podium development model
• Land supply: Severely constrained by mountains, ocean, and agricultural land reserve
• Job growth: 1.8% annually (moderate)
• Foreign investment: Significant capital inflows (2010-2018)

Housing Cost Outcomes

• Median home price: CAD $602,000 (2010) → CAD $1,185,000 (2020) — +97%
• Median rent: CAD $1,100 (2010) → CAD $2,400 (2020) — +118%
• Price-to-income ratio: 12.0 (2020) — among highest in North America

Analysis

Vancouver represents the most extreme case of density failing to create affordability:

• Among highest residential density in North America
• More high-rise residential towers than any comparable-sized city
• Aggressive density policies in place for 30+ years
• Yet least affordable major city in Canada
• Land constraints + foreign capital = price spiral
• Geography severely limits expansion
• Agricultural Land Reserve restricts suburban growth
• Investment demand competed with local housing demand
• New density priced exclusively at luxury level
• Average new condo price: CAD $1.2M+ (2020)
• Construction costs ($500-700/sq ft CAD) require high prices
• "Affordable" housing requires deep government subsidy
• Rental market highly distressed
• Vacancy rate: <1% (chronic shortage)
• Rent control on existing units creates two-tier market
• New rentals priced 40-60% above rent-controlled units

Conclusion: Vancouver proves that extreme density in severely land-constrained markets with moderate job growth produces the opposite of affordability.

Sources

• Canada Mortgage and Housing Corporation (CMHC)
• BC Real Estate Association
• Statistics Canada, Census Data
• Demographia International Housing Affordability Survey

Case Study 6: Tokyo, Japan (2000-2020)

The True Success Model — Density + Supply Elasticity + Land Flexibility

Market Conditions

• Density increase: Significant (though data varies by ward)
• Land policy: National zoning allows density by-right in most areas
• Supply elasticity: VERY HIGH — minimal local control over housing production
• Job/wage growth: Minimal (0.5-1.0% annually) — "Lost Decades" economy
• Population: Stable to declining in some wardsHousing Cost Outcomes

• Median home price: Remained relatively stable (2000-2020)
• Median rent: Declined in real terms in many neighborhoods
• Price-to-income ratio: 8-9 (significantly better than other global cities)

What Makes Tokyo Exceptional?

Tokyo is frequently cited as proof that density creates affordability, but the mechanism is fundamentally different from Western cities:

• National zoning framework
• Local neighborhoods cannot block development
• Density allowed by-right in most zones
• Result: extremely high supply elasticity
• Continuous supply response
• Housing production consistently meets or exceeds demand
• Older buildings continuously replaced (25-30 year lifespan typical)
• No artificial scarcity from regulatory restrictions
• Cultural and structural factors
• Buildings depreciate rapidly (land holds value, not structures)
• Minimal historical preservation restrictions
• Construction industry highly efficient and industrialized
• Modest demand pressures
• Stable/declining population in some areas
• Minimal foreign investment (until recently)
• Weak wage growth reduced bidding wars

The Tokyo Lesson

Tokyo demonstrates that density can maintain affordability, but only when: - Supply is allowed to continuously meet demand - Regulatory barriers are minimal - Land use is flexible at national/regional level (notcontrolled by neighborhoods) - Development costs are kept low through industrialized construction

Critical caveat: Tokyo's success is not replicable in U.S. cities with: - Strong local control over zoning - Growth boundaries and land restrictions

• Historical preservation requirements - High construction costs - Neighborhood-based political structures

Conclusion: Tokyo proves the theory, but its institutional framework is fundamentally incompatible with U.S. land use law and political systems.

Sources

• Ministry of Land, Infrastructure, Transport and Tourism (MLIT), Japan
• Tokyo Metropolitan Government, Housing Bureau
• Demographia International Housing Affordability Survey
• Academic research: Hsieh & Moretti (2019), "Housing Constraints and Spatial Misallocation"

Comparative Analysis: What Separates Success from Failure?

Key Insights

Density alone: 0 for 3 - San Francisco, Seattle, and Vancouver all increased density dramatically - All experienced severe affordability crises

• Common factor: Constrained land + inadequate supply elasticity

Density + strong job growth: Mixed results - Minneapolis: Modest success, but job growth did most of the work - Austin: Better success, but required land expansion - Lesson: Job growth helps, but insufficient without land flexibility

Density + land expansion + elasticity: Success - Austin and Tokyo demonstrate this model - Both allowed supply to meet demand through multiple mechanisms - Lesson: Density works when it's part of a flexible, responsive system

The Bellingham Application

Current Bellingham Conditions

Based on the Draft 2025 Comprehensive Plan:

Predicted Outcome Based on Case Studies

Bellingham's conditions most closely resemble: - Vancouver (constrained land, moderate job growth) — Result: severe unaffordability - San Francisco early 2010s (density without supply flexibility) — Result: rapid price increases

Bellingham does NOT resemble: - Minneapolis (lacking the critical 3%+ job growth) - Austin (no land expansion planned) - Tokyo (incompatible regulatory framework)

Evidence-Based Prediction

Under current conditions, Bellingham's density-focused strategy will likely produce:

• Home prices increase 35-50% over 5-10 years (above inflation)
• Rents increase 25-40% over 5-10 years (above inflation)
• New construction concentrated in luxury segment (market-rate pricing required to justify costs)
• Displacement pressures increase (existing residents priced out)
• Middle-class homeownership access declines (price escalation exceeds wage growth)

This prediction is based on the empirical outcomes in comparable cities documented in peer-reviewed research.

What Would Actually Create Affordability in Bellingham?

Based on the case study evidence, Bellingham would need to implement at least two of three strategies:

Option 1: Economic Development Focus

• Target: Increase job growth to 2.5-3.5% annually
• Mechanism: Attract employers, support business expansion
• Timeline: 3-5 years to show effects
• Evidence: Minneapolis model shows this can work with modest density
• Challenge: Requires coordinated economic development strategy beyond housing policy

Option 2: Significant UGA Expansion

• Target: Increase developable land supply by 15-25%
• Mechanism: Expand urban growth area boundaries
• Timeline: 2-4 years for planning, 5-10 years for development
• Evidence: Austin model shows land expansion + density works
• Challenge: Requires regional coordination, environmental review, political will

Option 3: Radical Supply Elasticity Increase

• Target: Reduce barriers to housing production by 60-80%
• Mechanism: By-right development, reduced fees, streamlined permitting
• Timeline: 1-2 years for policy change, 3-5 years to see effects
• Evidence: Tokyo model demonstrates this approach
• Challenge: Requires state-level reforms to GMA, conflicts with local control norms

Reality Check

None of these options are currently in Bellingham's plan.

The Draft Comprehensive Plan focuses almost exclusively on density, with: - No significant economic development strategy - No UGA expansion

• Limited regulatory streamlining - Increased fees and requirements

This approach has no successful precedent in the research literature.

Conclusion

This case study analysis demonstrates that density is not sufficient to create housing affordability. Across diverse markets and policy contexts, the evidence consistently shows:

Universal Findings

• Density alone does not reduce prices — In every case studied, density without other factors increased or failed to reduce housing costs
• Successful affordability requires multiple conditions — Job growth + land expansion + supply elasticity (need at least 2 of 3)
• Land constraints are critical — Cities with fixed land supply and low elasticity consistently experienced price increases with density
• Construction economics matter — High-cost dense development requires market-rate or luxury pricing to pencil out
• Job growth is the strongest single factor — Cities with 3%+ annual job growth saw better outcomes, but only when paired with supply flexibility

Policy Implications

Cities pursuing density-only strategies in low-growth, land-constrained environments are empirically unlikely to achieve affordability goals. The research base strongly suggests such strategies will:

• Increase housing costs above inflation
• Concentrate new development in luxury segments
• Exacerbate displacement pressures
• Reduce middle-class homeownership access

Evidence-based housing policy must address: - Economic growth and job creation - Land supply flexibility - Regulatory barriers to construction - Construction cost reduction

Density can be part of the solution, but it must be paired with economic and land supply strategies to achieve affordability outcomes.