The Economic Effects of Density

WHAT THE AUTHORS EXAMINED

The study evaluates how increased density affects:

• Housing costs

• Wages

• Land prices

• Construction costs

• Infrastructure efficiency

• Public service efficiency

• Commuting patterns

• Pollution

• Inequality

Cities analyzed span North America, Europe, Asia, and Australia — giving the study global applicability.

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KEY FINDING #1 — Density Increases Construction Costs

The authors find a clear, statistically significant relationship:

 

Higher density → higher construction costs.

Why?

• Taller steel/concrete structures

• More complex engineering

• Elevator and fire code requirements

• Higher labor costs in dense metros

• Limited staging space for construction

• Higher regulatory complexity

 

This alone disproves the “density reduces construction costs” myth.

If it costs more to build, it costs more to rent or buy.
Period.

 

KEY FINDING #2 — Rents Increase Faster Than Wages

One of the most important findings:

 

Rent elasticity = 0.15
Wage elasticity = 0.04

 

That means:
For every 1% increase in density, rents increase nearly 4× faster than wages.

This flips the Sightline narrative upside down.

Density does produce economic activity…but that economic activity does not benefit renters.

It benefits:

• Landowners

• Developers

• Cities through higher tax assessments

• Firms that profit from urban agglomeration benefits

 

Renters alone fall behind.

 

KEY FINDING #3 — Renters Are Net Losers in Dense Cities

The authors do something rare:
They calculate net welfare — benefits minus costs.

Even after adjusting for:

• Shorter commutes

• Lower public service costs

• Better amenities

• Energy efficiency

The result:

 

“The net benefit remains negative for renters.”

This is a devastating finding for the density-as-affordability argument.

Even in the BEST-case scenario, renters lose ground financially in dense cities.

 

KEY FINDING #4 — Density Raises Land Prices

Because more people are competing over the same limited amount of land:

Land values rise disproportionately.

The authors explain:

• When cities restrict expansion

• When land supply is artificially constrained

• When zoning prevents outward growth

Density compounds scarcity instead of relieving it.

This is exactly Bellingham’s situation:

• 0 of 15 UGAs annexed

• Population up 30%+

• No new land supply

• Density piled on top of scarcity

This isn’t affordability — it’s a pressure cooker.

 

KEY FINDING #5 — Density Increases Infrastructure Pressure and Inequality

The study also documents negative externalities:

• Increased congestion

• Higher pollution exposure

• Higher noise

• Social inequality pressures

• Amenity crowding

Public services may become more cost-efficient — but the burden shifts to residents.

 

KEY FINDING #6 — Density Does NOT Create Affordability

This is the bottom line.

The study concludes:

• Density increases aggregate economic output

• But the gains are captured by landlords, property owners, and governments

• Renters face higher costs and receive fewer financial gains

This is exactly what we see in Bellingham:

• Renters pay the highest cost per square foot in the city

• Dense apartments generate far higher impact and connection fees than single-family homes

• The City prefers density because it produces the most revenue

• None of this makes housing cheaper for residents

WHY THIS STUDY MATTERS FOR BELLINGHAM

Everything this study identifies exists in Bellingham:

✔ Scarcity of land due to 20 years of non-annexation
✔ Rising construction costs
✔ Rising rents outpacing wages
✔ Renters as net losers
✔ Density producing higher tax assessments and fees
✔ The City financially benefiting while residents struggle

When Bellingham says:

 

“Density creates affordability.”

This study proves:

 

Density increases costs unless paired with land expansion or massive subsidies.
Bellingham has neither.