Opponents of high-density housing development often argue that, contrary to traditional economic theory, as the housing supply increases, the price of housing increases rather than decreases. They observe more efficient, higher-capacity buildings replacing older outdated building in their neighborhood, often accompanied by higher per-unit rents. Thus, they conclude that the ultimate goal of developers is to earn the highest profits possible at the expense of the community. While it is true that new buildings can have higher rents and that gentrification is a valid concern when it comes to redeveloping urban neighborhoods, halting analysis at this point irresponsibly places blame on the wrong parties and misses the big picture.

Firstly, it overlooks the fact that high rents are generally not due to a developer’s pursuit of profit, but rather due to the multitude of regulatory barriers developers must overcome in the building process. Such barriers significantly increase the cost of development, thus requiring developers and building managers to charge higher rents in order to make their projects financially viable under the constraints handed to them by financiers. Under the guise of claiming to protect renters’ interests, opponents of new development in their neighborhoods protect their own ‘NIMBY’-based interests by citing higher rents that result from inhibitive policy as grounds for even more regulatory restrictions for development.

However, if these individuals were truly concerned with the availability of reasonably priced housing, they would understand that the real way to lower rents is to reduce barriers to entry facing developers, thus increasing competition between suppliers. Rather than trying to enact inefficient policy to limit profit-maximization beyond socially optimal levels, why not let market forces do so? By lowering regulatory barriers, more developers could enter the market, increasing the supply of housing and creating greater competition among landlords. Though it is possible for individual new buildings to violate the general trend and have higher than average rents, overall, shifting the burden of competition away from tenants and towards landlords exerts downward pressure on housing prices.

Not only does this make logical sense from a theoretical economic perspective, but it is also supported by the data. It has taken time for the attempts to increasing housing density to take effect, but as a recent Seattle Times article reports, rents in Seattle have finally started to go down after a long period of increasing rents. Additionally, they project that rents should continue to fall for the coming months. This new data shows that while its effects may not be immediate, new development is key to reducing rents.

Furthermore, another Seattle Times article shows that Seattle has finally started growing faster than its suburbs. Plagued by the effects of an extensive highway system, large corporations settling in the suburbs, and a lack of an initial comprehensive plan between local municipalities to manage patterns of growth, much of the Seattle Metro area’s growth over the past several decades has taken the form of suburban sprawl. However, aided by increased housing supply and gradually decreasing housing costs, Seattle has recently been able to channel demographic growth more efficiently into urban areas.