DC Height Act: Not Necessarily the Villain Yglesias Thinks
Matthew Martin 10/02/2012 06:01:00 PM
I believe Yglesias when he says that if we repealed the act, more people could live in DC and rents would be cheaper. But it isn't at all clear that this is optimal. Let me explain.
Suppose--as I think is the case--that people like the open-air feel of DC compared to living in the man-made caverns of Manhattan. In DC, there are lots of open vistas where you can see all the neo-classical monuments, and the sun can always reach your window. In Manhattan, you can only see the glass-panneled office space across the street, and the sun only shines in your living room twice a year. That means that there is some value-added to having a DC-type city as opposed to a New York-type city, and the amount that people are willing to pay to move from NYC to DC can be measured in the difference between the utility they get from each.
Unfortunately, the fact that people like the atmosphere of Washington DC better than New York City is not enough to guarantee that a free market would provide the former as an option. The reason is that the impact of a single development is negligible. That means that even though a building developer knows people will pay more to live in DC than in New York City, they also know that plopping a single New York City type skyscrapper in the middle of the DC skyline won't significantly change the atmosphere, so they will always choose the higher-density option. The problem is that this is exactly the calculus that all landowners in DC do--so all of them will choose to build tall skyscraper even though they will all be worse off afterwards.
This means that there is a trade off. There is the higher benefit of cramming more people in a smaller area compared to the lost benefit of having a DC-style urban environment. The optimal policy, then, is to have a zoning restriction such as the Height Act, and set the height at just the right level so that the marginal gains from having more residents equals the marginal loss from loosing DC's charmming atmosphere.
Of course, this is not the calculus that Yglesias is doing, since he, apparently, hates sunlight.