Should cheap land be on cities’ wishlist to Santa? Yonder peasant, who is he? Where and what his dwelling? Sire, he lives a good league hence, Underneath the mountain Right against the...
Should cheap land be on cities’ wishlist to Santa?
Yonder peasant, who is he?
Where and what his dwelling?
Sire, he lives a good league hence,
Underneath the mountain
Right against the forest fence
By Saint Agnes fountain.
~ Good King Wenceslas
One of the most common myths we encounter at Centre for Cities is the belief that cheap land is an asset for city economies. Sometimes we see commentators and activists express surprise that anyone would want to live in expensive cities like York, Brighton, or Cambridge when both housing and land in their city is much cheaper. From that perspective, the housing shortage could easily be solved, and growth in poorer cities could be given a boost if people chose to move away from expensive cities to cheaper cities.
Where this falls down is that it sees the cost of housing as unrelated to people’s choices. In reality, we can see that the cost of land is strongly linked to the productivity of the local economy: cities that are more prosperous also have higher land prices.
What lies behind this is the different roles that cities play in the economy. Cities with lots of highly-skilled, productive workers and a dense city centre full of jobs, like Reading or Milton Keynes, see high demand from firms to locate there. Highly-skilled workers, in turn, locate in these cities to participate in the strong local labour market. Together, these drive up prices for land.
Cities with cheap land like Mansfield face the opposite situation – they have a lack of highly-skilled workers and a rather weak local labour market. Cheap land in these cities reflects a struggling economy, rather than an economic advantage.
This isn’t to say that expensive land is good. Land is a cost, and firms and people obviously want to pay as little as they can to access the things they need. That’s why expensive cities should supply enough housing and commercial property to stabilise rents in the face of high demand.
But some activity needs highly-skilled workers, and highly-skilled workers need a local labour market that can offer them high wages and progression. For cities looking to reinvent their economies around such high-skilled work, offering cheap land won’t cut it. Instead, cities should focus on offering the very things that high-skilled workers and firms need – each other.
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