Why Starting New Cities Isn’t a Quick Fix for the Housing Crisis

The US's biggest cites are struggling. But is building new cities from scratch the answer?

America’s biggest cities are struggling. The housing shortage, growing since the ‘70s, has reached a boiling point. Rents are skyrocketing. Rates of homelessness are increasing. 

While remote work has enabled some people to relocate from expensive metro areas, many of the smaller cities and towns they went to have quickly developed housing shortages of their own.

America wasn’t always like this — we once built all those countless cities and towns, after all.

A common thread: American towns and cities are no longer able to adapt to new residents as they once were, thanks to rigid zoning codes and tangled bureaucracy that makes infrastructure cost far more than it does in Europe or Asia. Even a simple bus lane can take over a decade to implement. And trying to change this can result in endless political fights.

So what if we just started new cities?

The simple, alluring idea has popped up everywhere — from the billionaire Marc Lore (who wants to build a techno-utopia called “Telosa”) to the socialist magazine Current Affairs (which wants new cities to solve California’s housing crisis).

And around the world, a number of new cities are actually in progress — from Saudi Arabia to China.

American towns and cities are no longer able to adapt to new residents as they once were.

Given this, you might think that new American city proposals would be quickly embraced. However, when Telosa was proposed, the reaction online was swiftly negative.

Another billionaire vanity project.”

“People just don’t want to do the hard work of running cities.” 

And there’s good reason to be skeptical: utopian city proposals have failed throughout history.

On the other hand — what if this actually is the right time to do it? 

Remote work is a new possibility. New transit forms are taking off (literally!). We have a record-setting nationwide shortage of housing.

And if status quo cities are taking decades to simply adjust road lanes, do large-scale challenges like climate change simply demand a fresh start?

And hell, who hasn’t fantasized about running a dream city? Why can’t we have nice things? I wanted this idea to work.

So I asked some experts why we can’t just build the city of our dreams from scratch.

It turns out there’s some pretty good reasons.

The Two Reasons It’s So Hard to Build a New City

Alain Bertaud has been a resident urban planner at cities from New York to Paris and Bangkok to San Salvador, and for 19 years, he was principal urban planner for the World Bank.

A bespectacled Frenchman with a knack for smiling and frowning at the same time, he currently teaches urban planning at New York University and is the author of Order Without Design: How Markets Shape Cities.

Credit: Dennis Letbetter
Urban planner Alain Bertaud.

His take on the primary reason planned cities in new locations often fail? Cash flow.

If you’re not an avid reader of the business section, let’s paint a picture.

Imagine you’re driving out in the vast countryside, wondering why nobody lives in this perfectly good land. You stop and decide you’re going to build a city right there.

First, you’ll need the basics. A sewer system; nobody’s going to move to a city without one. But here’s the catch: you can’t start by building a sewer system for 5,000 people and then gradually extend it. If you want your city to quickly have 50,000 people, you have to build a sewer system for 50,000 people right away. 

You also need electricity for 50,000 people. Roads. Telecommunications. Water. Very basic infrastructure we take for granted gets extremely expensive fast, even if you are a billionaire. And you don’t have the thing most cities depend on to pay for them: people. Taxpayers, homeowners, businesses. You’re trying to pay for this all when the population of the city is, well, you. 

And we’re just talking about a city of 50,000 people, good enough to be the 10th largest city in Kansas. Telosa aims to scale to a million residents within 20 years.

Very basic infrastructure we take for granted gets extremely expensive fast, even if you are a billionaire.

Now, you have a trick up your sleeve: debt. You can borrow money by persuading investors to buy into your vision of the city and hope residents come quickly. But you’re likely to run into the second great roadblock.

“Nobody will move to a city because it is high tech or because it has a very impressive sewer system,” Bertaud explains, dashing the dreams of sewer sales-people everywhere. 

“You move to a city because of the people who are living there. It’s human capital which makes the wealth of a city. So how do you attract the first people? A city which has nobody, even if it has roads and schools, is very unattractive. If you are a teacher and say ‘there will be a new school there, I want to move there’, but when you move there is nobody there, so nobody will pay your salary, how would you buy housing? And if there are no schools running, families will not move. And I say schools, but…that’s true for police, it’s true for grocery stores, it’s true for everything.” 

In other words, you have a giant collective action problem. 

“Nobody will move to a city because it is high tech or because it has a very impressive sewer system. You move to a city because of the people who are living there.”

Alain Bertaud

Think of the way many new social apps struggle: they need content to attract users, but they need users to create content. But if you thought getting someone to download a free app and post a cat video was tough, try getting millions to pack up their belongings and sign a lease someplace nobody else lives yet.

And if you fall even a bit short on population growth, that’s the cash flow problem: you won’t have the money to maintain operations or pay debt. Your investors will see it as one of hundreds of other failed city ideas and cut losses, your infrastructure and services will deteriorate, existing residents will leave — and the infrastructure you’ve spent untold millions or billions on will be worth as much as any abandoned ruin in the woods.

When planned cities work — and don’t

So if cities are so hard to start, how are there so many of them?

Planned cities are hardly unheard of — Washington D.C. was one, as were other capital cities like Canberra and Brasilia. But these have a key advantage.

The resources of a national government can provide both a huge source of jobs and the funding to build infrastructure without needing to immediately profit, because it serves a greater long-term national purpose (e.g. bridging the gap between the north and south in the postcolonial United States).

There are current-day national projects aspiring to similar goals: Hong Kong’s new proposed city to address its housing shortage and “prove its loyalty” to China, or Saudi Arabia’s Neom, envisioned as a tourist hub and way to transition the kingdom’s economy off of fossil fuel dependence.

The resources of a national government can provide the funding to build infrastructure without needing to immediately profit.

On a smaller scale, company towns can spring up around mines or factories, military bases can support small communities, and college towns can grow around universities — like anchor stores at a mall. But like malls, if those big tenants struggle — the factory becomes obsolete, the military base closes, the college fails — the whole community can quickly dwindle.

Michael Manville, an associate professor of Urban Planning at UCLA, compares a city taking off to capturing “lightning in a bottle.” After all, who can tell when founding a town if a future resident will start the next big company or it’ll be chosen as the perfect place for a stop on a new transportation system, like Chicago was?

There is also another approach to building new cities that can work: you can build them as extensions of existing cities. It might be less romantic than turning a field into a great city, but that way you can piggyback on their infrastructure — the regular airline flights, the power plants and sewers — and the existing local demand for housing. 

The US is, after all, still building exurban sprawl around city cores. Selling land piecemeal for developers to plunk down a subdivision of a few hundred houses here or there and leaving their residents to drive ever-further to job centers is economically risky (as many a dead mall can attest), requires heavily subsidized infrastructure, and is terrible for the environment. 

“A lot of these cities that got their start in 2000, 2003 — they are pretty much developed — if you go there now you will not know that they were a new city.”

Wade Shepard

But it can be handled differently.

France’s government — after years of unsuccessfully trying to stop Paris from growing and push growth into other regions — finally gave up and decided to build smaller satellite city centers, with museums, parks, etc. in the metro area. The Korean government similarly built satellite cities connected by high-speed trains on the outskirts of Seoul. 

In the United States, the city of Irvine is a private city within the Southern California megapolis — and, freed from the restrictions of most cities, has grown far faster than nearby cities while maintaining leading quality of life. In India, new cities have sprung up organically (if haphazardly) on the outskirts of congested metropolises.

Building “satellite cities” en masse in America, however, may run into the same problems of building up existing ones. Existing residents of the proposed area may not want change, and infrastructure to connect them with the existing city can cost many times more than it does in other countries.

 A city where no blue collar workers can afford to live is not a city anyone wants to live in.

In any case, new extensions to an existing city aren’t really what we think about when it comes to founding a new city — and projects like Telosa don’t seem to be planning to do it, either. 

The closest thing to systematic creation of new cities may be seen in China. Here, government pushes for urbanization and population limits in major cities have spurred the creation of hundreds of new cities — and even private companies specializing in creating them

This has had a mixed track record, with both successes and “ghost cities” that attracted investment but not enough people to be a thriving, self-sustaining place to live. However, even some desolate ones have eventually flickered to life over time as growing demand for housing has seized on this source of supply. 

Ghost Cities of China author Wade Shepard, who has been documenting them since 2006, told Australian Broadcasting Corporation, “A lot of these cities that got their start in 2000, 2003 — they are pretty much developed — if you go there now you will not know that they were a new city.”

Creating new cities doesn’t fix problems with old ones

Another issue with the “just create new cities” approach: It’s not much help to the people who live in LA, New York, or other cities and are currently struggling with rent. 

Often the decision to move to another city isn’t a simple calculation of living costs; it’s deeply intertwined with a person’s family and personal network, work, spouse, school, etc. Forcing people to leave in order to avoid problems with existing cities hardly feels like a fair solution.

Most of the land in many of America’s most populated cities bans the creation of apartments, restaurants, or any use except detached houses.

Furthermore, giving up on accommodating the working class overall (the “if the rent’s too high, move out of the city!” approach) — or failing to address overcrowded conditions or multiple-hour commutes — isn’t just a problem for the people in those situations. A city where no blue collar workers can afford to live is not a city anyone wants to live in. 

It’s one which will always struggle with traffic, with air pollution, with labor shortages, with lower quality and more expensive infrastructure and services — not to mention homelessness and even deadly outbreaks in overcrowded housing.

So what should we do now?

Bertaud agrees the status quo of American cities is bad, but he says rather than build a city from scratch, we should focus on something closer to home: our existing cities’ antiquated zoning systems, which prevent them from evolving from the cities of the past into the ones we need today.

Invented in the 19th century, zoning originally served the sensible purpose of keeping industrial uses like lead smelting away from where people lived. Soon, however, it was adapted to prohibit things as innocuous as duplexes in residential areas with the same zeal as if they were hog-rendering plants.

The result is that most of the land in many of America’s most populated cities bans the creation of apartments, restaurants or any use except detached houses with big yards. Even many of our iconic, historical buildings — not to mention 54% of the city of San Francisco — would be illegal to build today.

Compared with the difficulty of convincing 1 million people to move to an empty field, perhaps changing zoning laws doesn’t look so impossible after all.

These prohibitions create chronic housing shortages in high-demand areas and is a key part of what’s pushed rents and home prices sky-high — and is preventing American cities from adapting to more sustainable and less car-dependent lifestyles.

Building codes and zoning rules are legendarily difficult to reform, with homeowners associations and casual “not in my backyard” sentiment often strangling even minor changes at the neighborhood level.

But compared with the difficulty of convincing 1 million people to move to an empty field — perhaps changing zoning laws doesn’t look so impossible after all. There’s space to build whole new cities in the cities we actually have, if we allow them to get built.


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