Devil's advocate: induced demand. Density increases interactions which are the economic point of cities, and why cities are wealthier than suburbs/rural areas (when suburbs/rural areas aren't juiced by subsidies and loans). Wealthier cities attract migration, migration increases demand for units.
That said, my personal belief is that prices are completely decoupled from demand and are more reflective of a desperation to keep them high for... other reasons.
(Keeping in mind that you are playing devils advocate, and that none of this is directed at you personally)
Induced demand for highways: sure. Well proven. Happens every single time.
Induced demand for housing? Gonna need to see some hard evidence on the time scales, etc.
Housing is very different from highways. People can go from using zero freeway miles to 50 freeway miles a day, if there's slightly cheaper housing further out. It's this drop in pricing that drives demand.
For housing, the increase in demand comes from having, presumable, more amenities, making the dense living more desirable. The change in time for amenities to develop is on the order of years, however. It takes a long time for businesses to develop, build customer bases, etc. And in that time, it's possible to build more housing. Housing scales far far far better than freeways. It's easy to double, triple, quintuple, and even 10x or more the density from single detached units. Freeways don't scale like that.
> Induced demand for housing? Gonna need to see some hard evidence on the time scales, etc.
Seattle: grew the number of units by 25% within the last 12 years. SF: only 5% within that timeframe.
Their price growth curve is nearly identical.
> Housing scales far far far better than freeways. It's easy to double, triple, quintuple, and even 10x or more the density from single detached units.
LOL, no. You have no idea how much city infrastructure costs.
> Freeways don't scale like that.
One mile of subway in Manhattan now costs more than 1000 miles of a 6-lane freeway.
I mean... The very existence of wealthy cities is a sort of proof. Remember that for America to temporarily be one of the few examples where dense cities were less wealthy than spread-out suburbs and exurbs, we had to combine massive subsidies and financing with good old-fashioned racism.
What I don't agree with from GP is the idea of real increases in housing costs for those already in cities. The rising tide lifts most boats, if density isn't being unduly suppressed. So, density increases housing value but also the wealth of city-dwellers, relative to everyone else. Supply keeps up with demand, except where we won't let it.
>the increase in demand comes from having, presumable, more amenities
Not necessarily. It can also come from the increased opportunity for exposure to people and culture.
That said, my personal belief is that prices are completely decoupled from demand and are more reflective of a desperation to keep them high for... other reasons.