Population density in the urban core leads to more innovation and thus increased job growth. Density alone, however, is not a panacea for the world’s economic problems. If that were the case, emerging cities in Asia teeming with super-dense populations would be more economically successful than New York City, which they are decidedly not (at least, not yet).

In order for the urban density equation to work, the city’s inhabitants must be educated and its local culture and government institutions must support entrepreneurship, such as in California’s Silicon Valley.  As a result, the average household income in the Silicon Valley in 2009 was $85,000 — nearly twice that of the statewide average. [For more information on how the education and affluence of certain communities impact local real estate markets, see the October 2011 first tuesday article, Age and education in the golden state.]

Above all other factors, cities act as incubators for job growth due to the close proximity of its residents. Individuals live closer to one another in cities, work in confined spaces, dine in packed restaurants and so on. This environment breeds innovation as people share their ideas, collaborate on business ventures and ultimately determine the fate of suburbia. [For more information on the role of suburbia in California’s real estate market, see the July 2011 first tuesday article, The fate of suburbia.]

first tuesday take:  Once innovation, production and incomes pick up in our urban centers, a long delay awaits the trickle down of wealth to even the closest suburbs.

Real estate’s lost decade is only in its formative years for brokers and agents, as well as builders. Aside from gaining new skills in property management, private money lending, business opportunities and nonresidential leasing, the California brokerage community would do well to study and become softly but persistently vocal about the myriad barriers facing urban development.

The most troubling are the woefully restrictive height and density restrictions posed by frontier-mentality city councils prone to favor suburban sprawl, influenced by the yearning for a home where the buffalo roam.

As always, the racist rent-control effect limits residential investment which, if allowed with long-term certainty, would put a stop to the need for controls, since supply would quickly catch up and overtake the demand for rental housing and condos.

re: “One Path to Better Jobs: More Density in Cities” from the New York Times