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St. Petersburg and Housing Regulations

While I’m no longer in Russia (on to France), I wanted to write a quick post about St. Petersburg’s building height regulations. It was one of the things I noticed immediately after landing in the city. Buildings are never more than 10 stories in height. Meanwhile, according to the Russian real estate magazine “Bulleten Nedvizhimosti,” the average cost of housing per square meter in the secondary market is 94,721 rubles (I would advise translating the magazine into English). According to the Federal State Statistic Service, Russian’s federal stat agency, the average cost of housing per square meter in the secondary market in all of Russia is 56,370 rubles (PDF). St. Petersburg is significantly more expensive than the national average.

In terms of population density, St. Petersburg ranks 599 out of 875 urban areas with a population greater than 500,000 in the world (PDF). It ranks 22nd out of 60 Russian cities in terms of population density. The reason? Building height restrictions. The Construction Codex of 1844 states that no building can be higher than the Winter Palace, which is just 23.5 meters tall. Over the past few decades, repeated attempts to construct high rises have failed due to opposition from the city’s citizens. Last August, city hall approved the construction of a 463 meter skyscraper, but activists have already pushed back and are urging their local politicians to retract the approval.

The height restriction limits the available housing supply in the city, driving up prices and rents. Higher rents means that businesses must charge more for their products and services in order to cover their costs. The height restriction thus drives up the cost of living throughout the entire city. Having just been there for a few days, I can attest to the high prices (though I’m sure part of that was tourist traps).

Protesters argue that allowing taller buildings will ruin the city’s skyline and historic landscape. To some extent, St. Petersburg is a beautiful city because it’s not a maze of 500-meter buildings. But that doesn’t mean that the 23.5 meter limit is acceptable either. The city should raise the cap on building heights – maybe to 75 meters, maybe to 100. This would keep the city’s skyline in tact  while drastically increasing the housing supply and lowering prices. Housing costs will not be as affordable as they could be if St. Petersburg removed the cap altogether, but the extra costs are what the city’s citizens pay to retain the beautiful views.

Frequently in the U.S., stupid city policies act in the same manner. Policymakers don’t even seem to understand the connection between height restrictions and high prices (Go read Matt Yglesias for more). They never propose loosening housing regulations as a way to fix the problem. At least in St. Petersburg, the city seems aware that the 169-year-old code drives up prices and have approved the building of skyscrapers in recent years. In this case, the opponents of taller buildings – mostly citizens of the city itself – are the ones preventing the implementation of sensible policies. Hopefully, city hall will not cave in to pressure yet again and St. Petersburg will be home to its first skyscraper.

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Categories: Economic Policy
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