29 October 2009

Why do rich people live in the hills?

This [unedited] guest post is by a student in my EEP100 class (background post).
Please praise/critique/comment on its economic quality and importance to you.


Emmeline Sun says:

It’s common to drive through an average suburban or metropolitan city and find yourself driving toward the “rich neighborhoods” the higher up you go. Take an urban setting like Berkeley, California for example. The houses and tenements located in South Side (note: closer to sea level) tend to be old and shabby. Yet as you go up toward North Side, the houses begin to straighten out, and you see a shiny imported mosaic window here, a well-kept garden there. They appear in better condition, and are clearly more expensive than their South Side counterparts, though North Side and South Side are less than a few miles apart. So why is this?

The higher price-value operates in a two-fold way. Firstly, developers and contractors would much rather build and place commercial sites somewhere flat- this is due to the greater cost/difficulty of building in the hills. If a firm or individual can reduce variable costs, net profit will be greater. Now, because of the lack of commercial development, the hills become a desirable area to live. Housing prices shoot up because prospective home-owners (with greater income) see the tranquility and safety (and view) of the hills as a fair trade-off for the cost. For anyone purchasing a home here, their personal benefit from living in the hills will exceed costs. And the costs will naturally be (at a base level) slightly higher than they would be on level ground, as housing development is more expensive in the hills.

Furthermore, hilly areas are often removed from the community, which makes it harder to live there. Travel time increases and people often have to commute. Public transportation rarely runs in these areas and many hillside home-owners have cars. To own a car or otherwise meet these inconveniences, one must have dispensable resources, i.e., a greater income. This equates to a higher budget constraint… which might also be applied toward sprucing up their houses with the aforementioned mosaic windows and pretty gardens. The picturesque quality of the neighborhood then leads again to an increase in housing prices, and the cycle
continues...

Bottom Line: Hill development is more expensive than development on level ground. Thus, there is little commercial activity. This leads to an increase in demand for hill houses, which translates as an increase in housing prices. The people who purchase hill houses typically have higher incomes and accordingly, higher budget constraints, to offset the higher costs of living in the hills.

9 comments:

Eric said...

The story gets more complicated and more interesting as you watch the development of a city over time and watch the rich move from one place to another. They do not start out on the hills.

J said...

Weak. In Rio de Janeiro and Caracas the poor people the hills.
Seaside properties are most expensive in Tel Aviv. What about Hong Kong? Widen your horizon.

Anonymous said...

How do you see land use planning impacting development for both commercial and residential buildings in flat or hilly areas.

Hill slopes tend to have landslides due to saturated soils, slope instability or seismic activity.

Could those factors modify your premise?

Emmeline said...

Good point... I should've limited the analysis to Bay Area housing."

J said...

On flat areas, Northern neighborhoods tend to be more elite.

BTW, something is wrong when a students always says that the teacher is right. Why are Oriental people so comformist? Destroy your critics!

Emmeline said...

Hi J...
Are you referring to yourself as a "teacher" of sorts? It doesn't matter- I never said you were right. Your likely came to that assumption yourself. If you didn't think your point was valid, you shouldn't have made it.

The Longs said...

Here in Utah it's a harsh visual status symbol. There are mountains in the east and the great salt lake to the west. Starting at the top of the wasatch mountains in the east are gaudy signs of disposable income like second homes and second cabins working your way down to mansions and large private communities. The valley has a mixture of the endangered species called middle class. The closer you get to the lake, the less the state cares and poorer the communities. BUT if you live west or southwest of the lake, where it starts to climb up the west Oquirrh mountains, you're once again in the exclusive communities like 'Day Break' or Day Fake we call it. In the salt lake valley it's a big bowl with the rich perched above everyone else.

Iason Cyrillus said...

They all knew about rising sea levels since the dawn of the industrial age. They live there simply because they know the sea levels will eventually drown the poor neighborhoods.

Anonymous said...

Here is two more reasons, They have better views of the city and can look down on others. The other reason is because of crap. Yes, crap. Sewer systems go down hill and down stream better. Most rivers run north to south so northern areas are more desired.