[Tactician_mark]

Your argument about increasing demand for services isn't convincing. Since there are more people in the area, should supply be higher as well, balancing prices?

It seems more likely that costs are higher in cities because there are valuable opportunities for skilled people who demand high salaries, simultaneously encouraging dense living to maximize access and increasing cost of living through the Baumol effect. High prices causing density, not the other way around.

[itake]

> Since there are more people in the area, should supply be higher as well, balancing prices?

I think we are starting a conversation about gentrification: Rich white-collar/coat workers move into an area creating demand for service work. There is some price competition for their service work labor, raising wages, but typically housing costs are too high for these workers, so they leave (lowering supply, pushing up wages).

[AnthonyMouse]

But this is just assuming the conclusion. Suppose that you were to increase the housing supply as much as, or more than, the increase in population. The existing lower-wage workers don't have to leave until prices have already increased to price them out, so their leaving can't have been the cause of the higher prices but rather its effect.

So it's a feedback loop, but one which is prevented by keeping supply enough to meet demand, because then lower paid workers aren't priced out and cost of living doesn't increase.