You know the old saying about having a hammer and everything looking like nails? I was reading an article in the Journal of Law and Economics about why housing prices in Manhattan are so high, and  I thought, "Omigosh! The answer to the demographic implosion." Since my hammer happens to be sex and marriage, even an economics article reminds me of sex. So bear with me. I’ll explain what the article had to say about housing prices. Then I’ll tell you what it has to do with sex.

The authors, Joe Gyourko, Edward Glaeser and Raven Saks, explain that the high cost of housing in Manhattan isn't as simple as a fixed amount of land. Developers can still produce more housing units by putting more stories on existing buildings. Extra stories don’t require any extra land.

How expensive is Manhattan real estate?

The median value of an owner-occupied housing unit in Manhattan rose from $245,633 in 1980 to $377,246 in 2000 (both in 2002 dollars), which implies a real appreciation rate double the national average for the same twenty year period. Another way to look at it: for condominiums sold in 1984, the price per square foot was $373. By 2002, the mean sales price (in constant 2002 dollars) had soared to $621 per square foot.

Obviously, increases in demand are a part of the picture. But, why didn't supply respond enough to keep the prices stable? In spite of skyrocketing prices, the housing stock has grown by less than 10 percent since 1980. Tens of thousands of apartments were built in Manhattan in the 1950s, and the prices remained flat.

Increases in production costs are nowhere near enough to account for price increases. Gyourko, an economist at the University of Pennsylvania and his co-authors at Harvard, estimate that construction costs of the typical Manhattan apartment was at most $300 per square foot, about half the average sales price. This gap between construction costs and price cries out for an explanation.

So why have housing costs in Manhattan risen? The authors believe the answer lies in housing regulation. They cite things like zoning regulations, use permits, and building inspections. They also point to landmark preservation requirements, which can absorb resources in public relations battles, and trigger expensive construction delays.

Now, the juicy part: what does this have to do with sex?