Glaeser first began to think about how real estate fit into this urban order a few years ago, after he spent some time looking at the effects of skills and sprawl on cities. While Glaeser seems able to turn out academic papers at an astonishing pace -- he almost always writes at home, so he can smoke cigars while he types -- it sometimes takes years for him and his collaborators to assemble the data and equations used to support his ideas. In addition to his urban research, Glaeser has written on voting behavior, hatred, poverty and public health; a few years ago, with David Cutler, he wrote a widely discussed paper that looked at why Americans are becoming so obese. (They attributed it partly to the microwave oven.) Yet urban subjects have consumed most of Glaeser's time and attention. In the late 1990's, he began thinking less about incorporeal forces like human capital and consumerism and more about the physical nature of places -- buildings, roads, buses -- and what kind of effect that had on a metropolitan area.

In 2000, Glaeser took a sabbatical from Harvard and began to spend a few days a week in Philadelphia working with Joseph Gyourko, a real-estate economist at the Wharton School of the University of Pennsylvania. Glaeser had already been thinking about the relationship between housing and urban poverty when one day he and Gyourko began to discuss why cities like Philadelphia and Detroit -- places with poor future prospects, both economists believed -- weren't doing even worse in terms of population. Why didn't everyone leave, Gyourko wondered, and go to a place like Charlotte, N.C., that had a fast-growing economy? This question addresses a puzzle of urban economics. Cities (think of Las Vegas or Phoenix) can grow at a very fast rate, exploding overnight with businesses and residents. Some can increase in population by 50 or even 60 percent in a decade. But cities lose their residents very slowly and almost never at a pace of more than 10 percent in a decade. What's more, when cities grow, they expand significantly in population, but housing prices tend to rise slowly; even as Las Vegas grew by leaps and bounds in the 1990's, for instance, the average home there cost well under $200,000. When cities decline, however, the trends get flipped around. Population diminishes slowly, but housing prices tend to drop markedly.

Glaeser and Gyourko determined that the durable nature of housing itself explains this phenomenon. People can flee, but houses can take a century or more to finally fall to pieces. "These places still exist," Glaeser says of Detroit and St. Louis, "because the housing is permanent. And if you want to understand why they're poor, it's actually also in part because the housing is permanent." For Glaeser, this is the story not only of these two places but also of Buffalo, Baltimore, Cleveland, Philadelphia and Pittsburgh -- the powerhouse cities of America in 1950 that consistently and inexorably lost population over the next 50 years. It is not just that there were poor people and the jobs left and the poor people were stuck there. "Thousands of poor come to Detroit each year and live in places that are cheaper than any other place to live in part because they've got durable housing still around," Glaeser says. The net population of Detroit usually decreases each year, in other words, but the city still attracts plenty of people drawn by its extreme affordability. As Gyourko points out, in the year 2000 the median house price in Philadelphia was $59,700; in Detroit, it was $63,600. Those prices are well below the actual construction costs of the homes. "To build them new, it would cost at least $80,000," Gyourko says, "so there's no builder who would build those today. And as long as those houses remain, the people remain."

The resulting paper, "Urban Decline and Durable Housing," caused a stir among urban economists even before its publication last year. (It was initially circulated with a subtitle along the lines of "Why Does Anyone Still Live in Detroit?" until the authors, thinking it politically insensitive, removed it.) In addition to illuminating some of the forces shaping our poorest cities, the research proved to Glaeser that it is impossible to think about urban economies without thinking of urban buildings at the same time. Meanwhile, it demonstrated to him how useful it can be to consider the relationship between actual construction costs and the market price of homes. That lesson seemed to apply not only to declining cities but also to places with extraordinary price appreciation, like the San Francisco or Boston metro areas. How could homes in these places be priced so much higher than construction costs? And why did the prices keep going up?

Glaeser has come to believe that changes in zoning regulations may be the most important transformation in the American real-estate market since the mass acceptance of the automobile. In his view, these regulations have essentially created a "zoning tax" that has pushed prices far above construction costs. Very, very far above construction costs. It is not a perspective shared by all housing analysts; some economists have been far more inclined to blame high prices on high demand (spurred by low interest rates) or on rampant speculation. Others agree with Glaeser in emphasizing supply but not necessarily fixing on zoning. Karl Case, for instance, an economist at Wellesley College who counts himself a fan of Glaeser's, agrees that lack of supply has led to steep prices in the Boston area, but he attributes the housing shortage not just to zoning but also to the nature of the construction business and the scarcity of large desirable tracts of land. Still, among the half-dozen leading economists who study housing supply, there seems to be wide agreement that regulations have had a tremendous effect on prices. "I think the evidence is overwhelming," says John Quigley, an urban economist at Berkeley who has looked specifically at the effects of regulation on the California market.

As Glaeser says: "It's so easy to forget the world that we were living in around 1970, when basically almost all of the value of houses was in the physical infrastructure. That was actually the cost. There was some land, and it was worth something, but it wasn't worth more than 20 percent of the value of the house." Even in New York City, Glaeser says, the price of an apartment back then was essentially the cost of building the next floor. In researching New York City's housing prices, in fact, Glaeser and Gyourko discovered that over the past 30 years, the average height of new residential buildings in Manhattan decreased in size. "That's crazy," he insists, especially in light of how much the demand to live in New York has increased. "You know, if prices in Manhattan are skyrocketing, you should be building more and more at 50 stories, rather than at 30. Not the reverse." So is it his contention that Manhattan could build far more than it has recently? "Oh, for sure," he says. "Technologically? Certainly. No reason why you couldn't."

Let's go back to Manhattan in the 1920's, Glaeser says. "New York in the 1920's is a pretty developed place, a pretty mature place. But they're producing a hundred thousand units a year. They're tearing up swaths of Manhattan and building higher buildings." That would be legally and politically impossible today, but as he and Gyourko see things, it is precisely those legal and political roadblocks to "tearing up" the city that have made the place so expensive. Actually, in 2004, the two men took a close look at Manhattan and estimated that one half or more of the value of condominiums in the borough could be thought of as arising from some type of regulatory constraint preventing the construction of new housing. The data for co-ops (because of their ownership structure) was more difficult to interpret, but Glaeser and Gyourko suspect that their estimates probably apply to the Manhattan market as a whole.