Question. Are there any historical examples of construction costs actually falling in a city, rather than just rising slower than elsewhere?
Answer. Yes! Not many, though.
I know of three examples, but the first is fairly irrelevant and is included here for completeness.
Example 1. London’s District line, going by Wikipedia data, cost 3 million pounds, which in today’s money translates to $90 million per kilometer. This was astonishingly expensive, and even today London Underground extensions, as opposed to Crossrail, cost less than that relative to British GDP per capita. The reason for the high cost: the line was built cut-and-cover without any street to go under, so it needed to carve a new right-of-way through Kensington, demolishing houses in an expensive area. No further cut-and-cover lines were built. Costs fell to about $30 million per kilometer with the invention of deep-bore tunneling a generation later; today, bored tunnel costs more than cut-and-cover, but with the technology of the late 19th and early 20th century, this was not the case.
Example 2. Milan built its first two lines very cheaply; in today’s money, M1 cost around $50 million per kilometer. It was built using a method invented specifically for the city’s narrow Renaissance streets called the Milan method or cover-and-cut, allowing vertical construction with retaining walls rather than sloped ones that require more street width. M2 was very cheap as well, but M3’s costs were much higher, I believe around $250 million per km in today’s money, built in the 1980s at the peak of Milanese corruption. Costs fell dramatically after a series of anti-corruption prosecutions that put much of the Italian political elite in prison. The Passante Railway was in today’s money around $140 million per km, not all underground, but it’s regional rail with difficult city center construction under three older lines. The more recent lines, M5 and M4 (in this order), run up to $120-160 million per km.
Example 3. Istanbul began building its subway system with M2, M3, and M4; the first Istanbul Metro line, M1, is light rail and its original section had very little tunneling. It used Italian designs and costs were low, not much more than $100 million per kilometer, but subsequently value engineering has led to slightly lower costs. The city had a learning process in which it reduced station footprints to save money, engaged in more extensive prior engineering before putting out new lines to bid, and generally gained experience in managing a project. Newer lines have cost slightly less, for example around $80 million/km for M5, all underground.
The angle of cleaning up corruption and building up state capacity is probably relevant – probably. Italy and Turkey remain very corrupt and clientelist states. In Turkey, the former mayor of Istanbul openly said he was going to prioritize metro construction in neighborhoods that voted for AKP, and then when the opposition won the city election the state stopped giving it money for new lines; construction goes on because the new mayor went to the European Investment Bank for financing. In Italy, for all the clientelism elsewhere, public-sector engineering is fiercely depoliticized and professionalized nowadays.
I might even speculate, without much knowledge yet (we’re still early in the work in Istanbul and even earlier in Milan), that Southern Europe may have such reputation for corruption that it has mundane mechanisms that professionalize public works. The clientelism in Turkey as far as we can tell extends to macro-level decisions of where to build lines, and evidently Istanbul managed to identify alternative sources of financing to the Erdoganist state.
If I’m right, then these same mechanisms of anti-corruption and public-sector professionalization can also be replicated in other parts of the world with state capacity problems. This cannot possibly be everything – Milan reduced its costs from levels that were not extremely high, and Istanbul was cheap from the start – but it does point in a more optimistic direction.