In the efficient outcome in the model, slums form at the edge of the city, where land is cheap. As the city grows, old slums are converted to formal settlement and new ones form on the ex- panding edge. Formal sector development is sub- ject to periodic demolition and reconstruction, and structures become successively taller and denser as the city grows and land values increase. If slum housing is inherently of lower quality, then slums will eventually be phased out entirely as incomes grow, just as 19th-century tenements and shacks in London and New York disap- peared decades ago.