This dissertation studies the economics of cities, with a particular focus on the environment. In the first chapter, I study the effects of local water scarcity management on the new housing market, household water use, and welfare. Rising costs of securing water for new developments have led water utilities to raise the water impact fees (WIFs) that home builders pay to connect new units to the water system, and to adopt variable WIFs based on expected water use. Using a novel dataset on water utility policies in Colorado, housing outcomes, and aerial imagery with a staggered difference-in-differences approach, I find that variable WIFs reduce new single-family lot sizes by 14% and irrigated areas by 27%, decreasing household water use by 14%. I also find that WIFs are fully capitalized into house prices. To estimate the effect on total water use, housing supply, and welfare, I develop and estimate an equilibrium model of new single-family housing where landowners endogenously choose the lot size and irrigated area of new housing. I estimate that variable pricing policies have increased welfare by $120 million and consumer surplus by $3,500 per household. However, even though metropolitan-area level water use declines, changes to housing supply cause a local rebound effect that increases utility-level water use among adopting providers by 3%. In contrast, counterfactual policies that cap irrigated areas lower utility-level water use among adopters by 8%, but have limited welfare effects. In the second chapter, my co-authors and I investigate the impact of recent gentrification shocks on minority neighborhoods in the 50 largest U.S. labor markets. We show that household moves from a given neighborhood are concentrated to few destinations with similar minority shares and strong network ties, but those neighborhoods are farther away from downtown. Gentrification affects Black neighborhoods by raising house prices, reducing the proportion of Black households, and increasing the share of movers going to neighborhoods with network ties. However, gentrification has negligible effects on Hispanic neighborhoods. Overall labor market area segregation decreases after a gentrification shock because highly Black neighborhoods become less segregated.