Background research--courtesy of Chris Briem, this empirical study confirms that the basic logic of supply and demand does in fact apply to increasing the supply of high-end units in gentrifying neighborhoods. Some affordable housing advocates erroneously argue new high-end units will induce more demand and therefore also increase prices in existing units. But as basic economics would suggest, it turns out that increasing the supply of high-end units does in fact make rents in older units lower, not higher:
https://appam.confex.com/appam/2018/...aper25811.html
Quote:
Preliminary results using a spatial difference-in-differences approach suggest that any induced demand effects are overwhelmed by the effect of increased supply. In neighborhoods where new apartment complexes were completed between 2014-2016, rents in existing units near the new apartments declined relative to neighborhoods that did not see new construction until 2018. Changes in in-migration appear to drive this result. Although the total number of migrants from high-income neighborhoods to the new construction neighborhoods increases after the new units are completed, the number of high-income arrivals to previously existing units actually decreases, as the new units absorb a substantial portion of these households. On the whole, our results suggest that—on average and in the short-run—new construction lowers rents in gentrifying neighborhoods.
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Basically, if you don't want higher-income people bidding up the prices for existing units, you need to give them an alternative.
So in practice, if you are concerned about housing affordability you should be concerned about maximizing the supply of both high-end and affordable housing. So, for example, a smart policy would be to give developers an incentive to offer affordable housing by saying if they do that, they can get variances to offer more high-end units too.
What does not make sense is to try to limit the supply of high-end units, and really you should even avoid policies that carve affordable units out of high-end units, as opposed to adding to them. Again, if you are really worried about affordability, you want as much of both as possible.