U.S. Has More Fancy Apartments Than It Is Able to Fill
wsj.com
wsj.com
The article says nothing about price. Based on precedent, we can expect this glut of luxury housing to reduce housing prices and rents in the affected markets.
Precedent: "Zillow data from 2013 to 2018" shows "new buildings lower nearby rents in low-income neighborhoods" [1]. In New York, "new high-rise construction (greater than seven stories caused nearby high-end and mid-range rental building rents to decrease" and no "significant rental decreases for housing at the low-end of the mark." The only place luxury housing had a gentrification effect, i.e. where more luxury housing increased community amenities, thereby causing "lower tier housing" to see "a 6.6% rise in rental pricing compared to comparison" was Minneapolis, and that's due to "a limited number of low market tier buildings in th[e] distance band."
Anecdotally, I years ago used the opening of luxury buildings in my Manhattan neighbourhood to negotiate a lower rent. The builidngs, which opened around the same time, competed heavily on discounted amenities. My building was 25% unoccupied; I showed my landlord the math for why, after accounting for gym and laundry costs, the luxury building was cheaper than our pre-War given the rent I was paying. He agreed and lowered it. (If he hadn't, I'd have moved and saved money.)
[1] https://www.pdx.edu/realestate/sites/realestate.web.wdt.pdx....
2k/month doesn't feel like high-wnd anymore, either.
I believe the reality is the market segments, new expensive housing only releases limited amounts of cheap housing, and does not significantly affect low cost housing availability.
What we need, is more PUBLIC housing. This is very unpopular for a range of reasons and some of them are valid. But I still believe we need the state providing rental property, to ensure a floor price in housing for people who cannot afford to buy expensive houses.
Absolutely revolting, Le Corbusier inspired tower block developments gave public housing a bad rap in the 50s and 60s and there are worldwide deserts of bad public housing. I'm not blind to how bad it can be, but where I live (Brisbane) its got to single older women living in tents by the river. We're failing society at large because the state and federal government privatised social housing decades ago. It's a disaster. One they fixed temporarily in covid, and have now given up on again EVEN THOUGH IT WAS CHEAP AND EFFECTIVE.
Finlands "no homeless" policy is worth looking at.
Yes on the former, no on the latter.
The differential effects of new luxury versus affordable housing on pricing in our most-expensive real estate markets is pretty much entirely a hypothetical given we haven't built enough of either to have a massive effect. What we can say is the effect of both is marginal and systemic. (Where affordable housing plays a unique role is in inhibiting gentrification through the creation of high-amenity neighbourhoods.)
In terms of the effect on affordable housing, you have to dig to find cases where the gentrification effect is positive, i.e. where more luxury housing didn't moderate or lower lower tier rents.
That all said, a YIMBY who argues against public housing is a hypocrite. We need more housing. How it comes up is less relevant than that it does. The parsimonious solution is to remove the restrictions that inhibit both public and private housing creation. Barring that, either is better than neither. (And yes, that includes only new luxury housing.)