Luxury Development is Making Our Housing Crisis Worse

Developers tout increased building as a salve for rising rents, lining their pockets while driving cycles of displacement.

RESEARCH & COMMENTARY
NOVEMBER 04, 2018
by Amee Chew

Rent control. It’s on the ballot in California this November, as tenant campaigns pick up steam across the country and revive an old refrain: “The rent is too damn high!” The real estate industry’s biggest argument in opposition? Rent control will hurt new construction. And – as the developers would have us believe – the only way to pull ourselves out of our dire housing shortage would be by building new construction.

This unquestioning reliance on new construction – a code phrase used by developers to signify for-profit building – is deeply flawed.

For one, for-profit new construction is overwhelmingly geared at the upper end – the luxury market, so to speak. But it’s lower-income households who face the severest affordable housing shortage. While our high-end stock has steadily grown – think towering market-rate apartments downtown – since 1990 on balance we’ve lost over 2.5 million affordable units renting for under $800. To what? In large part, rent increases.

Meanwhile, new units then take decades to depreciate down to prices actually affordable to most renters (see here also). “Trickle down” isn’t happening fast enough.

Even worse, however, new construction actually fuels displacement in the short term – even when no already existing housing is knocked down. Why? Numerous studiesshow market-rate housing development has price effects on surrounding neighborhoods – driving up rents and increasing the burden on lower-income households. Many residents in communities transformed by gentrification can already attest to the connection between for-profit development, rising living costs, and the mass exodus of lower-income residents. Maybe this won’t play out in Malibu, or a sparse neighborhood with very few low-income folk, but otherwise the above effects are widespread in our cities.

Market-rate construction brings wealthy in-movers. One study found that in neighborhoods with an influx of higher-income groups, working-class residents moved at three times the rate of their counterparts in other areas – usually to leave gentrifying communities (see also here and here).

Location – including proximity to high-end development – also affects price changes. During housing booms, it’s the poor neighborhoods bordering rich ones that sufferthe largest rent increases. The trend applies to neighborhoods near transit stationsand luxury housing, too. Prices ripple across place.

Read the full article on Inequality.org

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Luxury Development is Making Our Housing Crisis Worse

Developers tout increased building as a salve for rising rents, lining their pockets while driving cycles of displacement.

RESEARCH & COMMENTARY
NOVEMBER 04, 2018
by Amee Chew

Rent control. It’s on the ballot in California this November, as tenant campaigns pick up steam across the country and revive an old refrain: “The rent is too damn high!” The real estate industry’s biggest argument in opposition? Rent control will hurt new construction. And – as the developers would have us believe – the only way to pull ourselves out of our dire housing shortage would be by building new construction.

This unquestioning reliance on new construction – a code phrase used by developers to signify for-profit building – is deeply flawed.

For one, for-profit new construction is overwhelmingly geared at the upper end – the luxury market, so to speak. But it’s lower-income households who face the severest affordable housing shortage. While our high-end stock has steadily grown – think towering market-rate apartments downtown – since 1990 on balance we’ve lost over 2.5 million affordable units renting for under $800. To what? In large part, rent increases.

Meanwhile, new units then take decades to depreciate down to prices actually affordable to most renters (see here also). “Trickle down” isn’t happening fast enough.

Even worse, however, new construction actually fuels displacement in the short term – even when no already existing housing is knocked down. Why? Numerous studiesshow market-rate housing development has price effects on surrounding neighborhoods – driving up rents and increasing the burden on lower-income households. Many residents in communities transformed by gentrification can already attest to the connection between for-profit development, rising living costs, and the mass exodus of lower-income residents. Maybe this won’t play out in Malibu, or a sparse neighborhood with very few low-income folk, but otherwise the above effects are widespread in our cities.

Market-rate construction brings wealthy in-movers. One study found that in neighborhoods with an influx of higher-income groups, working-class residents moved at three times the rate of their counterparts in other areas – usually to leave gentrifying communities (see also here and here).

Location – including proximity to high-end development – also affects price changes. During housing booms, it’s the poor neighborhoods bordering rich ones that sufferthe largest rent increases. The trend applies to neighborhoods near transit stationsand luxury housing, too. Prices ripple across place.

Read the full article on Inequality.org

Leave a Reply