More luxury housing helps the less affluent to get housing – or does it?

There is a move on X (formerly known as Twitter), to promote the building of luxury housing in towns on the grounds that by so doing so, less affluent people will be able to move into those properties left by those moving up.  The supporters argue that where such housing is built, rents have fallen.

 

The assertion is flawed in a number of respects.  The studies quoted mistakenly use only two variables – additions to dwelling numbers and changes in rent.  In the real world it would be appropriate to examine all of those factors, which influence rents and/or house prices.  Other factors include – earnings, population change, economic fluctuations including unemployment. 

 

Charts produced show that Austin in Texas has seen a fall in rents since the high point was reached.  Yet several points are ignored.

 

1 Austin has extremely high house prices and rents.

2 Rents have fallen back from a peak but are higher than the period before the peak.

3 House building levels are lower than in the 2017-2019 period.

4 Th4e sudden increase in building reflected the unusual conditions around the period when covid19 was prevalent.

 

The Burns affordability index shows that Austin was equal fourth with Seattle for unaffordability at 8.5. 

 

Conclusion

Various factors lead to falls in rent and/or house prices.  They are a consequnence  of a range of factors.  The notion that building more luxury housing is a means of reducing rents (or prices) is pure fantasy.