New Housing, Prices and Rents
A running dump of articles and studies regarding the construction of new housing and the impact of rents.
Building more housing—both throughout a metropolitan area and in a particular neighborhood—keeps rent growth lower overall, but it takes the most pressure off of older, less-expensive housing, essentially mitigating the competitive process just described. Pew’s analysis of the 1,654 ZIP codes tracked by Zillow throughout U.S. metropolitan areas suggests that every 10% increase in a market’s housing supply (using American Community Survey data) from 2017 to 2023 correlated with rents growing 5% less from 2017 to 2024, controlling for a variety of factors... A 10% increase in a ZIP code’s housing supply means average rents grew by 1.4% less than they did in a ZIP code with no supply growth...Housing shortages don’t just drive up costs—they’re regressive. Maintaining restrictive zoning that exacerbates the housing shortage puts vulnerable tenants in a more precarious position by burdening them with steep rent increases. Allowing enough homes for everyone improves affordability overall, but the evidence shows it benefits low-income renters most.
We study the local effects of new market-rate housing in low-income areas using microdata on large apartment buildings, rents, and migration. New buildings decrease rents in nearby units by about 6% relative to units slightly farther away or near sites developed later, and they increase in-migration from low-income areas. We show that new buildings absorb many high-income households and increase the local housing stock substantially. If buildings improve nearby amenities, the effect is not large enough to increase rents. Amenity improvements could be limited because most buildings go into already-changing neighborhoods or buildings could create disamenities such as congestion.
The majority of U.S. households that qualify for federal rental housing assistance do not receive it. In the absence of an entitlement to housing assistance, an underexplored cause of the shortfall is that higher rents in some areas driven by supply-constraining local regulations increase program costs, leaving fewer funds available to serve additional families. In this paper, we simulate the effect of increasing housing supply on the cost of Section 8 housing assistance programs in Los Angeles, as well as all 11 metropolitan areas most constrained by local regulations. If Los Angeles (all 11 metropolitan areas) produced new housing units at the same rate as the 90th percentile metropolitan area for a decade, market rents would fall by 18.1 percent (2.0 to 24.0 percent), and federal cost savings would equal 1.8 billion), enough to increase the number of assisted families by 23.8 percent (18.6 percent). For comparison, doubling the number of units placed in service through the Low Income Housing Tax Credit for a decade—an alternative method for increasing housing supply—would lead to much lower cost savings of $18 million in Los Angeles, and $231 million across all 11 metropolitan areas.
This paper studies a sequence of zoning reforms enacted in Lower Hutt, a constituent municipality of the wider Wellington metropolitan region of New Zealand. Beginning in the late 2010s, Lower Hutt independently implemented a sequence of widespread zoning changes to enable medium- and high- density housing in residential areas. Using a synthetic control to specify the policy counterfactual, we find that these zoning changes generated a three-fold increase in consents per capita and nearly tripled the number of housing starts over the six years subsequent to the onset of the reforms. Depending on how potential displacement effects are accounted for, the Lower Hutt reforms increased housing starts across the wider metropolitan region by approximately 10 to 18%. We also present evidence that the upzonings reduced rents by around 21% relative to the counterfactual.
We generate the first cross-city panel dataset of land-use reforms that increase or decrease allowed housing density and estimate their association with changes in housing supply and rents. To generate reform data, we use machine-learning algorithms to search US newspaper articles between 2000 and 2019, then manually code them to increase accuracy. We merge these data with US Postal Service information on per-city counts of addresses and Census data on demographics, rents, and units affordable to households of different incomes. We then estimate a fixed-effects model with city specific time trends to examine the relationships between land-use reforms and the supply and price of rental housing. We find that reforms that loosen restrictions are associated with a statistically significant 0.8% increase in housing supply within three to nine years of reform passage, accounting for new and existing stock. This increase occurs predominantly for units at the higher end of the rent price distribution; we find no statistically significant evidence that additional lower-cost units became available or moderated in cost in the years following reforms. However, impacts are positive across the affordability spectrum and we cannot rule out that impacts are equivalent across different income segments. Conversely, reforms that increase land-use restrictions and lower allowed densities are associated with increased median rents and a reduction in units affordable to middle-income renters.
This paper examines the effects of relaxing land-use regulations on housing supply and rents at the local intra-city level. We apply a staggered difference-in-difference model, exploiting exogenous differences in the treatment timing of zoning plan reforms as identifying variation. Increasing the allowable floor-to-area ratio (FAR), i.e., upzoning, significantly increases the living space and housing units by approximately 9% in the subsequent five to ten years. This effect is stronger for larger upzonings, for rasters where zoning is binding, and where rents are high. Furthermore, upzoning leads to no difference in hedonic rents between upzoned and later-upzoned rasters. These results show that upzoning is a viable policy for increasing housing affordability. However, the effects depend on the upzoning policy design and take several years to materialize.
We study the city-wide effects of new, centrally-located market-rate housing supply using geo-coded population-wide register data from the Helsinki Metropolitan Area. The supply of new market rate units triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals. Thus, new market-rate construction loosens the housing market in middle- and low-income areas even in the short run. Market-rate supply is likely to improve affordability outside the sub-markets where new construction occurs and to benefit low-income people... We have analyzed the city-wide effects of new market-rate construction using geo-coded register data from the Helsinki Metropolitan Area. We show that even when new market-rate units get occupied by high-income households, they also benefit middle- and low-income households through a moving chain mechanism. These results are important for the policy debate in many cities about the merits of increasing the supply of market-rate housing. As, for example, Been et al. (2019) argue, skepticism surrounding the connection between housing supply and affordability has been growing and one of the main concerns is that market-rate supply benefits only the better-off. Our results, together with the results by Mast (2021) for US cities, should alleviate the concerns of these skeptics. As geo-coded register data become available in other countries, replication of our study and comparing the results to ours and to those by Mast (2021) will help to further shed light on the type of contexts where new market-rate supply is most likely to benefit lower-income households. Finally, we stress that while market-rate housing supply seems to have wide-ranging beneficial effects, it is not a panacea for all housing market problems. Some people may get discriminated out from the housing market and for some others even the cheapest housing in the city may not be affordable. Housing allowance or voucher programs, as well as social housing are important complements to market-rate supply. These programs, if well-designed, may also be helpful in preventing residential segregation (e.g., Collinson and Ganong 2018 and Davis et al. 2021).
Housing affordability and potential sources of affordable housing remain national concerns. Using the 10 largest metropolitan statistical areas (MSAs), this study measures the degree to which a multifamily housing property’s age affects its affordability, hence examining the rate at which a necessary step in the filtering process is taking place. We find that a property’s affordability increases by about 2.7% during the first decade of its existence and by about 0.5–1% every following decade, with some variation across MSAs. While this indicates that filtering could be taking place at a relatively slow rate, we show that this can add up to significant rent savings for a low-income family.
Overall, nationwide, filtering in good years produced a substantial boost in housing opportunity for low-income households in apartments. A total of 69,000 additional low-income occupied units was generated annually between 2000 and 2006 in the existing stock, whereas 22,000 units were added annually by growth in HUD-subsidy programs for apartment housing supply, with another 92,000 low-income (<50 percent of area median income) units added annually through LIHTC tax subsidies.
Increasing supply is frequently proposed as a solution to rising housing costs. However, there is little evidence on how new market-rate construction—which is typically expensive—affects the market for lower quality housing in the short run. I begin by using address history data to identify 52,000 residents of new multifamily buildings in large cities, their previous address, the current residents of those addresses, and so on. This sequence quickly adds lower-income neighborhoods, suggesting that strong migratory connections link the low-income market to new construction. Next, I combine the address histories with a simulation model to estimate that building 100 new market-rate units leads 45-70 and 17-39 people to move out of below-median and bottom-quintile income tracts, respectively, with almost all of the effect occurring within five years. This suggests that new construction reduces demand and loosens the housing market in low- and middle-income areas, even in the short run.
In 2016, the city of Auckland adopted zoning reforms that enabled more housing on approximately three-quarters of its urban land. Three subsequent studies have found that these reforms increased housing supply and reduced rents... In our view, there is remarkably robust evidence that zoning reforms increased housing supply and reduced rents in Auckland.
Nowhere in the country have rents declined as much as they have in Austin — now 22% off the peak reached in August 2023, according to Redfin. The median asking rent is $1,399 per month, down $400 in less than three years... Developers dumped almost 50,000 rental units on the city in 2023 and 2024, according to Fannie Mae data. That represented a 14% increase in the supply, the biggest on a percentage basis for any major US metro area... That year, Watson, who had led the city as mayor during the dot-com boom, returned to the job. He focused on slashing delays in the permitting process, and the city scaled back rules that limited the height of buildings within 540 feet (165 meters) of single-family homes. Austin also became the largest city in the US to end parking mandates. More recently, Austin has focused on boosting the supply of single-family homes by allowing developers to build as many as three units on lots that were previously restricted to one home and slashing the minimum lot size to 1,800 square feet from 5,750. Home prices have also dropped from pandemic heights, down 23% since May 2022 as interest rates climbed
A 1% increase in new supply (i) lowers average rents by 0.19%, (ii) effectively reduces rents of lower-quality units, and (iii) disproportionately increases the number of second-hand units available for rent. Moreover, the impact on rents is equally strong in high-demand markets. Employing a quantitative model, I explain these results by second-hand supply: New supply triggers moving chains that free up units in all market segments.