How Blocking New Homes Hurts Poor Renters the Most
Building more homes — even expensive luxury apartments — cuts rents most in older, affordable buildings where low-income families live.
Between 2017 and 2024, poor neighborhoods experienced rent spikes 10 percent higher than those in affluent areas. However, cities that built a lot of new housing saw rents drop fastest in older apartment buildings.
Pew Charitable Trust researchers Seva Rodnyansky, Dennis Su, and Alex Horowitz studied this pattern in “New Housing Slows Rent Growth Most for Older, More Affordable Units.”
Key Takeaways:
- Housing shortages hurt lower-income areas the most: Neighborhoods with median incomes under $43,300 faced rent increases 10 percent steeper than areas with median incomes over $69,800.
- New supply helps residents in older, affordable buildings the most: Cities that boost their housing stock by 10 percent or more saw rent drops in older, cheap apartments the most. The rent slowdown was 6.5 percent lower than those in luxury towers.
- Regional building has 4 times the impact of local building: A 10 percent housing increase across an entire metro area reduces local rents four times more than a 10 percent increase within just one neighborhood—regional supply cuts rents everywhere.
The researchers needed to solve a puzzle: when rents change, is it due to new housing or other factors, such as job growth? They collected rent prices from Zillow for 1,654 ZIP codes from 2017 to 2024, then matched each area’s rent changes with Census income data and housing construction counts. This lets them compare similar neighborhoods that built different amounts of housing. They also analyzed 41,000 apartment buildings, sorting them by age and quality to see if new supply affects different building types differently.
Housing shortages create unequal rent burdens because lower-income residents have fewer alternatives when prices rise. During the shortage, neighborhoods with median incomes under $43,302 experienced rent increases 10 points higher than neighborhoods with median incomes over $69,804. When wealthy neighborhoods block construction, higher-income households outbid middle-income families in middle-class areas, who then compete with lower-income families in affordable neighborhoods. Lower-income residents have nowhere cheaper to go.
New housing provides the most significant rent relief to residents in older, affordable buildings rather than luxury properties. Among 11 metro areas that increased their housing stock by 10 percent or more from 2017 to 2023, Class C apartments (older buildings with basic amenities) experienced larger rent decreases than Class A luxury buildings during 2023-2024. Austin led with 11 percent drops in Class C buildings, while Class A properties barely changed.
But why does luxury housing help cheap apartments? New housing creates “moving chains” where expensive condos attract residents from slightly more affordable apartments nearby. Those apartments then open up for middle-income renters, whose previous places become available for lower-income families. Separate research confirms that approximately 70 homes in below-average income communities become available for every 100 market-rate units built in affluent areas.
Expanding housing across entire metro regions produces bigger rent benefits than adding housing within individual neighborhoods. Every 10 percent increase in metro-wide supply correlates with 5 percent slower rent growth, while a 10 percent supply increase within a single ZIP code reduces that neighborhood’s rents by only 1.4 percent. Housing markets function regionally—more choices throughout a metro area decrease competition everywhere.
Cities should focus on building housing across entire metro areas rather than blocking development, since regional supply increases cut rents four times more than building within individual neighborhoods. Policymakers should eliminate zoning rules that ban apartments, following Houston, Minneapolis, and New Rochelle, which experienced slower rent growth and less displacement after rapidly expanding supply. The evidence suggests that blocking construction—even luxury towers—forces low-income residents to absorb steeper rent increases, indicating that affordability requires building more homes rather than restricting development.
Photo by Puddles eyes, CC BY-SA 4.0, via Wikimedia Commons
