Supply Skepticism Revisited

Abstract

Although “supply skeptics” claim that new housing supply does not slow growth in rents, we show that rigorous recent studies demonstrate that: 1) Increases in housing supply slow the growth in rents in the region; 2) In some circumstances, new construction also reduces rents or rent growth in the surrounding area; 3) The chains of moves sparked by new construction free up apartments that are then rented (or retained) by households across the income spectrum; 4) While new supply is associated with gentrification, it has not been shown to cause significant displacement of lower income households; and 5) Easing land use restrictions, at least on a broad scale and in ways that change binding constraints on development, generally leads to more new housing over time, but only a fraction of the new capacity created because many other factors constrain the pace of new development.

Keywords: land use/zoning, affordability, gentrification, rental housing, multifamily, construction/building