Building New Market-Rate Homes Makes Other Housing More Affordable

Building new market-rate homes in high-income areas ultimately reduces gentrification pressures elsewhere, even when those new homes are expensive concludes a recent research report from the Greater London Authority – which rebuts a lot of traditional thinking about some negative impacts of top-end housebuilding.

The GLA’s James Gleeson delved into seven in-depth economic research reports before summarising the key findings in one paper – which makes some surprising but well-reasoned points.

There is clearly evidence that increases in the supply of housing bear down on housing costs over the long term, but until recently, there has been little evidence on the short- term and local impacts of new supply on affordability, explains the report. It does so, by creating chains of vacancies and moves that can reach across an entire housing market area. These moving chains improve the availability and affordability of housing throughout the range of prices and rents, including for low-income households.

In the right circumstances, prime new-build homes can actually thwart gentrification. Building even relatively high-cost new homes in one area can lead to increased availability of low-cost housing in another, but building market housing only in low-income areas can increase gentrification pressures there. adding. Conversely, building new market-rate homes in high-income areas reduces gentrification pressures elsewhere.