Does Building New Housing Cause Gentrification?
"Building new housing can set off other moves from building to building that quickly free up units for lower-income renters."
What It’s About
Holder tackles the pop culture belief that new housing construction leads to gentrification. Drawing from recent studies across diverse cities such as Helsinki, Auckland, San Francisco, and Minneapolis, she demonstrates how expanding housing supply actually stabilizes or reduces rents.
Upshot
Holder concludes that:
- More Supply Slows Rent Growth: Studies in cities around the world demonstrate that building more housing significantly slows rent increases at the citywide level
- Minimal Displacement Risk: Although new housing attracts wealthier residents, actual displacement of existing communities is typically limited and may even decline
- Moving Chains Work: New developments trigger relocation sequences that free up affordable housing units for lower-income residents
Did you know? In a study of 52,000 residents across 12 U.S. cities, new housing set off “moving chains” that reached low-income renters within just six moves—with 40% of final tenants coming from low-income neighborhoods. I.e., by building new housing for wealthy tenants, the market opens up new units for middle-income tenants, and so on.
Why It Matters
Most people correctly notice that new development and higher rents pop up together. But Holder uses economics research to show that new housing is a symptom and even a treatment, but not a cause, of gentrification — they go together like rain and umbrellas!
Who Wrote It
Sarah Holder is a reporter for Bloomberg CityLab, specializing in urban housing, transportation, and policy analysis. Her work explores how cities respond to economic and social challenges, offering evidence-based insights to inform equitable urban development