"IT’S A QUESTION that looms large over the effort to promote more development in housing-starved Massachusetts: Does increasing the supply of housing, even if it’s mainly higher-cost, market-priced units, temper the runup in costs that has so many residents straining to make ends meet?The idea follows the basic economic principle of supply and demand – when more of something is made available, its price falls. But there are plenty of “supply skeptics” who aren’t convinced that simply opening the housing production spigot will lower costs, and argue instead that it often just drives up prices by promoting gentrification.In a recent report, only 30 to 40 percent of those polled in a national survey of urban and suburban residents believed a 10 percent increase in housing production would result in lower home prices and rents. Against that backdrop, however, a research team at New York University issued a report last month arguing that there is clear evidence that boosting supply is the key to lowering or moderating housing costs.“All the evidence shows that it does reduce housing costs,” said Vicki Been, director of the NYU Furman Center for Real Estate and Urban Policy. The report by Been and two NYU colleagues attempts to look at all the evidence available from studies of the question.“In sum,” they write, “significant new evidence shows that new construction in a variety of settings decreases, or slows increases in, rents, not only for the city as a whole, but generally also for apartments located close to the new construction.”
Continue reading the article at CommonWealth Beacon
From the paper referenced in the article the Abstract summarizes:
"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."
Link to research paper paper -> https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4629628
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| The Taj Estates apartments on East Central street |
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