While new apartment construction has been enjoying unprecedented growth across the country, the existence of the additional units has a negligible effect on area rents, says a new report.
According to Xiadi Li, a real estate and urban economics scholar with the New York University’s Furman Center, fears that new market-rate housing may lead to a sudden spiral in the rents of other nearby apartment complexes may have been overstated.
In fact, available evidence suggests that the average rent prices have in many cases marginally moved in the opposite direction. According to Li, “for every 10 percent increase in the housing stock within a 500-foot buffer, residential rents decrease by 1 percent.”
The author adds: “Across neighborhoods, the impact is smaller in more central areas, presumably due to more elastic demand.”
While the economic benefit of having a new high-rise housing luxury apartments has long been debated in many communities, Li notes that such completed projects also tend to attract “new full-service restaurants and coffee shops.”
Li adds that, overall, if a new market-rate development doesn’t reduce area rent prices, it can have the effect of at least slowing down the growth rate of those prices.
In an assertion sure to engage community activists worried about the negative consequences of increasingly larger high-rises, Li contends that “opposing such development may exacerbate the housing affordability crisis and increase housing cost burdens for local renters.”
The Furman Center is devoted to the study of urban policy, housing, and neighborhoods.
By Garry Boulard
