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New Developments Lower Rents in Surrounding Neighborhoods, Study Says

A study that made the rounds as a working paper at the beginning of 2019 has now been published in a peer-reviewed journal.
May 11, 2021, 5am PDT | James Brasuell | @CasualBrasuell
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Texas Apartment Construction
Trong Nguyen

A study years in the making has added a new reference in the debate about the effects of large new apartment developments on low-income neighborhoods located nearby.

The study, titled "Local Effects of Large New Apartment Buildings in Low-Income Areas," was published by The Review of Economics and Statistics on May 6, but the research first attracted attention it the beginning of 2019. Planetizen blogger Michael Lewyn introduced the research findings (in what was then a working paper) as potential ammunition for the YIMBY response to rising housing costs in large cities with restrictive zoning codes and low amounts of residential development.

Now published in a peer-reviewed journal, the research finalizes its findings, as summarized in the study's abstract: "New buildings decrease rents in nearby units by about 6 percent relative to units slightly farther away or near sites developed later, and they increase in-migration from lowincome [sic] areas."

The researchers argue that new apartment developments achieve price reductions in nearby neighborhoods by absorbing high-income households and increasing local housing stock. "If buildings improve nearby amenities, the effect is not large enough to increase rents. Amenity improvements could be limited because most buildings go into already-changing neighborhoods, or buildings could create disamenities such as congestion," reads the abstract.

For more of the latest on the subject, researchers at the University of California, Los Angeles recently published a survey of recent research on the consequences of new development for local housing markets.

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Published on Thursday, May 6, 2021 in The Review of Economics and Statistics
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