By Andrea Fox, Efficientgov Senior Editor
The California Legislative Analyst’s Office (LAO) has revealed some interesting findings about the effects of gentrification where developers build higher-priced, new construction in lower income neighborhoods.
According to LAO’s paper, Perspectives on Helping Low-Income Californians Afford Housing, there are connections between the availability of housing, rate of displacement, and growth in rents. The critical elements seem to be time and supply.
Note that the report does not conclude that new upscale construction is an across-the-board answer for fixing rising housing costs for low-income people like a recent Washington Post headline: “The poor are better off when we build more housing for the rich,” might make you think that it is. In fact, LAO frames the discussion as: “More Private Home Building Could Help.”
“Considerable evidence suggests that construction of market-rate housing reduces housing costs for low-income households and, consequently, helps to mitigate displacement in many cases. Bringing about more private home building, however, would be no easy task, requiring state and local policy makers to confront very challenging issues and taking many years to come to fruition,” LAO explains in the paper’s introduction.
What the findings show, according to LAO, is that increased supply generally lowers costs. And over time, today’s tony two-bedroom condo usually becomes tomorrow’s middle-class investment. Other cases, such as when increased housing supply reduces market competition and places downward pressure on rents, show support for new development as having a more positive long-term effect on the resident poor than expected.
However, the popular news blog Gawker points out the effects of new development in saturated areas where housing supply is too low to meet demand are not the same. The original report shows, with some interesting charts, reduced displacement rates and lower rent hikes in high-construction neighborhoods.
