Does building luxury condos create more affordable housing?
IIn good leftist fashion, we’ll first answer the question by questioning its premise. New homes at market price are rarely “luxury condos”. Only 5% of multi-family homes are condos, the lowest rate in 50 years. The problem is housing
which does not receive subsidies to cover the rent of low-income households. In California, nearly 90% of multi-family rental units are market priced and about 90% of low-income households live in market priced units.
As for “luxury”, don’t believe what the owners tell you. It’s the scarcity of available apartments that drive up housing costs, not stainless steel appliances or a small fitness room. And this rarity is real; Contrary to what you may have heard, American cities do not have a vast supply of vacant apartment towers as vehicles for investment. Indeed, our rental vacancy rate is at a historically low level.
The best way to end a housing shortage is to build more. New research, made possible by previously unavailable fine-grained datasets, shows that market-rate construction makes affordable housing available through “migration chains.” High-income people move into new homes, middle-income people move into housing previously occupied by high-income residents, and so on, all the way down the income scale. Thus, the construction of more “luxury condos” frees up affordable housing for low- and middle-income households.
Displacement is real, but the construction of housing at market price does not increase displacement pressures. While researchers have long known that building more housing reduces prices at the regional level, more recent research finds that building market-priced housing reduces rents and evictions even at the neighborhood level. Removing restrictions on housing construction in urban areas also reduces racial and economic segregation, greenhouse gas emissions and homelessness. Also, landlords find it harder to discriminate against potential tenants with housing vouchers in a loose housing market.
While those on the left who oppose mark-to-market housing construction sometimes deride pro-development theories of affordability as “trickle down economics,” they are dead wrong. The bogus thesis of trickle-down economics says that by lowering taxes on the wealthy, you will stimulate economic growth that will ultimately benefit everyone. Proponents of trickle-down believe that the supply (of investment capital from lower taxes) generates its own demand (for consumer goods and jobs). We say the opposite: demand (for houses) should lead to supply response (building more houses).
Building more housing at market price is a necessary but not sufficient condition for creating more inclusive, affordable and sustainable communities. As California Assemblyman Alex Lee, author of the California YIMBY co-sponsored social housing legislation, has said, being pro-housing means taking a ‘yes and’ approach: yes to more housing at the cost of market and yes to more subsidized affordable housing, social housing, tenant protections, tenant subsidies and pathways to home ownership. Etc.
But why build more housing at market price? Migration chains work, but wouldn’t only allowing affordable projects work even better? No, for several reasons.
First, the choice between market price and subsidized affordable housing is wrong. Zoning, or allowing builders to build apartments in areas where only single-family homes were allowed, reduces competition between for-profit and subsidized nonprofit developers for building land.
Second, although we need to invest more public funds in building affordable housing, it is impossible to meet our current housing needs with 100% subsidized affordable housing. Los Angeles, for example, must plan for 456,643 new homes through 2029 to meet state-mandated accessibility goals. At a price
at around $500,000 per unit, it would cost the city of Los Angeles $228 billion to meet its housing needs. The only way to build on the scale needed is to rely on private development, affordable housing developers and, where possible, public agencies.
Third, more market-rate development means more taxes for cities, which can then be funneled into housing subsidies and landlord assistance, creating a more hospitable place for poor and working-class residents. .
Finally, we cannot let the persistence of capitalism prevent us from helping people who are currently in a precarious or homeless situation. In the short to medium term, there is no viable path to a world in which private real estate ceases to exist.
The abundance of housing benefits everyone except homeowners and private equity firms. And when combined with other policies aimed at reducing inequality and promoting inclusive growth, a housing strategy can lead us towards a more equal, inclusive and sustainable future.
OWe cannot rely on the private sector to solve a problem that it created itself. We cannot simply change a racist and broken system. We need wholesale transformation.
Today’s housing market is a catastrophic failure, built on land theft and chattel slavery and shaped by the relentless prioritization of those who profit from our basic need for housing. Black incomes make up 60% of white incomes, and black families own nearly 10% of white family wealth. Millions of tenants are forced to choose between paying rent and feeding their children. Two years of pandemic and economic turmoil have inflicted more suffering as tenants racked up rental debt, struggled to access inadequate federal aid and were evicted from their homes. Rents have risen 17.5% over the course of 2021, which has taken a toll on black and brown tenants the most.
The problem isn’t a lack of luxury condos; the problem is racial capitalism. In this system, the wealthy, who are overwhelmingly white, profit and derive power from the exploitation and oppression of the working class and poor of all colors. Our housing system has been designed around capital accumulation that depends on high inequality and, more specifically, the subjugation of black tenants.
The run-off housing policy is a farce. In a highly speculative housing market, increasing supply does not automatically reduce housing costs. When cities allow more development at the market rate, developers build more housing at the market rate because that’s what will yield the best return on investment. Especially when labor productivity lags in the construction sector, the profitability of housing production depends on rising rents. Rents are not set based on the quality of a house, but on what the market allows. This is why most “luxury” housing is so ugly and poorly built.
“Affordability” is an overused concept in development agreements and local policy-making. Developers receive government subsidies and tax allowances to build apartments at market price, sometimes with conditions to reserve “affordable” units. These conditions rarely create truly affordable housing, because the definitions of “affordable” have more to do with what is affordable for the developer than what is affordable for a working family. Affordability standards are determined by “area median income,” but the area is not a neighborhood; it is often a county or a metropolitan area, and the income is not limited to renters but also includes that of landlords.
Even if private development could solve the housing supply problem, who benefits from the increased supply and at what cost? Mac Properties, a Chicago developer that markets apartments for young professionals through pool parties and hashtags, began developing a corridor in the Midtown neighborhood of Kansas City, Missouri in 2007. Between 2010 and 2021 , the region’s black population has shrunk by 21%. The only thing residents like Pat Lucas got was 30 days notice to vacate their 17-year-old home. After his eviction, Lucas described Mac’s impact on his neighborhood. “Mac thinks we’re degenerates,” she said. “They convince us that we are worthless. And you know that’s not right.
The most important question is: how can we ensure that everyone has permanent, safe and accessible housing? The answer is not zoning changes; it is social housing. The government must secure housing as a public good and then build or rehabilitate millions of homes that will be permanently off the private market and unavailable for speculation. A large-scale social housing program should be combined with strict and universal rent control.
We have an obligation to reject the cutesy, technocratic suggestions of advocates and instead follow the demands of organized tenants. They are closest to the perils of racial capitalism and therefore closest to the solutions – they are the experts on their own liberation.
Midtown tenant and KC Tenants leader Maya Neal called on her fellow tenants to unionize at a rally in May. “It may seem inevitable that the gentrifiers will crush us, mow us down, push us out,” she said. “It may seem inevitable that they will pay our city leaders and get their little things done. It may seem inevitable that people like me will have to sacrifice our sanity, our physical health, our babies, and our humanity, all for this violent mess. It may seem inevitable that a magnificent gathering like this will not be possible in a few years because the profiteers will have turned us into ghosts. I refuse to become a ghost. And none of this is inevitable, not if we organize ourselves.