How is that possible? How could building more housing (at any level) be a net problem for the housing market? Doesn't more housing trickle down and make things better for everyone? It's not that complicated: When you build a new luxury housing complex, new resident move into it. For the most part, they result in net additions to the number of people in the city: If the person who buys a new condo moves out of a rental unit, someone else will move into that rental. Quickly.
The people with high disposable incomes who fill those condos or luxury rentals will spend money in town, creating a demand for jobs -- restaurant workers, grocery clerks, cops and firefighters, bank tellers ... and those people will also need a place to live. [...]
So according to the study, by Keyser Marston Associates, every time the city allows 100 new high-end housing units, it needs to build between 20 and 43 new affordable units -- just to keep the housing balance the way it is now. Put the affordable units in the main complex and the impact is lower (because fewer millionaires move in). Built them, as is common, somewhere else and the impact is greater. [...]
If the city demands 15 percent affordable set-asides, then every market-rate building adds more demand for affordable housing than it supplies. That means every new building makes the housing crisis worse.
Again: This isn't me and some crazy leftists saying that. It's the city's own studies, done by a respecting economic consulting firm.
If you require less than about 40 percent affordable housing, the net impact of high-end construction is to make the housing market worse.