Does New Housing Supply Affect Displacement?

The current housing affordability crisis is driven, in part, by a lack of supply. High demand and rising housing costs have led to increasingly exclusive neighborhoods, where households with lower incomes are displaced or unable to afford entry. Though adding more supply is often touted as one way to address displacement and exclusion, it’s unclear if the addition of new supply reduces housing prices and increases access for people with lower incomes, or if the added supply disrupts neighborhood patterns, drives up costs, and spurs demand. This study examines the impact of market-rate housing construction on the probability that households with lower incomes will migrate into or out of different types of neighborhoods.

The authors focus on Los Angeles and San Francisco during the 2010s, using a dataset of individual and household characteristics from Data Axle and data on new construction—both subsidized and market rate—and neighborhood characteristics measured at the block-group level. They analyze how market-rate and subsidized development affected displacement and exclusion after one and five years by examining movement out of and into local neighborhoods. They focused on households with incomes at either 80 to 120 percent of the area median income or below 80 percent of the area median income. They characterized neighborhoods as affluent if they had a median home value and rent higher than the city’s 70th percentile, and they characterized tracts as high appreciation if the growth in median home values or rent was greater than 125 percent of the city’s increase or stagnant appreciation if less than 50 percent of the city’s increase. They find that constructing new units helps alleviate displacement pressures for households with lower incomes, though effects vary by market.

Key findings

Housing construction was associated with more in-migration and out-migration. This was more pronounced in San Francisco than Los Angeles.

• Move-in rates exceeded move-out rates significantly only when more than 100 housing units were built in a block group.
• Effects varied by city. Building 100 market-rate units increased the probability of households with low incomes moving out of a neighborhood by 0.982 times in Los Angeles and 1.138 times in San Francisco (short term), with effects decaying over the long term. This means a household with a low income saw a decreased probability for out-migration of 2 percent in Los Angeles but an increased probability of 14 percent in San Francisco of moving out relative to when there was no new construction.

New construction affected out-migration differently across markets and increased in-migration.

• In Los Angeles, the construction of 100 new market-rate units was associated with out-migration in all neighborhood types (3 percent in the short term and 8 percent in the long term), except for affluent neighborhoods, which experienced a 24 percent decrease in the probability of moving out over the short term.
• In San Francisco, the construction of 100 new market units increased probabilities of out-migration in all neighborhood types by 15 percent in the short term, with effects decaying in neighborhood types (except in neighborhoods defined as stagnant) over the long term.
• Market rate construction increased in-migration for both Los Angeles (10 percent) and San Francisco (15 percent) in the short term.
• When fewer than 20 new housing units were built in a block group, out-migration and in-migration rates were similar to when there was no new production, particularly in Los Angeles.

Subsidized housing broadly worked to reduce out-migration and increase in-migration. When subsidized units were built, move-in rates exceeded move-out rates, except in San Francisco, where this effect occurred only with the construction of more than 20 units.

• Onsite inclusionary housing in San Francisco increased the probability of short-term out-migration (by 11 percent), whereas the 100 percent subsidized housing reduced it over both the short and long terms (by 4 percent).
• Inclusionary housing resulted in substantial (25 percent) increases in short-term in-migration, whereas effects of 100 percent subsidized housing were much lower (6 percent).

Policy implications

• Market-rate housing development may help alleviate rent pressures, but it’s insufficient to address displacement. Tools such as housing preservation and tenant protections are also needed to address systemic inequities that lead to housing instability and displacement.
• The effects vary by market, and as such, planners need to understand local neighborhoods to determine what types of investments are most appropriate.
• Both more market-rate and subsidized housing development can be encouraged through zoning and fiscal tools.