The Research All Points in the Same Direction: Adding More Homes Curbs Rents for Low-Income Tenants

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The Center on Poverty and Inequality at Georgetown Law made a surprising and contrarian argument in a new paper: adding more homes does not benefit low-income tenants. Three recent separate analyses of exactly this issue – by real estate economist Jay Parsons, real estate economist Kevin Erdmann, and also The Pew Charitable Trusts – all reached the opposite conclusion. They found that housing scarcity pushes up rents most for low-income tenants, but areas adding the most housing have seen rents drop, and those areas have seen rents drop most for low-income tenants. 

The reality is that when homes are scarce, high and middle-income earners can trade down into lower-income neighborhoods to find housing, but low-income households have nowhere to turn, so they end up having to compete for their own homes and wind up paying higher rents. 

A close read of the Center on Poverty and Inequality (CPI) report reveals the discrepancy between its findings and the prior three analyses. The CPI paper looks at six metro areas that added an above-average amount of housing from 2015 to 2023: Atlanta, Dallas, Houston, Phoenix, Seattle, and Washington, D.C. It finds that rents rose in these six metros, and they generally rose more for low-income households than high-income ones. These findings are consistent with prior research. Oddly, the paper does not compare rent growth in these metros to any comparison group, such as low-supply metros, the U.S. overall, these six metros at different points in time, or any control group. 

Without any comparison, it’s difficult to know whether rents would have risen more overall or for low-income tenants if the places had added even less housing. Instead, the paper notes these six metros added “new supply” but rents still rose. The paper does not examine whether these metros had sufficient housing, so as to assess whether they were experiencing “abundance” or had a shortage. Up For Growth’s analysis with economic research of housing underproduction by ECOnorthwest, which includes these six metro areas in 2019 (the midpoint of the CPI dataset), found that these metro areas had a cumulative housing shortage of more than 600,000 homes – underscoring why the CPI paper’s conclusion is such an outlier. 

The authors from CPI analyzed metro areas experiencing a severe housing shortage, then titled their paper “Abundance for Who?” as if those six metros had enough homes. The paper’s unusual characterization extended to other areas, paraphrasing earlier research describing the San Francisco Bay Area, widely recognized as experiencing an extreme housing shortage, as a place that “overproduced market-rate and luxury homes.” Zillow data shows rents rose an average of 57% in CPI’s six studied metro areas during this time period… and 58% overall in the U.S. 

If the CPI paper had examined a time when there was an actual surge of new apartments, such as 2023 to 2024, when many buildings were delivered due to financing secured when interest rates were low, the results might have been instructive. In the six metro areas examined, rents fell an average of 0.8% from 2023 to 2024 (while incomes rose), and rents for Class C apartments (older units with few amenities usually occupied by lower-income residents) fell 2.3%. 

From 2023 to 2024, Rents Fell Overall and Fell Most for Class C Apartments in Six Metro Areas Examined in Georgetown Paper

	Rent Change (2023-2024)	Class C Rent Change (2023-2024)
Atlanta	-3.0%	-4.0%
Dallas	-1.7%	-2.7%
Houston	.5%	-1.0%
Phoenix	-3.2%	-5.2%
Seattle	0.8%	-0.3%
Washington, D.C.	2.2%	5.0%
Average Rent Change	-0.8%	-2.3%

This result highlights that if researchers wish to know whether adding a lot of housing improves affordability for low-income tenants, it’s essential to use a timeframe when the studied locations actually added a lot of housing. 

The CPI findings don’t tell us whether allowing more homes helps or hurts low-income tenants because the CPI paper didn’t compare areas that have added more housing versus less. Fortunately, the three prior analyses of this issue all do.

Jay Parsons’ research found that rents for Class C apartments have risen in low-supply markets and fallen in high-supply markets. This trend has accelerated with deliveries of apartments that were financed when interest rates were lower.

Rents for Older, Less Costly Apartments Rose in Metro Areas That Added Little Housing and Fell in Metro Areas That Added the Most

Chart Source: Jay Parsons’ analysis of RealPage data

Kevin Erdmann’s research found that the housing shortage has been highly regressive, reducing after-rent incomes only slightly in the highest-income quintile of zip codes, but reducing after-rent incomes a staggering 15% in the lowest-income quintile of neighborhoods. When housing supply was less constrained, in 1999, he found there was little difference in housing costs as a share of income in low-income and high-income zip codes, but that after the housing shortage took hold, costs rose far more as a share of income in poor neighborhoods compared with rich ones. 

Housing Shortage Caused Costs to Rise Far More in Low-income than High-income Areas in Atlanta, Los Angeles, and Phoenix

Chart Source: Kevin Erdmann, Mercatus Center.

Pew’s research found that in the metro areas that added the most housing in the U.S., rents have fallen more for Class C apartments than for Class A or B apartments. This result suggests low-income renters are the largest beneficiaries of adding more homes, which makes sense because this finding is simply the converse of low-income renters being hurt the most by housing scarcity. 

Rents in Older, Less Expensive Apartments Decreased Most in High-Supply Metropolitan Areas

Chart source: The Pew Charitable Trusts

Pew also found that Class C rent declines were steeper in the highest-supply metros than in the U.S. overall. The CPI paper does not include data points like these for comparison, and their inclusion offers insight into the relative benefits of having more versus fewer homes.

Metro Areas That Added the Most Housing Saw Reduced Rents Across Building Types in 2023 to 2024

Chart source: The Pew Charitable Trusts

The CPI paper’s core result – rents for low-income tenants rose from 2015 to 2023 – is correct. However, because the examined metro areas aren’t compared to anything else, it’s hard to know what to make of that finding. All six of the metro areas they examined were experiencing housing shortages during the time studied, which explains why rents rose there, especially for low-income tenants, who see the steepest rent increases amidst housing scarcity because they cannot trade down into less-costly neighborhoods. Fortunately, the Jay Parsons, Kevin Erdmann, and Pew Trusts analyses all compare higher-supply and lower-supply areas to each other. All three studies reach the same conclusion: Housing shortages are regressive, hurting low-income tenants most, while areas that have added the most homes have not just seen improved affordability, but when rents have fallen, low-income tenants have reaped the largest rent declines. 

Casual observers of the debates around housing could come away with the mistaken impression that there is serious disagreement among experts about how to improve housing affordability. There isn’t. The authors of the CPI study emphasize the need for subsidies, but acknowledge that we need more housing supply. Ardent supporters of deregulation to boost housing supply readily state that the lowest-income households will need subsidies to afford decent homes even in a well-functioning housing market. But subsidies aren’t going far enough because restrictive zoning and other regulatory barriers are causing a housing shortage, driving up rents and prices. Subsidies for the lowest-income households are crucial, and there’s no way to achieve widespread housing affordability without removing the red tape that is preventing us from allowing enough homes for everyone. 

Eduardo Mendoza is a policy analyst, researcher, and demographer, and a Research Associate with the Metropolitan Abundance Project (MAP) and California YIMBY. He previously worked with the Population Dynamics Research Group on foundation-supported research for the Lucile Packard Foundation and the Haynes Foundation, publishing on displacement, housing costs, and housing supply needs. His work has been featured in HUD’s Cityscape journal and Slate.