Key points:
- Building more housing slows rent growth significantly.
- Increased housing supply benefits low-income renters the most.
- Restrictive zoning laws exacerbate housing shortages and rent inflation nationwide.
A new analysis by The Pew Charitable Trusts finds that building more housing—even expensive new units—can significantly slow rent growth, especially for older and more affordable apartments. The findings provide evidence that increasing housing supply, both at the regional and neighborhood level, benefits low-income renters the most by relieving pressure on the lower end of the housing market.
Conducted by Seva Rodnyansky, Dennis Su, and Alex Horowitz of Pew’s housing policy initiative, the report examines how housing supply affects rent growth across various income levels and building types. The research is based on an analysis of ZIP code–level rent data from Zillow and socioeconomic data from the U.S. Census Bureau’s American Community Survey.
The U.S. is currently short between 4 million and 7 million homes, a deficit driven largely by restrictive local zoning laws that limit housing production. From October 2017 to October 2024, rents in U.S. metropolitan areas increased by 49%, according to Zillow data. However, the impact was not distributed evenly. Rent increases hit low-income neighborhoods hardest, with the lowest-income ZIP codes experiencing rent hikes that averaged 10 percentage points higher than those in the highest-income ZIP codes.
To analyze these trends, Pew researchers mapped Zillow rent data across 1,654 ZIP codes and cross-referenced it with income data from the Census. They divided ZIP codes into income quartiles, finding that the bottom quartile—those with median household incomes below $43,302 in 2017—saw the steepest rent increases. In contrast, ZIP codes in the top quartile—with incomes above $69,804—saw significantly slower rent growth.
“When not enough homes are built in high-income neighborhoods, people who would have lived in those neighborhoods can usually afford to move into middle-income neighborhoods,” the report explains. “Middle-income residents can usually afford to move into low-income neighborhoods, but residents of low-income neighborhoods have nowhere to turn.”
As wealthier residents migrate downward through the housing market, low-income renters are often left with few options and rising costs. According to Pew, a record 27% of renters now spend more than half of their income on rent, far above the 30% threshold used to define a household as cost-burdened. Nearly half of U.S. renters fall into the cost-burdened category.
But the report offers a hopeful counterpoint: building more housing helps to reduce rent pressure across the board—and especially benefits renters in older, more affordable buildings. Pew’s analysis shows that every 10% increase in a metro area’s housing stock between 2017 and 2023 was associated with a 5% reduction in rent growth over the same period. At the ZIP code level, a 10% increase in housing correlated with 1.4% lower rent growth, even after controlling for other socioeconomic variables.
The average rent in the ZIP codes tracked by Zillow rose from $1,525 in October 2017 to $2,225 in October 2024—a $700 or 46% increase. However, renters in metro areas with at least 10% housing growth paid about $470 less annually than renters in slower-growth metros. At the neighborhood level, renters in high-growth ZIP codes saved at least $120 per year compared to those in stagnant areas.
Crucially, the report emphasizes that regional housing supply has a far greater effect on affordability than local supply alone. “Increasing the whole region’s housing supply has four times the impact on local rents compared with just adding local supply,” the authors note.
The research also supports previous Pew findings that cities with restricted housing growth—such as Chicago, Los Angeles, and New York—have seen higher costs and greater displacement. Meanwhile, metro areas like Houston, Minneapolis, and New Rochelle, New York, which have added housing at a rapid clip, have curbed both rent growth and displacement.
Eleven large metro areas increased their housing stock by at least 10% from 2017 to 2023. According to RealPage Explore data, these high-growth metros saw average rents decline from 2023 to 2024 in large apartment buildings—particularly in Class C apartments, which are typically older, less expensive buildings with fewer amenities and outdated features.
In these 11 metro areas, Class C apartments experienced the steepest rent declines. Austin, Texas, had the largest decrease overall, with an 11% drop in Class C rents. In contrast, cities like Houston had more modest rent decreases, but the trend remained consistent: the most affordable buildings saw the biggest rent relief. Even though most of the newly built apartments were not subsidized and had higher price tags, their presence helped push down rents in older units by reducing the overall competition for housing.
This pattern held true across a broader sample of more than 41,000 large apartment buildings in 223 metro areas. In high-supply regions, Class C buildings saw rent decreases of nearly 6.5% compared to Class A units, which are typically newer and more expensive. Class B units, which fall in the middle in terms of quality and pricing, also saw rent declines, though less pronounced than Class C.
The findings align with the work of economist Evan Mast, an assistant professor at the University of Notre Dame, who has studied “moving chains” triggered by new housing construction. According to Mast, new market-rate apartments in high-income neighborhoods prompt wealthier renters to vacate existing homes, which are then occupied by people from slightly less affluent neighborhoods, creating a cascading effect. Mast’s research estimates that for every 100 new market-rate units built, as many as 70 homes become available in below-average income neighborhoods.
The Pew report argues that policymakers concerned about displacement and affordability should prioritize expanding housing supply, even if most new construction is not income-restricted. “Housing shortages don’t just drive up costs—they’re regressive,” the authors write. “Maintaining restrictive zoning that exacerbates the housing shortage puts vulnerable tenants in a more precarious position by burdening them with steep rent increases.”
The research underscores a growing consensus among economists, housing advocates, and urban planners that restrictive zoning and insufficient housing production are major contributors to rent inflation and tenant displacement—particularly in lower-income communities. While much of the political focus has been on building subsidized housing, the report makes clear that market-rate development also plays a critical role in keeping rents down.
“Allowing enough homes for everyone improves affordability overall,” the authors conclude, “but the evidence shows it benefits low-income renters most.”
The full report, “New Housing Slows Rent Growth Most for Older, More Affordable Units,” is available here.
As I have been pointing out here for years adding supply puts downward pressure on prices.
I have yet to see any evidence whatsoever that there’s a shortage of buildings. These type of articles never explain how they’ve come to that first conclusion that everything else they claim is based upon.
There are no restrictions preventing builders from constructing apartment buildings in undeveloped areas. In developed areas, it costs a lot more to knock down buildings, work with existing infrastructure to build something denser, etc. THAT’s what causes this imaginary “shortage” of “affordable” apartments.
From article: “When not enough homes are built in high-income neighborhoods, people who would have lived in those neighborhoods can usually afford to move into middle-income neighborhoods,” the report explains. “Middle-income residents can usually afford to move into low-income neighborhoods, but residents of low-income neighborhoods have nowhere to turn.”
Is there actually any evidence that this occurs, or are the “researchers” just blowing smoke out of their arses?
Seems to me that what ACTUALLY occurs is that folks don’t move TO expensive areas like the Silicon Valley (unless they’re highly-paid tech workers, earning much more than existing residents). And that some of the pre-existing residents move out of the area (and are displaced by these highly-paid newcomers) entirely. (If that’s not true, then tell me what “low-income neighborhoods” they’re moving to in that area.)
And what about high-cost cities which have implemented rent control? (Are there lots of renters in rent-controlled apartments in San Francisco moving to some imaginary low-income neighborhood in or near that city, for example? Especially since the rent control laws are preventing them from getting priced-out in the first place?)
By the way, did anyone notice that Newsom just “excused” Pacific Palisades from dense rebuilding requirements (regarding SB-9)?
And do you think he (and the mayor) is actually concerned about “fire safety”, or do you think he caved in to a bunch of wealthy property owners who want to rebuild their paradise as it was?
For that matter, wouldn’t fire safety concerns dictate NO rebuilding in that area, if that’s what the governor is concerned about? (It was already considered very high-risk BEFORE the fires). Is it preferable if the next fire “only” takes out multi-million dollar McMansions?
https://laist.com/news/housing-homelessness/los-angeles-palisades-fire-rebuilding-sb9-adu-mayor-bass-housing