Study reveals how high-cost housing can indirectly increase affordability for those on lower incomes.

New Luxury Housing Can Benefit Low-Income Households, Finds City Hall Research

Study reveals how high-cost housing can indirectly increase affordability for those on lower incomes.

Category: National

A recent report from the Greater London Authority has uncovered how the construction of new luxury homes can help make housing more affordable, even for lower-income families. The research, based on several economic studies, highlights that building high-cost properties—despite their price—can create a ripple effect that improves the availability of affordable housing in broader areas.

According to the findings, market-rate homes are able to indirectly lower costs in other segments of the housing market. When expensive new homes are built, they often trigger a chain of moves that result in vacancies in cheaper properties. This creates more affordable options for those seeking lower-priced housing. “Even though new market-rate housing is not directly aimed at low-income households, it helps to ease housing shortages across the entire spectrum of prices,” the report notes.

The research points out that although new social housing directly addresses the needs of low-income residents, building luxury homes can also help alleviate pressures on the affordable housing market. In contrast, when demand for high-priced properties exceeds supply, it is usually lower-income families who suffer the most, as they are the ones who typically benefit from the construction of new homes in the higher-cost segment of the market.

Location is also a key factor. In areas already facing high property prices, the addition of luxury housing can reduce gentrification, potentially slowing down displacement. However, when these homes are built in lower-income areas, they can contribute to gentrification, further pushing up property costs in those neighbourhoods.

While building new market-rate homes may not provide immediate solutions for low-income housing, it undeniably plays a role in improving the overall availability of affordable housing, thus benefiting all income groups in the long term.