We're talking about two seperate issues. Your study looks at maintenence long-term of old properties, versus the investment into new properties. New supply theories in the US are based on the hermit crab theory.
Rotjan et. al wrote:When a hermit crab discovers an empty but oversized shell, it waits nearby rather than simply walking away. Once a small group gathers, crabs begin piggybacking by holding onto the shell of a larger crab and riding along. Such waiting and piggybacking behaviors seem to increase the chances that a synchronous vacancy chain will happen. "They spend hours queuing up, and then the chain fires off in seconds, just like a line of dominoes," says Rotjan. Computer models populated with virtual hermit crabs and shells confirmed that synchronous vacancy chains depend not only on crab density, but also on how long crabs are programmed to wait near an unsuitable shell.
An observed behavior in hermit crabs is that when a crab discovers a new, better shell, it will wait before taking residence. When a queue has been formed, the largest hermit crab will take the largest shell, leaving theirs vacant. The next largest takes the new vacated shell, leaving their own vacant, and so on. This social behavior leads to all crabs having a new, better fitting home.
This truism is applied to the rental market in the US.
When a new developer builds luxury housing, it is assumed that the richest individuals will move to the newer housing - leading to their old housing becoming available for middle or low income earners.
This theory is emperically false - and it is a restatement of the same trickle down nonsense that ruined our financial markets.
What actually occurs is different. A new developer builds brand new luxury housing, and because it is brand new, attaches a premium to the price of the housing above local market rates. This makes sense and is observed.
What the theory expects, then, is that the older luxury housing will become, in effect, middle income housing, as the old vacant housing reduces rents to fill vacancies.
This does not happen.
Landlords do not reduce rents. Once they've recieve $2500 a month for a property, they will very very rarely devalue that price, and this is made worse by tons of commercial software available that enables landlords to collude on rental prices (see link). Now, some this is sort of necessary in the US because of the way property tax valuations occur, but this remains true in countries without property tax. Landlords do not reduce rents.
What occurs is a gradual shift upwards in price. As the new luxury condominiums are built, they charge a higher market rate. The other landords, left with vacant housing,
at best keep their rents at the same level. This is observable.
Landlords prefer to leave housing vacant to "maintain market rates" than to reduce rent. Maintenences is discourage when landlords cannot increase rent in an environment where property taxes remain based on prior valuations - but this is not the sole reason. Owners emotionally are reluctant to charge less for rent than they used to.
By incentivizing increased supply at the top end, we just gradually increase average rents in a city as time goes on, because new developers prioritize top-end, not affordable, housing.
We need to incentive supply at lower and middle income stratas. This means a rent cap/rent control on new developments. By capping the amount of rent a developer or investor landlord can charge on new housing, we effectively outlaw the building of new luxury developments and increase supply in the stratums that need it most - the ones
most affected by the current crisis.
A profit can be made at 1,000 dollars per 100m2 (1/2 bedroom flats) in the vast majority of cities around the world (and of course, local conditions apply and should be considered!). But this only occurs if you build housing designed to service that market, which requires government stepping in to make sure that only that sort of new development is incentivized.
I'm a complete hypocrite here. My startup is designed around buying affordable apartments and renting them exclusively to international students from East Asia, and especially China, at about 30-50% above market rates.
@Rancid argued that you should ban folks from owning multiple properties - this is a good idea, if you disregard those people that
need rental properties. In my case, its international students, or medium-term stays by folks working for a foreign multinational sent to a specific office that need housing for a year or two and don't want to outright buy it. Rental properties are necessary to create fluidity of human capital within the system. But they absolutely should be regulated, because landlords, governed by a pure profit motive, do not act in a way that helps low and medium income renters. Why would a developer build apartments for the poor unless they had no choice? Their profit margin is much lesser.
We can talk about revolutionary changes, but if we're looking at practical, short-term solutions designed to work wtihin the current system... you need to ignore existing housing almost entirely... and you need to cap prices that new developers can charge so that they are incentivized to actually newly supply the populations in need.\
Subsidies or grants for developers cost local governments money. Rent caps do not, while incentivizing a desired behavior.