[cameronlpmoore]

No developers would be building if that were the case. Ever notice how every new apartment building is a "luxury" building? That's because construction costs are so high it only makes sense for developers to build if they can charge top dollar for rental prices. If the rental prices were low they wouldn't build.

[saosebastiao]

Construction costs aren't much higher than they have been historically. Slightly higher because of demand for things with inelastic supplies (like tower cranes), but we're talking average cost change by a few percent at most.

And yes they would keep building. Land owners are the ones who gain/lose by fluctuations in demand, not developers. If demand drops and rental prices drop, land owners lower their prices that they sell to developers. This has been proven so substantially by Housing Economists that it's basically considered consensus by now. Spend some time with the Journal of Housing Economics if you would like to learn more.

The real reason why developers only build luxury buildings is that they can't build enough to satisfy all demand, so the few buildings that they can build will obviously go to the types with the highest margins. If we allowed for more development, developers would still build luxury buildings as long as there was unsatiated demand for them, but they'd also build normal and affordable housing as well.

[stale2002]

But developers ARENT allowed to build. That's the problem.

Yes, let's get rid of all these building height limits so that builders can actually build. That would be wonderful.