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by eliasmacpherson 1063 days ago
Agree - it's the 'Trickle-down Effect' except with property instead of wealth.
1 comments

No, it's just basic supply and demand.
A definition of demand: Demand is an economic concept that relates to a consumer's desire to purchase goods and services and willingness to pay a specific price for them.

The poor do not have the willingness to pay a whole category of prices, as they are unable to finance it. Creating luxury accommodation can increase supply, but as the decrease in price does not necessarily put the older accommodation within reach, the owners of captial can choose to retain it.

If there are 10 houses available and there are 12 families looking to buy then the they will bid up and the 10 wealthiest families win. If you build 2 luxury homes, it doesn’t matter if poor families 11 and 12 can’t afford them, because 1 and 2 can, which makes them not bid on normal house 1, 2, …, n lowering all housing prices.
Poor people don't buy accommodations they rent them in your example where demands exceeds supply owners of accommodations can jack up prices to whatever the poor people can pay without living on a street corner hoovering up any benefit obtained in your example.
why do you assume a wealthy family will only buy one house, or could be outbid by a poor family?
What will the wealthy family do with their 3 houses? If they rent them out that’s still good for the poor family (indeed perhaps they couldn’t afford to buy anyway).
on the other hand, if they don't rent them out they can let them appreciate in value, wait for more wealthy families to show up.
Are things made better or worse by building the 11th & 12th houses when there are 12 families in need of houses?
Made better, in that case with those numbers.

Given rental vacancy rates of ~5.8% in the USA in 2022 it is more akin to a hypothetical of building a 12th and 13th house, while an 11th already lies unoccupied.

I am not sure in this more realistic case that building improves matters, unless an unhoused family can gain access to one.

Undesirable areas are full of cheap mansions, slowly decaying because no one wants to live in a place with no jobs.

Housing is not that special, when there is a lot of it, it gets cheap.

Nobody with enough capital to buy/rent them wants to live there.
For every "basic supply and demand" there is a "markets can remain irrational longer than you can remain solvent"