[mpyne]

> I believe there are, for instance, many reasonably wealthy people who live somewhere outside California and would not move into a dumpy old apartment in LA or SF but might move into a fancy new one. In other words, they will not occupy an additional housing unit (in a given market) unless it is "nice" enough.

That's the point, the "dumpy old apartment" was never going to be the thing stopping the rich person from moving in.

Due to overlap in preferences amongst a multitude of people, the rich person would free up the housing they like by buying it from whoever, who would then free up slightly-less-good housing in the area by kicking out someone else (with money, to be clear) and so on down the chain until you get to the "dumpy old apartment", whose rent now rises because there are more people interested in moving into it due to lack of other options.

New housing, even if it's new 'luxury' housing, breaks this chain of housing migrations in the area before it gets to buying people out of their dumpy old apartments.