Building 100 Market-Rate Units Opens 70 Lower-Income Homes Through Moving Chains

In 2021, economists at the W.E. Upjohn Institute for Employment Research tracked the addresses of 52,000 residents who moved into newly constructed, market-rate apartment buildings across 11 major United States cities. They wanted to know exactly who moved in, but more importantly, they wanted to know who moved into the apartments those initial renters left behind.[1]

The findings documented a mechanism that urban economists call a "moving chain." When a developer completes a luxury high-rise, the people who lease those units are typically high-income earners vacating slightly older, slightly less expensive apartments nearby.[1]

That initial move creates a vacancy in a middle-tier building. A moderate-income renter then moves into that newly available unit, leaving behind a vacancy in a lower-tier building. This sequence continues, cascading down the income ladder until someone moves out of a shared living situation or a unit is demolished.[1][6]

For a local renter watching a crane erect a building they cannot afford, the construction feels irrelevant to their housing search. However, the data shows that this sequence of musical chairs directly alters the availability of cheaper units across the wider metropolitan area.[4][6]

According to the Upjohn Institute data, building 100 new market-rate units ultimately opens up between 60 and 70 vacancies in neighborhoods with below-median incomes. The new construction acts as a pressure release valve for the entire regional housing market.[1]

Tracing the Migration Sequence

To prove this chain exists, researchers cannot rely on theoretical models; they have to follow the mail. By analyzing change-of-address data from the United States Postal Service and consumer reference databases, economists map the exact sequence of household relocations.[1][3]

A 2021 study by the VATT Institute for Economic Research in Helsinki replicated this approach using Finland's comprehensive population registry. They tracked 104,000 moves triggered by the construction of 3,500 new market-rate apartments in the capital region between 2010 and 2019.[2]

The Helsinki data confirmed the American findings with remarkable precision. In both markets, a single new apartment generates an average of three to four subsequent moves before the chain terminates.[1][2]

"The chain usually ends when a young adult moves out of their parents' house, a couple separates into two apartments, or someone migrates into the city from outside the region," notes the Factlen Editorial Team's analysis of the combined datasets.[6]

Each step in this sequence represents a household upgrading their living situation without necessarily increasing their housing budget. Because the overall supply of units has increased, landlords of older buildings face slightly more competition to fill their empty units.[4]

This increased competition forces owners of aging properties to moderate their rent increases or offer concessions to attract tenants. For a renter signing a lease on a 30-year-old garden apartment, the price is indirectly capped by the new luxury tower downtown.[3][4]

The Income Transition Across Steps

The most critical question for housing policy is whether these chains actually reach the lowest-income renters, or if they merely shuffle upper-middle-class households between different luxury buildings. The empirical evidence points heavily toward the former.[1][4]

Factlen's cross-market normalisation of the Upjohn and VATT datasets reveals a consistent decay rate in household income across the moving chain. Regardless of the city's specific regulatory environment, the income drop between the first mover and the sixth mover remains remarkably stable.[6]

The household moving into the brand-new market-rate unit typically earns more than 120 percent of the area median income. By the third step in the chain, the household filling the vacancy earns roughly the area median income.[1][2][6]

By the sixth step, the household moving into the available unit earns 45 to 48 percent less than the first mover. This places them firmly in the below-median income bracket, proving that luxury construction reliably reaches lower-income earners.[6]

"We find that new market-rate construction loosens the housing market in low- and middle-income areas, even in the short run," the Upjohn Institute researchers concluded. The effect is not a theoretical decades-long trickle-down process, but an immediate reshuffling.[1]

The speed of this sequence is often underestimated. The VATT Institute found that the majority of these sequential moves occur within two years of the new building's completion. The pressure relief happens during the current leasing cycle, not a generation later.[2]

Geographic Spread and Neighborhood Effects

While the economic benefits cascade down the income ladder, they do not necessarily stay within the same neighborhood. Moving chains are highly spatial, but they cross municipal and neighborhood boundaries as households seek better commutes or school districts.[1][3]

A 2021 working paper from the National Bureau of Economic Research examined the local effects of large new apartment buildings in low-income areas. They found that the immediate neighborhood sees a 5 to 7 percent reduction in rents compared to areas without new construction.[3]

However, the Upjohn data shows that only about 20 percent of the subsequent moves in a chain occur within the same zip code as the new building. The remaining 80 percent of the vacancies open up across the broader metropolitan area.[1]

This geographic dispersion explains why local residents often feel skeptical of new development. A renter living across the street from a new high-rise may not see an immediate vacancy in their own building, even as the regional market loosens.[4][6]

For a city council evaluating a zoning variance, this presents a political challenge. The disruption of construction is hyper-local, but the benefits of the resulting moving chain are distributed across thousands of voters who may not even live in the district.[4]

The NYU Furman Center has documented this phenomenon, noting that "supply skepticism" often stems from this geographic mismatch. Residents see luxury prices in their neighborhood and assume the new supply is driving up costs, rather than absorbing high-income demand.[4]

Where the Chain Breaks Down

Despite the robust evidence for housing filtering, moving chains are not a panacea for the most severe housing crises. The mechanism has distinct limitations, particularly for households at the very bottom of the income distribution.[5][6]

The California Legislative Analyst's Office points out that while market-rate construction slows the growth of rents regionally, it rarely reduces rents enough to make them affordable for households living below the poverty line.[5]

A household earning minimum wage cannot afford a unit that has filtered down from the middle market unless that unit has deteriorated to the point of being substandard. For these renters, the moving chain terminates before it reaches their price point.[5][6]

Furthermore, in markets with severe, decades-long supply shortages, the pent-up demand among high-income earners is so vast that new construction barely makes a dent. The moving chain gets absorbed by affluent renters who were previously living with roommates.[4][6]

In these hyper-constrained environments, a new luxury unit might only trigger one or two moves before the chain ends. The pressure release valve works, but the pressure in the system is too high for a single building to noticeably lower the gauge.[6]

This is why urban economists universally argue that market-rate construction must be paired with subsidized housing. The moving chain handles the broad middle and lower-middle class, while direct subsidies target the households the chain cannot reach.[4][5]

The Policy Implications for Zoning

Understanding the mechanics of moving chains fundamentally alters how municipalities should approach zoning and land use. If blocking a luxury development prevents 70 lower-income units from opening up, then anti-development policies actively harm the working class.[1][4]

When a high-income household is denied a new luxury unit, they do not simply leave the region. Instead, they bid up the price of existing, older housing stock, outcompeting middle-income renters and triggering a process known as gentrification.[3][4]

The NBER research confirms this displacement effect. In neighborhoods where new construction was blocked, high-income in-migration led to higher rents in older buildings, forcing lower-income residents to relocate to cheaper, peripheral suburbs.[3]

By absorbing the demand from the wealthiest renters, new market-rate buildings act as a sponge. They protect the existing, older housing stock from being renovated and upscaled, preserving the naturally occurring affordable housing that already exists.[1][3]

The data is unequivocal: building housing for the rich directly benefits the poor by freeing up the units the rich would otherwise occupy. The moving chain is the invisible infrastructure that makes regional housing markets function.[1][6]