Almost all new construction is luxury housing; it's what pencils out. The mechanism by which it reduces prices is by reducing demand pressure on older housing stock, which would otherwise be bought up and rehabbed by the same people moving into the "luxury" housing. The constraint that makes this work is increased density: so long as you're adding net units to the market, new construction at any price level will reduce prices in the market.

As someone who grew up in San Diego and now lives in Dubai, I point towards how much of the construction companies in Dubai are partly government owned and were at once fully owned before the government sold shares in their IPOs.

I really don’t understand why the California government doesn’t just build luxury condos at a large scale for profit. The state will get revenue and lower housing costs overall.

The question is whether the well-off person moved in from the same market, or from elsewhere. (Also, whether they vacate their previous unit or, e.g., keep it as a vacation home.)

> What they fail to miss is that for every luxury unit that's built and is occupied, some well-off person moved into it... And out of a shitty, cheap unit that's now on the market.

Ah yes, good old trickle down economics, applied to housing. It's obviously always true that the people moving into a new luxury home are coming from existing lower-luxury homes in the same part of the same city, and will immediately sell or rent those homes off at prices no larger than what they themselves had paid for them and no more.

And we're basing all of this on a tiny decrease in the prices of new rent offers in one of the most expensive in the USA, which built a tiny amount of extra homes recently, not even clear of what type. Clear causation well established.