The economic background underlying all of this is that there has been increasing geographical concentration of high-skill and high-paying jobs over the past couple of decades. So people move to Seattle, Silicon Valley, etc. not because they like the locale but because that is where the high-tech high-pay jobs are. And people endure the high housing costs and hassle because there aren’t that many high-paying jobs elsewhere, unlike what was more the case fifty years ago. Housing costs are low in Cincinnati, but what’s the high-skill high-pay job market like there?
So building a few luxury condos in Seattle, Silicon Valley, etc. probably doesn’t do much to relieve housing costs lower down because there is too much demand from people continuing to move there for the jobs. So the complaint goes that building more housing just brings in more people, which is true to a certain extent, but those people would be moving there anyway and squeezing out the working class and middle class even worse without a small amount of luxury housing being built. Over the past couple of decades there has been an exodus of working class and middle class people from California that were squeezed out by the high costs and who could not compete with people brought in by the high pay tech job market.
The reason that affordable housing isn’t built is because it’s not profitable with the costs of land and regulatory burdens so high. Really, affordable housing is dense housing (which zoning largely prevents) or old housing (luxury housing several decades later). So it is crazy to expect developers could build low cost housing but are just choosing not to, but that’s a common sentiment.
My current neighborhood ought to be ground zero for low-cost affordable housing - small houses built for the working class sixty years ago, but now even more depreciated, outdated, and worn out. But region-wide supply is so limited and demand is so high that prices have risen to the point that only double-income professionals can afford to buy in the neighborhood. The couple next door moved in a couple years ago and just had a baby and the wife is returning to work after only a few weeks, I assume because they cannot afford to live without her income.
So it’s not just the case that building luxury housing isn’t freeing up housing lower down the scale – it’s that the people who would normally live in luxury housing can’t do so because the supply is so small so that they have to go far downscale and live in 60-year-old working class housing.