You add housing at the top of the market, the highest price point, because people will pay more for a newer home. Consequently the older ones become cheaper, because people who prefer the new ones and can afford them no longer compete in the market for older ones.

This has been dramatically demonstrated in Berkeley, where I live. We have added tons of 0- and 1-bedroom apartments recently. These are very expensive, $3000/mo+. This building boom has caused the price of rent-regulated older apartments to plunge. What had been renting for $2252/mo in November 2018 is now renting for $1688/mo in November 2023. That is a significant increase in affordability of studio and 1-bedroom apartment, effected by building newer, expensive ones.

Edited to add sources:

The discussion is too long for me to recapitulate here, but all of my data in various forms and some visualizations are available here:

https://observablehq.com/@jwb/berkeley-rent-board-data

Also in random tweets such as:

https://twitter.com/Jeffinatorator/status/172890293692602402...

I believe these are visible to non-account holders.