A new house makes every other lower quality house cheaper by providing an alternative. What matters is the total supply of the houses as good or better as the one you want.
Plus other reasons like people want to live in good school districts and higher income areas tend to have better schools.
Many studies find a small net drop in rent (1-5%). But other studies show no aggregate drop in rent. And importantly show an increase in rent for lower quality apartments.
Also for single family homes, nearby property values generally rise.
https://www.tandfonline.com/doi/full/10.1080/07352166.2026.2...