This is the second biggest piece of economics misinformation, behind people who believe their net income will go down if they get a raise into the next tax bracket.
Just like cars, all new housing is luxury. No one working minimum wage can afford the cheapest new car on the lot. But those new cars get bought by people who sell their used cars.
Yes, I understand this argument and it makes some logical sense. The issue is that when it comes to housing, it doesn't seem to be happening, at least not on the time scale of a couple of decades. Affordable housing is not increasing, and that's where the need actually is.
Yes, because of severe supply constraints in the previous decades, there are not enough old units to go around and get cheaper. Rather they refurbish and rebrand as luxury as well. As its usually illegal to build new ones, there is no competition.
Just like cars, all new housing is luxury. No one working minimum wage can afford the cheapest new car on the lot. But those new cars get bought by people who sell their used cars.