What a load of crap. Many new appointments do not end up at undergraduate colleges.
Hm? I think the argument is that most of the fellows choose to work out of their offices at their respective colleges (undergrad here was a poor choice of words by the author as places like Nuffield and All Souls and the other grad colleges are full of academics). That statement though is absolutely true. In fact, it's why Nuffield is particular desirable for students and academics: its dense set of social scientists allows the kind of conversations and cross-fertilizations that occur in a normal academic department. One could make a somewhat similar argument for something like All Souls but it would have to be built only partially around the density of academcis in the same discipline and more for the 'brilliance' of everyone there.
Elsewhere, though, you're lucky if an undergraduate-dominated college has two political scientists and a sociologist or economist that might be around to talk to. Even then, offices are all over the college and there's nothing similar to the hallways of US departments that allow people to have informal chats.
As far as "new appointments", it's true that a lot of the lecturers are more often working out of DPIR, but that's because they're not fellows and don't have the same kind of ties to the colleges. That said, a lot of them will have some kind of college affiliation and spend time at that college.
I don't think it's really up for debate that the social science building does not replicate other top departments around the world that are more centalized and densely populated with academics, which might be benefitial for academics and certainly is for students. Whether it scares away hires is a different question.