In the housing affordability crisis, it’s the lowest income bracket that winds up getting priced out and displaced, so how can we expect the almost exclusively luxury housing being built in the tightest rental markets to solve the problem? Even market-rate housing is already too expensive (see: the definition of the affordability crisis). While it may be true that high-end development alone won’t solve the affordability crisis, especially for the lowest income renters, there are several mechanisms by which it can definitely help.
The most obvious of these is tightly related to supply and demand. In its simplest form, the argument is that if you increase the supply of housing, competition for units will go down, and rents along with it. Acknowledging the spectrum from comparatively affordable older units to luxury new construction, we can still see that providing new housing for the highest income bracket relieves pressure at the next say high-middle income bracket, which in turn relieves pressure for middle income housing, and so forth. Build some high end units, and eventually some lower end units will become vacant on the other end.
The second mechanism by which market-rate or more luxury development lowers rents for all is called “filtering.” According to the Washington Post, “Filtering is the process by which, as housing ages, it becomes less desirable to wealthier residents, thereby becoming affordable to the middle class and poor.” In fact, much of what we consider affordable housing today was originally built as market-rate housing (and probably marketed as luxury :P).
It should be noted, however, that if newer units are not added to the market, filtering will not happen. If there are no newer, sexier units for higher income renters to move into, they will continue to compete for the slightly older, would-be affordable units, keeping rents high even as the units age. In this way, the two phenomena are actually one and the same. So really, filtering is the process by which "older market-rate housing becomes more affordable as new units are added to the market," (source: Berkeley IGS).
While filtering may not solve the entire affordability crisis today, with the anticipated growth of cities in the coming decades, we need to be building now if we want to have a large stock of more affordable housing in the future.
The most obvious of these is tightly related to supply and demand. In its simplest form, the argument is that if you increase the supply of housing, competition for units will go down, and rents along with it. Acknowledging the spectrum from comparatively affordable older units to luxury new construction, we can still see that providing new housing for the highest income bracket relieves pressure at the next say high-middle income bracket, which in turn relieves pressure for middle income housing, and so forth. Build some high end units, and eventually some lower end units will become vacant on the other end.
The second mechanism by which market-rate or more luxury development lowers rents for all is called “filtering.” According to the Washington Post, “Filtering is the process by which, as housing ages, it becomes less desirable to wealthier residents, thereby becoming affordable to the middle class and poor.” In fact, much of what we consider affordable housing today was originally built as market-rate housing (and probably marketed as luxury :P).
It should be noted, however, that if newer units are not added to the market, filtering will not happen. If there are no newer, sexier units for higher income renters to move into, they will continue to compete for the slightly older, would-be affordable units, keeping rents high even as the units age. In this way, the two phenomena are actually one and the same. So really, filtering is the process by which "older market-rate housing becomes more affordable as new units are added to the market," (source: Berkeley IGS).
While filtering may not solve the entire affordability crisis today, with the anticipated growth of cities in the coming decades, we need to be building now if we want to have a large stock of more affordable housing in the future.
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