New research published in Housing Policy Debate, “Has Housing Filtering Stalled? Heterogeneous Outcomes in the American Housing Survey, 1985–2021,” examines long-term trends and dynamics in the filtering of housing units within U.S. housing markets. The author, Jonathan Spader of the Federal Housing Finance Agency, finds significant variation in filtering outcomes across time periods, price points, and metropolitan areas. In some metropolitan areas or time periods, the downward filtering of housing can in fact stall or reverse as housing markets tighten, meaning that housing units in such markets may not become more affordable as they age – a process that has historically increased the overall supply of lower-cost housing. Spader concludes that filtering outcomes are related to local housing market conditions and that the process cannot always be relied upon as a source of affordable housing.
Broadly defined, filtering is the process by which housing comes to serve different residents and uses over time. In some contexts, housing can filter downwards as it ages and can become more affordable to lower-income households. In other contexts, housing can become more expensive as it filters upwards to higher income households. In still other contexts, housing units might be converted for different uses or demolished. Downward filtering is thought to be the most significant source of low-cost housing in the private market.
To analyze filtering dynamics, Spader relied on two panels of the American Housing Survey (AHS): from 1985 to 2013, and from 2015 to 2021. The AHS collects detailed information on a representative sample of housing units and their occupants every two years, allowing for analysis of changes in housing unit and household characteristics over time. Analyzing the AHS, Spader found that housing units, on average, filtered downward between 1985 and 1993 and between 2005 and 2013, while between 1995 and 2003 and between 2015 and 2021, filtering either stalled or there was significant upward filtering. The period from 2015 to 2021, on average, saw upward filtering of housing units to higher income households across the country. These findings directly contradict prior research that concluded that housing filters down on average.
Spader also found that the direction and magnitude of filtering can vary by metropolitan area. More specifically, Spader observed significant differences in filtering dynamics between high-appreciation metropolitan areas on the West Coast and metropolitan areas with lower appreciation and lower growth in housing units. While filtering in the low-appreciation, low housing-unit-growth metropolitan areas remained relatively constant, the high-appreciation metropolitan areas on the West Coast showed significant shifts between downward and upward filtering over time. Periods of upward filtering appeared to coincide with strong housing demand and rising prices, while a pronounced period of downward filtering appeared to coincide with the Great Recession.
Spader concludes that filtering may not always be a reliable source of lower-cost rental housing and that affordable housing subsidies might be necessary in markets that experience periods of upward filtering. He further concludes that the variation observed in filtering outcomes might warrant federal policies that are more sensitive to local conditions.
Read the article at: https://bit.ly/3HV0Zgc