Why Filtering Doesn’t Work – Two Reasons

Did you know there are almost 16,000 vacant rental units (apartments, houses) in Portland?  That over 95% of current housing construction in Portland is for the luxury market?

“Glut of Overpriced Apartments Has Made Rents Fall for Rich, Soar for Poor in Cities Nationwide”

“Diane Yentel, president and chief executive of the advocacy group National Low Income Housing Coalition (NLIHC), outlined the governing theory that has led to this nationwide crisis. “For-profit developers have predominantly built for the luxury and higher end of the market, leaving a glut of overpriced apartments in some cities,” she explained.

“Some decision-makers believed this would ‘filter down’ to the lowest income people, but it clearly will not meet their needs.”

In Portland, the city built a few hundred “affordable housing units” between 2010 and 2014, but since that time, city commissioner Nick Fish told Stein that more than 95 percent of private construction has been in “the luxury end of the market.” “

For anyone looking for a new $2,500 or $3,000 luxury apartment in Portland, times are good.  The new high-end apartment buildings are as much as 20% vacant and many are offering months of free rent.

For anyone looking for an affordable apartment in Portland, are times good?  Err, no.

The record pace of development in Portland is not helping lower-income or even median-income families.  Almost none of the new apartments, condos, duplexes, and other housing being built is affordable to those families.

This isn’t what the YIMBY and real estate groups backing RIP want to hear.  So they claim that building lots of expensive housing will somehow help lower-income families find affordable housing.

How does that work?  This idea is “trickle-down” housing, also called “filtering”.  The idea is that over time, today’s expensive new condos, apartments, and other housing will eventually become old and cheap, thus trickling – or filtering – down to low income families.

The problem is that filtering doesn’t work.  Here are two reasons.

First, housing depreciates (loses value) very, very slowly if at all.  Even those who believe in trickle-down housing agree it will take thirty to fifty years, for 2018’s high-end or luxury apartment building to become old and cheap enough to be affordable to lower income renters.  And that’s in average real estate markets: in regions where housing prices are growing strongly, filtering is even slower if it happens at all.

Second, filtering often doesn’t happen at all.  When the real estate industry sees a low priced  building on a parcel of valuable land, they find ways to “fix” the situation.  Older apartment buildings can be bought and renovated – new kitchens! new lobbies! – to raise their rental value, then re-rented to higher-income tenants.  If they can’t be renovated, they are torn down to build new high-end apartments or condos.  Older houses can be remodeled and updated, and well built, attractive older houses actually rise in value after reaching a certain age.

Third, with infill development, low priced housing being demolished to build the the new high priced housing. Developers choose the least expensive housing in the neighborhood to tear down – higher profits that way – so this RE-development actually takes away today’s affordable housing to build high-priced housing.  The displaced families can’t wait fifty years to see if anything trickles down.

We will be writing a lot more about trickle-down housing and the groups who support it.  For now, read more here:

“The ‘Filtering’ Fallacy”

“Will Filtering Keep housing Affordable”

“Housing Doesn’t Filter, Neighborhoods Do”



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