How ‘Filtering’ Opens Up Affordable Housing

An analysis of 12 U.S. cities found that new market-rate construction often leads to more affordable units becoming available, but the effect varies across housing markets.

2 minute read

March 20, 2024, 8:00 AM PDT

By Diana Ionescu @aworkoffiction

Wood-frame two-story rowhouses under construction.

dbvirago / Adobe Stock

A new study from the Federal Bank Reserve of Minneapolis shows that the construction of market-rate housing units leads to more available affordable housing units. Writing in BisNow, Kayla Carmicheal outlines the results of the study, which analyzed renter moves in 12 U.S. metro areas. “When high-income residents move into new market-rate housing, their previous homes are freed up for other renters or homebuyers. When those residents move, their old place is then available for others and the price on it may lower because of a shift in demand. This process is known as filtering.”

The study contributes to an ongoing debate over what policies are most effective in improving housing affordability and making more housing available to renters and homeowners alike. While some policies offer rental assistance and tax incentives for affordable housing developers, others can improve the overall building climate and boost the housing supply by streamlining permit processes and updating zoning regulations to meet today’s needs.

Carmicheal notes that filtering doesn’t occur evenly across cities. The study “found that the Minneapolis-St. Paul metro has a high rate of filtering, with nearly 0.6 affordable units opening up for every new market-rate unit, while New York City has a below-average rate of less than 0.2 units freed per new build.” Meanwhile, “When there are fewer homes available but high demand, older homes that used to be accessible to first-time home buyers are more likely to be snagged by higher-income residents over time,” amounting to a reverse effect and, in some cases, the displacement of older residents and the gentrification of previously low-income neighborhoods.

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