Pro-Housing Pittsburgh

Councilperson Warwick and Councilperson Gross have both expressed skepticism on filtering in housing. It's worth taking a couple paragraphs to explain what filtering is, what empirical evidence we have for its existence, and why it does not appear to have provided cheap housing in Pittsburgh.

What is Filtering?
When new market rate homes are built, households move into them, reducing demand and prices for the homes they leave behind. Other households now move into these cheaper homes, leaving behind still more homes.

An easy illustration of this uses hermit crabs:
If you line up a bunch of hermit crabs, too big for their shells, and place a large, empty shell among them, the largest crab moves into the new shell. The second smallest crab then moves into the shell the largest crab left behind. And so on and so forth, until even the smallest crab has a new, larger shell.

The same process happens in housing. When supply increases faster than demand, the wealthiest households move into the newest, most desirable homes. Less wealthy families move into the homes the wealthiest households left behind, even less wealthy families move in the homes the less wealthy families left, so on and so forth, until even the poorest households have affordable housing. (Some people have derisively referred to this as "trickle down" - that is an entirely different concept. Trickle down is the idea being that wealthier people will use an increase in income to increase demand, thus generating higher wages for lower income. households. Filtering, on the other hand, is the mechanism of how an increase in supply results in lower costs).

Empirical Evidence
There have been multiple papers studying filtering since the 1970s (see Boddy & Gray, 1979, for a review of these early papers). Since then many more have come out(Bratu et al, 2023; Weicher et al, 2018, and Kindström and Liang, 2023).

I will focus here on only one: Evan Mast's 2023 paper "The effect of new market rate housing construction on the low income housing market", published in the Journal of Urban Economics.

In this paper, Mast looks at the construction of 686 new, large, market-rate buildings in 12 major US cities (Atlanta, Boston, Chicago, Dallas, Denver, Houston, Minneapolis, New York City, Philadelphia, Seattle, San Francisco, and Washington, DC). Then he traces all the households that moved into those buildings (over 52,000 individuals), the buildings they moved out of, the households that moved into those buildings, etc - for a total of 6 such moves.He finds that for every 100 new market rate units built, the resulting migration chain creates 45-70 new housing units for below median income households, including 19-39 new housing units for bottom quintile income households.