You might have heard about how important filtering is when it comes to housing markets. Build new luxury homes, and the new resident vacates their old home, and that resident vacates their old home, etc.

You might have even seen this chart.

But it is obvious to anyone that adding to the stock of a durable good market means filtering. Everyone sees it in the market for cars. But we also see that only producing new Ferraris is probably not ideal either and doesn’t solve the distributional issues in “car affordability”.

Here are two articles of mine digging into the issue.

First, trying to see what the arguments are. There are bad ones on both sides, because none seem to articulate well that this is a distributional argument.

Second, an article that digs into the fact that, yes, filtering occurs on the consumer side by relocating household, but it also occurs on the production side, when zoning relocates where homes go.

As I say “In brief, the equivalent of moving chains on the producer side meet household moving chains on the consumer side to determine a market equilibrium with a spatial dimension — an equilibrium for where homes are built, of what type, at what price, and with which residents. Households substitute by moving between built dwellings, and developers substitute by moving where dwellings are built (and what they look like). Spatial variation in rents and prices maintains and reflects this equilibrium, balancing these two forces.”

Enjoy