Rosenthal study on private Markets and filtering a source of low-income housing published in AER

Are Private Markets and Filtering a Viable Source of Low-Income Housing? Estimates from a "Repeat income" Model

Stuart S. Rosenthal

American Economic Review, January 2014

Stuart Rosenthal

Economics Department

Aging Studies Institute

Center for Policy Research

Housing

American Economic Review

Stuart Rosenthal

While filtering has long been considered the primary mechanism by which markets supply low-income housing, direct estimates of that process have been absent. This has contributed to doubts about the viability of markets and to misplaced policy. The author fills this gap by estimating a "repeat income" model using 1985-2011 panel data.

Real annual filtering rates are faster for rental housing (2.5 percent) than owner-occupied (0.5 percent), vary inversely with the income elasticity of demand and house price inflation, and are sensitive to tenure transitions as homes age. For most locations, filtering is robust which lends support for housing voucher programs.