Filtering to Affordable: Does Multifamily Housing Become More Affordable as It Ages?

Abstract

Housing affordability and potential sources of affordable housing remain national concerns. Using the 10 largest metropolitan statistical areas (MSAs), this study measures the degree to which a multifamily housing property’s age affects its affordability, hence examining the rate at which a necessary step in the filtering process is taking place. We find that a property’s affordability increases by about 2.7% during the first decade of its existence and by about 0.5–1% every following decade, with some variation across MSAs. While this indicates that filtering could be taking place at a relatively slow rate, we show that this can add up to significant rent savings for a low-income family. Lastly, we conduct two follow-up case studies of affordability in Atlanta and Philadelphia.

Keywords:

• Affordable housing
• housing policy
• filtering

Notes

1 HUD defines families that pay more than 30% of their income for housing as housing burdened. For more information, refer to https://www.hud.gov/program_offices/comm_planning/affordablehousing

2 The ACS 1-year estimates show that approximately 37% of renters reside in a “5 or more” unit property, which is within the coverage of our data set (6- to 600-unit properties are in our data set from AXIOMetics). As a result, this 37% corresponds to 15.9 million units, which very closely aligns with the national coverage reported by AXIOMetrics.

3 Income data from the Census Bureau are pulled from Moody’s Analytics, which forecasted quarterly median income levels that are used in our analysis. The forecast goes through year-end 2017.

4 For a further explanation of this issue and why a fixed-effects model could not include both property and time effects while estimating the impact of age on housing burden, see Wooldridge (2020, Ch. 14).