The ‘Filtering’ Fallacy
The rationale behind recently-proposed “solutions” to the housing affordability crisis that seek to reduce limits and regulation on high-end housing development policy is the theory of Filtering. According to filtering, maximizing the supply of housing at the high-end of the market will eventually result in housing that “trickles down,” with reduced prices to meet all affordability needs. This theory relies upon the deregulation of the real estate market, through actions such as eliminating local development approval processes, eliminating requirements on developers to contribute to infrastructure or affordable housing, or easing restrictions on demolitions of existing housing.
But, as the head of the California State Buildings Trades Council pointed out recently in the Los Angeles Times, “We have found the history of mass deregulation in America doesn’t work well for working people.”
Understanding why deregulation policies like the “by-right” one proposed by California Governor Jerry Brown (Streamlining Affordable Housing Approvals), which would ease the zoning approval process for housing developers and other market-based solutions, won’t actually make housing more affordable requires a closer examination of the filtering theory. If you haven’t heard of filtering, have no fear–the Council of Community Housing Organizations has created an info-graphic (below) that breaks down the basics of filtering, the assumptions behind it, and the reasons it doesn’t work the way some say it does.