In housing economics, filtering is the process by which a housing unit becoming more affordable with age. In markets with sufficient housing supply, homes will command the highest prices and rents when brand new, and depreciate over time as they get older. Thus new constructions will tend to be occupied by higher-income groups at first, but successively filter (become accessible) to lower-income groups.[1]
Importantly, filtering depends upon sufficient supply[2] (either from new construction in a growing area, or depopulation — see Housing in Japan). In markets with insufficient housing supply, reverse or upward filtering can occur. This is when units once occupied by lower-income residents quickly appreciate and become occupied by higher-income residents (see also gentrification).[1]
Prevalence
A 2014 Syracuse University study found that, in the United States, "the nation’s housing stock filters down at a rate of roughly 1.9 percent per year in real terms". In other words, people buying a 50-year-old home would have about 60 percent less real income than those buying a newly built home.[3]
