Hi Kevin! I thought of a question, and wasn't sure where to ask it, so I'm just writing it on this post.
You've written that when demand outstrips supply, rents rise most rapidly in the lowest income neighborhoods. But when supply outstrips demand, do rents fall most rapidly in the lowest income neighborhoods?
Unfortunately, federal policy choices have turned the whole country undersupplied since 2008, so those cases are tenuous in recent data.
There are places like Auckland, NZ that have been making significant inroads in reversing undersupply and they appear to confirm those results.
Also, one pattern that I have found in the U.S. is that low income cost inflation comes from the slow roll of perpetual undersupply associated with local migration into poor neighborhoods that ultimately price poor households out. But where price appreciation is due to short-term or cyclical demand booms, like Austin recently or Phoenix in 2005, that isn’t the pattern. In those cases, where the supply/demand mismatch is from new households moving in rather than from a lack of homes that forces existing households out, prices rise across the board. Not just in poor neighborhoods.
So, another form of evidence is that the pattern I highlight isn’t the only pattern we see when costs are rising. It’s just the pattern we see when rising costs are associated with low rates of building.
Hi Kevin! I thought of a question, and wasn't sure where to ask it, so I'm just writing it on this post.
You've written that when demand outstrips supply, rents rise most rapidly in the lowest income neighborhoods. But when supply outstrips demand, do rents fall most rapidly in the lowest income neighborhoods?
Thank you!
Unfortunately, federal policy choices have turned the whole country undersupplied since 2008, so those cases are tenuous in recent data.
There are places like Auckland, NZ that have been making significant inroads in reversing undersupply and they appear to confirm those results.
Also, one pattern that I have found in the U.S. is that low income cost inflation comes from the slow roll of perpetual undersupply associated with local migration into poor neighborhoods that ultimately price poor households out. But where price appreciation is due to short-term or cyclical demand booms, like Austin recently or Phoenix in 2005, that isn’t the pattern. In those cases, where the supply/demand mismatch is from new households moving in rather than from a lack of homes that forces existing households out, prices rise across the board. Not just in poor neighborhoods.
So, another form of evidence is that the pattern I highlight isn’t the only pattern we see when costs are rising. It’s just the pattern we see when rising costs are associated with low rates of building.