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MODULE 8
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Filtering Model

• Definition Filtering Down (Up) is a decline
  (increase) in real value of a a quality-adjusted
  unit of housing.

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Filtering Model Assumptions

• 1.) For each Household i, Yi Real Income
• 2.) For each Dwelling j, QLj Quality
  Measure
• 3.) For each Dwelling j, Vj Real
  Value
• 4.) Housing Market is assumed to be in
• Equilibrium

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Limits to Filtering Up/Down

• (A) Limits to Filtering-Up
• (B) Limits to Filtering-Down

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Describe Equilibrium
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Describe Shifts from Equilibrium
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Does the Filtering Model Work?

• Low Income Housing
• Removal of Slums
• Supply of Slums

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Sub-optimality of Housing Slums

• (1.) Neighborhood Externalities
• (2.) Profitability Bias
• (3.) Social Costs