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

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

(A) Limits to Filtering-Up

(B) Limits to Filtering-Down

ePric

Supply theis SP whereVSP(QL)

Costs User

and Costs Fixed Costs Prime

Revenue Rev

Costs Prime Rev(QL)

• Low Income Housing

• Removal of Slums

• Supply of Slums

(1.) Neighborhood Externalities

(2.) Profitability Bias

(3.) Social Costs