What Is ‘Trickle Up’ Housing Affordability?

an inverted faucet with a drip appearing to 'trickle up' from it
Faucet photo by nekidtroll is licensed under CC BY-SA 2.0

Given it’s name, ‘Trickle Up’ affordability would suggest the defiance of gravity. That’s always a risk when using physical world metaphors for the financial workings of such as a housing market.

‘Trickle Down’ First

‘Trickle down’ housing affordability has a much more pleasing relationship with gravity. Too bad it doesn’t work particularly well, or at least, work in ways which good old Adam Smith (Law Of Supply And Demand, Economics 101, Free Market thinking, etc.) thought it would.

In that free market dreamworld, housing would age gently and gracefully. Originally new and shiny, now slightly shopworn and shabbified, housing would slowly decline in market value, becoming more affordable to rent or buy as its initial pricing slowly ‘trickles down’ to the benefit of lower income citizens who could not afford the new, shiny stuff.

Well, lower income citizens and their families can’t afford modern new builds, even when public incentives are offered in exchange for what has turned out to be shoddy glamour.1

But they can’t afford older housing either. It turns out that yesterday’s better-built housing, refurbished or not, is often more spacious and gracious as well. It may not fall in price after all as time wears on. Indeed, after refurbishing, it may well become more expensive than it ever was.

So much for trickle down.

Trickle Up: How Does it Work?

First, government spends its money as efficiently as possible by building (several ways) ‘true’ affordable housing for those with the lowest incomes and no incomes. That they need to build the housing to last goes without saying, as does the need to hold that housing indefinitely away from the free housing market.

Reasonably affordable housing now becomes available as the low/no income citizens move into the ‘true’ affordable housing. Remember, those low/no income citizens were previously living somewhere they really couldn’t afford (with the exception of the homeless — an important exception which needs addressing, to be sure).

That vacated, barely affordable, housing is in turn occupied by lower middle class renter/buyers who finally see homes they can actually afford compared to those they are currently living in. In turn, this exodus of lower-middle class renters/buyers presents an opportunity for middle-middle class households to move in, and spend less on housing than they had been previously. And so on.

Trickle up.

Incredibly, ‘trickle up’ theory does not depend on fighting the free market by some means of force-lowering housing prices across the board. It utilizes existing lower price housing that becomes available as housing is vacated.

Taken to a logical (if irrational) extreme, one day a cash-strapped billionaire might find himself living in a home trickled up from a minimum wage coffee barista.

Unlikely? Perhaps. But any more unlikely that the billionaire’s multi-million dollar condo will trickle down to one day be inhabited by a lucky barista?

See more in Shelterforce: Why Voters Haven’t Been Buying the Case for Building

Footnotes

  1. Shoddy? How’s that? Read more in The Guardian: Why Are Britain’s New-Builds All So Ugly?

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