FWD #260 • 1,061 words

New research helps explain how new construction can (and can’t) improve housing opportunities for everyone.

In early 2026, Austin became one of the only major U.S. cities where rents had fallen below pre-pandemic levels. The reason was straightforward: the city built a lot of housing. That result puts fresh pressure on a long-running debate about whether market-rate housing production eventually reaches lower-income renters, and under what conditions.

What is Filtering?

Filtering is the process by which housing units become accessible to lower-income households over time. As buildings age, rents tend to drop, making those units available to households that couldn’t afford them when new. The process can also run in reverse: when higher-income households compete for older stock, rents rise and affordability shrinks.

The debate over filtering tends to conflate two distinct mechanisms. The slower one works through physical depreciation — over 30 to 50 years, aging buildings naturally command lower rents. The faster one works through moving chains: when a higher-income household moves into a new unit, they vacate an older one, which becomes available for the next household, and so on through several rounds. This chain can reach lower-cost neighborhoods within months, not decades.

That distinction matters for both policy design and how quickly affordability can realistically improve.

When Supply Is Sufficient, Filtering Works

A 2021 study of the Helsinki metropolitan area traced moving chains triggered by new market-rate construction and found that by rounds five and six, roughly 30% of households gaining housing access came from the bottom income quintile, even though movers into the new buildings were predominantly high-income.

A 2026 study tracked every household move connected to a single 512-unit condo tower in Honolulu. The building triggered more than 500 local vacancies within three years. The homes left behind by those moves were about 40% cheaper than the new units and spanned diverse housing types across the market.

At a national scale, a 2025 Pew Charitable Trusts analysis found that every 10% increase in a market’s housing supply correlated with rents growing 5% less. The steepest declines were in the older, less expensive buildings known as Class C properties. New supply helped the lower end of the market most.

Austin is the most compelling recent test case. After years of sustained construction, Austin’s median rent fell from $1,546 in late 2021 to $1,296 by early 2026. This drop took it from 15% above the national median to 4% below it. In inflation-adjusted terms, rents fell nearly 19%.

When and Why Filtering Stalls

The filtering mechanism has real limits, and understanding them is more useful than dismissing the mechanism entirely.

A study released in January by the Georgetown Center on Poverty and Inequality examined six metros that built more than the national average and found lower-income households still saw rents rise. It’s a real finding, but those markets entered the study period with a combined housing shortage exceeding 600,000 units. Building above the national average from a deep deficit isn’t the same as building enough.

Where new construction goes within a metro also matters. A University of Minnesota study found that new buildings lowered rents in higher-income neighborhoods but were associated with rent increases in lower-income ones — likely because development in low-income areas generates demand effects that can outpace the supply benefit. That’s an argument for pairing new construction with anti-displacement tools in vulnerable neighborhoods, and not a case for restricting supply growth.

When supply is genuinely constrained, filtering can actually work in reverse. Higher-income households bid up older units, pushing lower-income renters out. Upward filtering is a symptom of underbuilding, not evidence that building doesn’t work.

Several years ago, an FHFA study tracked five decades of American Housing Survey data to find that housing filtered downward during periods of market stability, but stalled or reversed when demand outpaced supply. Between 2015 and 2021, the national trend was upward filtering, with older housing moving to higher-income households rather than lower ones. Filtering didn’t fail. The housing shortage did.

The inequality argument also deserves its due. A recent working paper from the London School of Economics argues that rising income inequality, not regulation, is the primary driver of declining affordability, and that even dramatic supply increases would take decades to benefit cost-burdened households.

Roosevelt Institute fellow Ned Resnikoff critiques the paper’s high affordability standard and modeling approach, arguing the best available evidence still supports supply. But the core observation holds: when wages are too low for households to afford even filtered-down units, supply alone can’t reach them.

Virginia’s Filtering Reality

Virginia’s regional housing markets illustrate the pattern. In Northern Virginia, older, smaller homes — historically entry points for moderate-income buyers — have appreciated sharply as demand outpaces supply. The HB854 Statewide Housing Study found that the share of starter homes in Northern Virginia dropped from 27% to just above 20% of the housing stock.

In Richmond, median home prices reached $435,000 this March, more than doubling over the past decade. In rural Southwest Virginia and the Eastern Shore, older homes have filtered down to lower-income households — but they carry deferred maintenance costs, infrastructure challenges, and rising insurance premiums that quietly erode the affordability gains.

In each case, the market is producing outcomes that reflect challenging supply conditions.

What This Means for Housing Policy

Supply works when there’s enough of it. The evidence also calls for pairing that growth with targeted programs to reach the households the market won’t serve.

Virginia needs production at a scale that relieves market pressure — not just keeps pace with growth at the margins. Simultaneous investments in LIHTC, the Virginia Housing Trust Fund, and other affordable rental resources are essential for reaching households that market-rate production won’t.

Preserving the affordable stock already in place — older buildings that have already filtered down — also requires active attention, particularly as operating costs rise. Zoning reforms that allow more housing types in more places create the foundation for supply growth at scale.

Supply addresses one dimension of unaffordability. It can’t close the gap between what lower-income households earn and what housing costs. Wages, rental assistance, and housing subsidies have to be part of the same strategy.

Virginia hasn’t been building enough for filtering to do its job. That’s the actual problem.

Want to learn more? Explore HousingForward Virginia’s Virginia Zoning Atlas and Sourcebook of housing metrics, and sign up for The FWD to stay informed on housing issues across the Commonwealth.