|In Vancouver, older houses to the right, monster house to the left|
Why do some places see gentrification while others see filtering? Can we get housing to start filtering instead to sate our needs for affordable housing?
Let's talk about cars...I think this analogy is good to understand the dynamic behind these phenomena. Cars are a prime example of filtering, the new car sold at 20 000$ is perhaps worth 10 000$ or less 5 years later, even if it is a low-mileage car. In developed countries, the secondhand car market has been what allowed the poor to afford cars that they could never have bought new. Why is it that cars' value go down while houses' value are not supposed to actually go down?
Well, new cars have warranties, old cars don't... but that's the case for housing too in general, new homes tend to be covered by warranties offered by the home builder (sometimes required by law).
Well, cars' likelihood of breaking down increases over time... but so do houses, over time they will also require renovations and replacement of certain parts (the roof for instance).
So why are old cars worth less than new cars? Even cars that have been well-maintained, covered by extended warranties and in perfect condition are worth less than new cars.
I think the reason is that old cars have to compete with new cars, and it is extraordinarily rare that a new model is not better in some ways than an older model. The engine and transmission may be better, more fuel-efficient and/or powerful. The design may be more modern and more comfortable. More amenities may be added to the car, etc, etc... Car manufacturers don't really have a choice, their cars must compete not just with other brands' cars, but also with their older model.
Considering that, why would anyone be willing to pay more for an old car than a new car when new cars are often so objectively better?
That's why old cars see their value go down over time, because we keep building new cars and these cars keep getting better and better. We could theoretically keep old cars around and just upgrade them, change the engine, change the transmission, redo the interior, etc... That way we could insert new technologies in older vehicles, but it's considered too much of a bother versus buying new cars instead, that come with all this new technology right out of the car dealer's parking lot.
But imagine if we suddenly decided "we have too many cars already, let's put a quota on the amount of new cars we can build, or even ban making new cars altogether". Suddenly, because you have no influx of new cars on the market and you're stuck with the old cars, their value would cease going down, because they have no more competition from new cars. In that context, if something breaks on a car, people will fix it instead of scrapping it, and people may start replacing old engines with new ones instead of buying new cars.
Since new cars couldn't be built, it would also mean that the supply of cars in the market would be stagnant, if population and wealth is growing, it would mean that cars' value would get higher and higher all the time and a smaller and smaller share of the population would be able to afford them.
This is not merely theoretical, it has happened in real life. After the Cuban Revolution, the United States started an embargo on Cuba, which included, of course, cars. The USSR struggled to build enough cars for its own people, so it couldn't pick up the slack from the loss of access to American cars. Cuba itself had no car-making industry. The result was that the stream of cars dwindled to nearly nothing in Cuba. Without the ability to replace existing cars, Cubans have developed an expertise in keeping their old 50s-era American cars on the streets, repairing and replacing parts as they failed, decades after most of the cars' "brothers" have been scrapped as useless junk in the United States.
Whereas the car market in North America is a classic example of "filtering", the market in Cuba might be much closer to "gentrification", with cars maintaining their value and upgrades the only way to get better cars.