Vacancy chains in urban housing

 Vacancy chains occur not just in labor markets, but also in housing markets. (Earlier this week I wrote about housing chains for hermit crabs that result from evictions.)  A vacancy chain in a housing market can be thought of as a moving chain: someone moves into a vacant house or apartment (perhaps a newly constructed one), and someone else moves into the home they vacated, and so on, until the chain ends when a person who was in some different market (e.g. in rental housing, or in a distant location) moves into the last identifiable home in the chain.

Here are two papers that explore what happens when newly constructed housing is relatively expensive. They find that the chain often reaches much more moderately priced housing, i.e. adding to the stock of expensive housing also makes more affordable, existing housing available to new occupants.

The first paper draws on data from a dozen American cities (from Atlanta to San Francisco):

The effect of new market-rate housing construction on the low-income housing market, by Evan Mast, Journal of Urban Economics, Available online 27 July 2021, https://doi.org/10.1016/j.jue.2021.103383

Abstract: I illustrate how new market-rate construction loosens the market for lower-quality housing through a series of moves. First, I use address history data to identify 52,000 residents of new multifamily buildings in large cities, their previous address, the current residents of those addresses, and so on for six rounds. The sequence quickly reaches units in below-median income neighborhoods, which account for nearly 40 percent of the sixth round, and similar patterns appear for neighborhoods in the bottom quintile of income or percent white. Next, I use a simple simulation model to roughly quantify these migratory connections under a range of assumptions. Constructing a new market-rate building that houses 100 people ultimately leads 45 to 70 people to move out of below-median income neighborhoods, with most of the effect occurring within three years. These results suggest that the migration ripple effects of new housing will affect a wide spectrum of neighborhoods and loosen the low-income housing market.

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A more recent working paper draws on data from metropolitan Helsinki and reaches similar conclusions:

Bratu, Cristina and Harjunen, Oskari and Saarimaa, Tuukka, City-wide Effects of New Housing Supply: Evidence from Moving Chains (August 31, 2021). VATT Institute for Economic Research Working Papers 146, Available at SSRN: https://ssrn.com/abstract=3929243 or http://dx.doi.org/10.2139/ssrn.3929243

Abstract: We study the city-wide effects of new, centrally-located market-rate supply using geo-coded total population register data from the Helsinki Metropolitan Area. The supply of new market rate units triggers moving chains that quickly reach middle- and low-income neighborhoods and individuals. Thus, new market-rate construction loosens the housing market in middle- and low-income areas even in the short run. Market-rate supply is likely to improve affordability outside the sub-markets where new construction occurs and to benefit low-income people.

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Earlier:

Vacancy chains in housing for hermit crabs   

Blum, Y., A.E. Roth, and U.G. Rothblum "Vacancy Chains and Equilibration in Senior-Level Labor Markets," Journal of Economic Theory, 76, 2, October 1997, 362-411.