TRICKLE DOWN & SUPPLY/DEMAND: HOUSING BELIEF FALLACIES

The above graphic shows what actually tends to happen in terms of beneficiaries with Trickle Down and Supply Demand Theories of the sort that are currently being advocated in the radical luxury housing up-zoning proposal in Cambridge.

Cambridge and other high demand cities have faced ongoing problems  in terms of housing affordability and availability due in large measure to investors buying up critically needed housing stock. See among other articles "What Happens When Wall Street Buys Most of the Homes on Your Block" New York Times (2023).  In 2021 Blackstone purchased some $325 million in housing in East Cambridge apartment housing investments, seeking to profit from the growing biotech industries and amped up housing need, furthering the costs of housing in the city HERE.  For more on our these concerns see our recent blogpost, Why Housing Prices Are So High and Going Higher. 

We also see an ongoing disconnect in housing re: the legacy of trickle down economic theory and the equally problematic "supply/demand" housing theory. We know that trickle down economic theory does not work (lower and middle income residents suffer most).  The same is  true for trickle down housing theory. In Cambridge, very few people move from their existing homes to take advantage newer ones that are even more expensive (leaving the present one at a lower price than market demands for someone seeking to move in with less financing means. Here and elsewhere, people tend to stay in the neighborhoods they first move to (work and family permitting), and if they do move, they are likely to seek top dollar housing return, if for no other reason than to help pay off new housing costs. When we throw in housing investors purchasing properties particularly in once lower income neighborhoods  simply to profit from the, trickle down theory in housing is equally if not even more problematic. The same is true for supply and demand housing theory in high demand high cost cities such as ours. Here, as in  other cities such as Vancouver,  there never can be enough homes to meet much less overcome demand leading to  housing costs magically falling to a price affordable to everyone. Each new and more expensive luxury housing property simply adds to the increased housing prices everyone must pay. 

And, since wealthy owners are not dropping their current homes to pick up and move to a more expensive contemporary structure in a different part of the city, leaving their still very expensive homes at less steep rates for a new buyer, than "trickle down" housing theory simply does not work. Instead, as is widely recognized in trickle down economics, we are simply setting up a prime situation where the wealthy get even more wealthy, and those who are not in this circle suffer through increasing housing costs, property values, and other factors.