Image from Discover Magazine. (Everyone needs homes – including hermit crabs.)
Update 1: It was good to see City of Victoria staff provide a concise explanation and infographic illustrating moving chains in the Victoria Housing Strategy Annual Review 2024:
Update 2: It was good to see CHEK News address the fact that new (i.e. expensive) housing result in affordability elsewhere.
“’Now you might say it should be affordable and you should make them be affordable. Well look,’ said Tom Davidoff, a housing economist with UBC’s Sauder School of Business. ‘New housing’s job is to provide housing. What it does it absorbs the top of the demand curve.’
Davidoff says expecting developers of new builds to be responsible for creating ‘affordable’ rentals is asking for too much, and could result in a building freeze.
Instead, Davidoff argues new buildings like University Heights have a secondary affect on affordability.
‘They perform the service of absorbing demand from those with the greatest willingness to pay, leaving others suffering less from competition on older units,’ said Davidoff.
In other words, new builds create more supply which lowers competition and ultimately prices.”
____________________________
Some people who live in Victoria upgrade and move into newly built homes. New homes are expensive, but they do get rented or bought – by people with more disposable income than average, people with more wealth, people who got a promotion at work, people whose families are growing, empty nesters downsizing into condos, etc, etc. There are lots of reasons why locals move into new homes.
When they do that, they leave their older and generally more affordable homes. Someone else – maybe with a more average income – moves into their old homes. Those people in turn leave their even more affordable home empty, and someone who needs that home and has a modest income can move into it.
This sequence of moves can take place quickly, within a few years or even months (in contrast to depreciation, which can take a couple of decades to reach affordability). This is called a vacancy chain or moving chain, and it’s been observed in many cities.
Moving chains, or vacancy chains, have been observed in a number of other (non-housing) settings. As noted more than 30 years ago:
“The concept of vacancy chains, originally developed in Harrison White’s pioneering analysis of organizational mobility processes, has been extended to phenomena as diverse as national labor and housing markets, the historical development of professions, gender and ethnic group discrimination in job and housing markets, organizational demography, and the mobility of hermit crabs to empty snail shells.”
– I.D. Chase, “Vacancy Chains” Annual Review of Sociology Volume 17, 1991 Review Article www.annualreviews.org/content/journals/10.1146/annurev.so.17.080191.001025
You can watch a 5-minute video in this Discover Magazine article about the hermit crab vacancy chains. It’s cute, a bit tense at times, and fascinating.
Vacancy chains have also been observed in the used automobile market, and younger sibling hand-me-downs (now that my teenage boys are taller than me, and more fashionable, I am the recipient).
It’s good to see CMHC bringing moving chains analysis (a.k.a. vacancy chains or filtering) into rental housing reports. The CMHC, Fall 2024 Rental Market Report stated:
“Rental supply grew at a record pace in 2024 due to new completions. These higher-priced additions were unaffordable to many renters and primarily served higher-income households. Because of the filtering effect, they will still play an essential role in improving overall affordability over time…
“Rental supply also increased with a strong uptick in condominium apartment completions that were subsequently rented out. These new units, featuring modern finishes and amenities, attracted renters, raising vacancy rates in the purpose-built rental market.”
The passage above referred to CMHC’s June 2024 report, “Understanding Filtering: A Long-Term Strategy to New Supply and Housing Affordability” The June report explained the process (also explained in this post), and also provided a handy infographic:
As outlined on the CMHC website:
“Here’s how it works: as higher-income households move into newly built homes; they leave their old homes vacant. These older vacant homes then become available for others. Over time, this creates more affordable housing options. It’s a win-win situation for both those moving and those looking for more affordable housing.”
By the way, the term “trickle down” has nothing to do with vacancy chains, or housing. It’s a term that was invented to try to justify tax cuts and government spending cuts that were in fashion in the 1980s. Using the term “trickle down” to oppose new housing is an example of the straw man fallacy. And an unsuccessful attempt to use the equivocation fallacy. 🙂
The CMHC June 2024 report also showed some data illustrating how new market housing becomes more affordable over time from the simple process of aging and depreciation. (It’s also fairly obvious to anyone who actually rents that much of today’s affordable housing was once “expensive new market housing” that has aged.)
The June report also was careful to make the obvious point that new market housing is not a complete solution to housing affordability, especially in the short term, and that a wide range of housing needs to be built at various price points.
And finally, here is a local story from a resident illustrating how people with higher incomes can sometimes get stuck in relatively cheap housing due to scarcity of other options. Housing scarcity is bad for everyone.
“In my family’s case, our pre-tax family income likely averaged $200,000 annually between 2018 and 2023, and my friend’s averaged $275,000. Yet we were both renting cheap, mine started at $1,600 – only went up once, and his started at $2,200 (and I don’t know if it COLA adjusted annually).
His place was a two BR, mine was a three BR. His was kinda nice though nothing special but mine was a little rough, unmaintained, and we had occasional rats in the walls. Neither of us felt like moving b/c the rent was cheap, and everything [available on the market] was so expensive. Both of us (and partners) felt the pressure of possibly being evicted.
Then in 2023 each of us moved into, bought a place, and freed up housing for people with lower incomes, which is where places renting for <$2,000 a month should be going.
Granted both our places were rented out for more than that once we left, I think my old place was $2,200 and ——‘s was $2,700.
His place is now rented to two nurses, and my old place was rented to a couple in their 20s.”
You can also read my post containing a response to a resident concerned about who can afford new apartments, and the fact that when vacancy rates are low, rents get raised when people move out of older, more affordable apartments.
And my post about affordability more generally.