The Exclusionary Benefit in Multifamily Housing

Abstract

The history of housing discrimination in the United States is examined with attention on exclusion through pricing in multifamily housing. A hypothesis, applying the concept of club goods and the economic theories developed by Thorstein Veblen to multifamily housing, is developed. The hypothesis - that exclusion through unit size delivers additional value to the unit - is tested in three ways: examining the products of Seattle's incentive zoning programs to determine if build or fee payment options are favored, examining the historical vacancy rates of larger apartments to determine if they attain a higher "natural" vacancy rate, and examining condominium sale prices and unit square footage to determine if increased area, ceteris paribus, correlates with increased price above expected values. The results of the analyses are mixed. Only two residential buildings have been built with the incentive zoning programs - not enough for a thorough analysis. The largest apartment units have a statistically significant higher vacancy rate than other apartments. Finally, an anomaly in condominium pricing suggests an exclusionary benefit beginning around $350 per square foot. Further research with larger data sets and advanced statistical tests will improve the internal validity of the hypothesis.