Can the Resale Housing Market Be Split to Facilitate Long-Term Affordability?

Abstract

This paper argues that a comprehensive affordable housing policy requires the formal splitting of the homeownership market into (at least) two distinct segments: one designated for the general public and following a conventional market pricing mechanism, and the other designated for eligible households and controlling both initial supply and subsequent sales of housing units through regulated affordability-oriented pricing mechanisms. To facilitate the systematic design of an affordable housing segment that remains intact upon household turnover, the paper introduces two alternative cap-on-resale mechanisms: “Mixed Indexed Cap” (MIC) and “Pure Indexed Cap” (PIC). It explains how such models could promote long-term social mobility, allowing multiple low- and modest-income households to engage in capital building by sequentially enjoying increments of appreciation of properties in the affordable housing segment.