5.

a) Why is most housing filtering downward rather than upward? (3)

b) Verbally explain O'Sullivan's analysis of how an increase in the price per unit of housing quality changes the optimal level of housing quality. What would happen to the optimal housing quality if the housing stock ages and the price per unit of housing quality increases over the same period? What would happen to optimal housing quality if the housing stock ages and the price per unit of housing quality decreases over the same period? (6)