Housing Highlights

THE CONTEXT

KEY TRENDS AND FINDINGS

MAJOR ACCOMPLISHMENTS AND INNOVATIONS 2002 - 2004

REMAINING CHALLENGES

COMPETITION

THE CONTEXT

Housing meets the basic human need for shelter, provides a key building block of livable communities, and is a means to economic opportunity and security — an essential element of a prosperous regional economy. In the City of Boston, roughly 600,000 people live in nearly 240,000 separate households. Metropolitan Boston is home to more than 3.3 million people living in 1.3 million households. The housing sector includes private home builders, community development corporations and other nonprofit housing providers, community-based and advocacy groups, banks and mortgage companies, and city and state housing and housing finance agencies. Civic and business leaders and many elected officials have also identified housing affordability as a key issue driving individual and business location decisions. Creative efforts have been launched to increase the production of housing.

KEY TRENDS AND FINDINGS

Housing costs have soared in Boston and across eastern Massachusetts. The median price of a single-family house in the Greater Boston region (as defined by the Massachusetts Association of Realtors) was $469,000 at the end of 2004, up 12% from 2003 and up 45% over the past five years. Home prices in the City of Boston have risen even faster, with the median sales price at $330,000 in 2003, more than double the price five years earlier. Two- and three-family home prices are rising even faster than the price of single family homes in Boston, with 2003 median prices up 17% to $434,000 for a two-family and $466,000 for a three-family.  While housing specialists recommend that households purchase homes that cost less than 2.5 times their annual income, a 2004 Boston Globe analysis of housing prices in 2002 concluded that the only community in Eastern Massachusetts where a family earning the median income could purchase a home costing less than three times annual income was Fall River. And a family earning 80% of median income can afford a home priced at 80% of the median in only 13 of Metro Boston’s 161 municipalities. (see indicator 6.1.1)

Boston is one of the ten least affordable metropolitan areas in the United States. While there is no single way to determine metropolitan-area affordability, a survey used to compare the cost of living in large metropolitan areas ranked Boston the fourth least-affordable market in the United States in 2002, with only Manhattan, Chicago and San Francisco costing more. The National Low-Income Housing Coalition’s 2004 Out of Reach report found that Metropolitan Boston was the eighth "least affordable" metropolitan area for renters, behind San Francisco, Stamford, Connecticut and five cities in California. In the Out of Reach rankings, Massachusetts was second only to California as the least-affordable state.

Advertised rents fell somewhat from 2001 to 2003, but rents remain unaffordable for many. Even with lower rents, 43% of rental households in Greater Boston spent more than 30% of their income for rent in 2002, and 21.5% spent more than half of their income for housing. The National Low Income Housing Coalition calculates that a full-time worker in Metropolitan Boston would have to earn $24.35 per hour to afford a two-bedroom apartment.

In Massachusetts, approximately 10,500 families — including 20,000 children — are homeless. The state has over 80 state-funded homeless shelters and in 2004 all were filled to capacity. Boston’s annual census of the homeless undertaken each December found a slight decrease from 2003 to 2004, but the population of approximately 6,000 homeless in Boston is one-third higher than in 1992. About 20% of Boston’s homeless are children. In a given year there are approximately 10,000 homeless preschool children — and according to a survey by Horizons for Homeless Children, less than half are enrolled in day care or Head Start. (see indicator 6.5.1)

More housing is being built, with permits for new housing rising from just under 10,000 annually in 2001 and 2002 to approximately 11,700 in Metropolitan Boston in 2003. Permits for of multi-family housing increased significantly, with 4,581 permitted units in buildings with five or more units in 2003, up sharply from only 2,701 such units in 2001.

The Commonwealth Housing Task Force brought together housing organizations, housing developers, the business community, organized labor, academic institutions, elected and appointed officials, smart growth advocates and many others to craft new policies to increase city and state resources available for housing production. The Task Force proposed paying cities and towns cash incentives to create and permit new housing construction in special zoning "overlay districts" in smart growth locations. It projected that 33,000 new units could be built in such districts over the next ten years.

Between 1990 and 2004, more than 16,000 dormitory beds were constructed in Boston — the equivalent of building 4,100 new housing units. The Boston Redevelopment Authority estimates that in just five years, Boston’s colleges and universities reduced the unmet demand for dormitory beds from a deficit of 21,795 beds in 1999 to one of 17,177 beds in 2004.

Boston’s major institutions are beginning to build housing for their employees and neighbors. Boston’s colleges, universities, hospitals and medical institutions employ 112,000 people, nearly one of every five jobs in Boston. Joslin Diabetes Center and Children’s Hospital are set to break ground on a combined research facility and condominium tower in Longwood Medical Area. The YWCA is creating 184 units of housing in its renovated headquarters building at 140 Clarendon Street, and Harvard University is helping fund affordable apartments in Allston.

New market-rate housing construction has tended to focus on expensive studios and one- and two-bedroom condominium units in Boston and large single-family homes in the suburbs.  Half of the land dedicated to new residential development is used for low-density, single-family housing with lot sizes of one-half acre or more, creating sprawl while in Boston, this focus fails to meet the needs of those not wealthy enough to afford high prices -- often young and immigrant families, young singles and empty nesters hoping to enjoy city life.

Homes in Massachusetts are growing larger.  The average living space for newly constructed single-family homes statewide increasing 44 percent between 1970 and 2001 from 1,572 to 2,260 square feet. Yet these larger homes are increasingly housing only one person, as single-person households make up 30% of all households in eastern Massachusetts and 37% of all households in Boston compared to only 25% of households nationwide.

Demographic trends and increasing demand for housing located near public transit are promoting "smart growth" development. A September 2004 study by Reconnecting America’s Center for Transit-Oriented Development found that over 400,000 people in Greater Boston live within one-half mile of the MBTA’s 280 commuter rail and rapid transit stations. The study projects that the demand for such housing, especially among both aging empty nesters and families with children, could increase to nearly 840,000 households by 2025.

Homeownership rates among people of color and newcomer immigrants in Greater Boston are increasing. Between 1990 and 2000, when the City of Boston lost 1,700 white homeowners, the number of black, Latino and Asian homeowners increased, with the number of Latino homeowners doubling. Harvard University’s Civil Rights Project found that while Metropolitan Boston’s suburbs suffered from worsening racial segregation, the City of Boston "showed notable progress in reducing segregation," with the number of ethnically-mixed neighborhoods increasing between 1990 and 2000. The US Census has found that black, Asian and Hispanic naturalized citizens had ownership rates ranging from 2 to 13% higher than their US-born ethnic counterparts. (see indicator 6.7.1)

Community development corporations (CDCs) continue to play a critical role in producing affordable housing. Nonprofit, community-based CDCs are a critical piece of the affordable housing production network in Boston and throughout Massachusetts. The Massachusetts Association of CDCs has set of goal of creating or preserving 3,000 affordable housing units statewide in a two-year period. Some 1,076 such units were created or preserved in the first year of this effort.

Advocacy on housing issues is becoming increasingly broad-based. Producing more housing and moderating the cost of housing was cited as a priority in reports issued by groups ranging from the Greater Boston Chamber of Commerce to the Massachusetts Technology Collaborative to MassINC.

MAJOR ACCOMPLISHMENTS AND INNOVATION 2002– 2004

Mayor Thomas M. Menino’s "Leading the Way" campaign exceeded the target of 7,500 new units. The three-year campaign launched in October 2000 resulted in the permitting of 7,913, of which 2,217 units were affordable, exceeding the target of 2,100 new affordable units and resulting in the renovation of nearly 1,100 units of public housing, the preservation of more than 3,100 at-risk federally subsidized housing units, and a 35% reduction in the number of abandoned houses in Boston. Mayor Menino launched "Leading the Way II," a four-year plan with a target of producing 10,000 new units of housing, 2,100 of which will be affordable units, committing $56 million in identified funds, and pledging to find an additional $25 million in new resources for affordable housing.

The Commonwealth Housing Task Force, initiated and supported by the Boston Foundation, brought together a broad range of housing sector stakeholders who crafted a consensus report leading to enactment of a new zoning law, Chapter 40R, as part of the state budget in the summer of 2004. The new legislation encourages "smart growth" zoning overlay districts near transit stations or in city and town centers, with at least 20% of the new housing units affordable to households at 80% of area median income or below.

As of 2004, 64 communities had adopted the Community Preservation Act (CPA) and $115 million in CPA projects had been approved. Housing accounts for 41% of this total, meaning that the CPA has produced a $47 million investment in affordable housing, with 618 units of CPA-funded housing completed or underway. The Community Preservation Act, enacted in 2000, allows communities to adopt a property tax surcharge and spend the resulting funds on affordable housing, open space and historic preservation; the state matches the local funds from a special trust fund.

Massachusetts’ affordable housing zoning law, Chapter 40B, was not weakened, despite repeated efforts, and continued to spur the production of new affordable housing. Chapter 40B streamlines the permitting of affordable housing projects in communities where less than 10% of the housing is affordable. A task force established by Governor Romney in response to the filing of more than 70 bills to weaken Chapter 40B, recommended changes but concluded that Chapter 40B "is effectively the only tool to create multifamily housing in many cities and towns in the Commonwealth." Over the past five years, 82% of all new affordable housing production in suburban communities was the direct result of 40B, according to an analysis by the Citizens Housing and Planning Association.

A partnership between the Massachusetts Association of CDCs and Local Initiatives Support Corporation (LISC) provides community development corporations with $7 million in grants and loans to build environmentally-friendly, energy-efficient "green" affordable housing. Five large-scale, high-visibility projects will receive both funding and technical assistance to integrate state-of-the-art sustainability measures into CDC-built affordable housing projects that will break ground within the next two years.

Visit the Hub of Innovation’s Housing Section.

REMAINING CHALLENGES

Local housing costs are a major barrier to attracting and keeping workers and families in Greater Boston and the Commonwealth. A survey by the University of Massachusetts’ Donahue Institute found that the number of residents considering leaving Massachusetts due to the high cost of housing increased from 19% in December 2001 to 46% in December 2004. And a Boston Consulting Group survey found that recent college graduates have become more concerned about affordability issues over the past five years, particularly graduates expecting to make less than $50,000 per year. Massachusetts was the only state to experience a net loss in population between 2003 and 2004.

Despite a longstanding, state law requirement, less than one in 10 Massachusetts communities are doing their fair share to provide affordable housing. Since 1969, a state law known as Chapter 40B has set a target of having each of Massachusetts’ 351 cities and towns ensure that 10% of its housing stock is affordable (defined as affordable to households earning 80% of the area’s median income). The law has been controversial because it provides that communities failing to meet this target cannot block certain affordable housing developments. While Chapter 40B has led to the creation of affordable housing in over 200 communities, only 39 of Massachusetts 351 cities and towns have reached the 10% affordable threshold as of 2004, up from 23 communities in 1997 (a mere 4%).

According to Northeastern University’s Center for Urban and Regional Planning, a total of 18,000 units per year must be constructed from 2003 through 2010 in Metro Boston in order to keep home purchase prices and rents rising no faster than the rate of inflation. This target accommodates a projected additional 100,000 households in Metro Boston, where population growth remains relatively flat — but the number of households is rising as average household size declines. The Greater Boston Housing Report Card 2003 concludes, "we will need to find a way to produce this new housing in the locations where people want to live and at prices they can afford."

Housing development is slowed and sometimes stymied by local and state regulatory barriers and NIMBY (Not In My Back Yard) opposition. A 2003 study by the Pioneer Institute for Public Policy Research and Rappaport Institute for Greater Boston concluded that, "much of the drag on housing production results from state and local regulatory policies and processes." The City of Boston’s permitting process for housing, especially small and mid-size projects, is extremely complicated, however the City and the Municipal Research Bureau are streamlining the regulatory process. Another barrier is the Not In My Back Yard syndrome (NIMBY). Even in many urban neighborhoods, current residents are successfully slowing down or stopping proposed housing developments.

Massachusetts has already lost over 10,500 subsidized units and is at risk of losing 27,020 more by December 31, 2010. From the 1960s through the 1980s, affordable housing projects were often developed with subsidized mortgages that were originally intended to lock in affordability for up to 40 years, but which included provisions allowing the owner to pre-pay the mortgage after twenty years and end the restrictions on tenant’s income and rent. Unless steps are taken to preserve their affordability, these so-called "expiring use" projects are at risk of being removed from Greater Boston’s already limited stock of affordable housing. Regional efforts need to match those in the City of Boston, where there are 2,700 such at-risk units in the City of Boston, and Mayor Menino has set of goal of preserving at least 75% of them as affordable.

New forms of housing are required to provide a range of options, in a range of processes, to respond to a diverse set of needs and stages of life. Ideally, Greater Boston’s housing market would expand in housing types and well as quantity to innovate new forms of housing for artists, students, families with young children, single parents, young professionals, large and extended families, and empty nesters and elders.

The state’s Affordable Housing Trust Fund and Housing Stabilization Fund are running out of funds and will need to be recapitalized through passage of a new Housing Bond Bill. The Affordable Housing Trust Fund was created five years ago with a stated goal of investing $100 million over five years, but the target funding level of $20 million per year was only achieved for the first two years, and no funding will be available in the future unless additional bond funds are provided. The Housing Stabilization fund was created in 1993 to help communities and developers acquire, preserve and rehabilitate affordable housing; a successful program, it will have no funds available after a final funding round planned for 2005. Almost no conceivable level of public investment will be able to meet Greater Boston’s housing needs, however. Substantial private-sector investment will be needed to meet demand.

New tools such as Chapter 40R zoning may face obstacles to implementation. Beginning in 2005, cities and towns will begin deciding whether or not to create zoning overlay districts in order to qualify for Chapter 40R payments. One concern is that communities will not use the Chapter 40R program because it did not include a key recommendation of the Commonwealth Housing Task Force, a provision guaranteeing municipalities that the Commonwealth would pay for any excess cost of educating school children who live in the overlay districts.

With the defeat of a rent stabilization program for the City of Boston, few housing programs meet the needs of very low-income families and those already homeless. Despite support from a broad coalition of housing advocates and even some small property owners, Boston’s City Council rejected a measure designed to stabilize rents for at-risk seniors and families. In the absence of rent stabilization, few programs effectively address the needs of Boston’s poorest households. Most affordable housing production programs target families earning up to 80% of area median income, but the most difficult families to house are those that earn only 30-50% of median income, and most "affordable" units are too expensive for such families to buy or rent. Similarly, additional efforts are needed both to prevent homelessness.

Many "fault lines" persist in Greater Boston’s housing market. Bostonians see housing issues very differently depending on their own needs and situations. Those who already own homes — particularly those who purchased them before the run up in prices — are better off than those who do not own, many of whom are being priced out of the housing market. High-income renters have many choices, while low-income renters who are being squeezed out. Public housing tenants and some others have state or federal housing subsidies; others struggle to pay market rates without any assistance. Many are finding themselves homeless. Crafting housing policies to address disparate conditions is a substantial challenge.

The decisions of aging Baby Boomers are changing the housing market. Baby Boomers are sitting on large amounts of home equity and what happens as these Boomers retire — whether they cash out and move to warmer climates, move into Boston and other city neighborhoods or age in place in suburban homes — will have profound effects on the region’s housing markets over the next decade and more.

COMPETITION

Massachusetts is one of the most expensive Leading Technology States. The Massachusetts Technology Collaborative (MTC) regularly compares Massachusetts to six other Leading Technology States in order to assess the state’s competitive position in the "innovation economy." MTC’s 2004 report, found that the Commonwealth has the second-highest home price among its competitor states and warned that affordability needs to be addressed in order for Massachusetts to remain competitive.