The Greater Boston Housing Crisis: Problem/Solution Boston Rental Property Association

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The Greater Boston Housing CrisisProblem/Solu
tionBoston Rental Property Association
Professor Barry Bluestone May 2004
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September 2000 New Paradigm for Housing in
Greater Boston
Faced with a limited supply of existing housing,
extremely low vacancy rates, and a decade of
inadequate housing production, the New Paradigm
report concluded that in the next five years an
additional 36,000 housing units would need to be
constructed in the Boston Metropolitan
Statistical Area (MSA), over and above existing
production levels, in order to help moderate
future price and rent increases.
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New Paradigm for Housing in Greater Boston

• a moral imperative for all those who need
  decent housing at affordable prices
• an economic necessity in order to sustain
  Bostons renaissance economy

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The Current Situation

• Corporations, educational institutions, medical
  centers and non-profits have difficulty
  attracting workers to Massachusetts.
• Many of the states best young minds are leaving
  for areas with more affordable housing.
• Future economic growth depends on housing at
  reasonable prices.
• The unique quality of life in New England is
  threatened by accelerating sprawl.

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How Have We Done?
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Household Growth vs. New Housing

• The 1990s
• of New Households 129,265
• of New Housing Units 91,567
• As a result, housing vacancy rates in Greater
  Boston plummeted

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Vacancy Rates
1990 2000 2003
Rental Housing 6.7 2.7 6.0
Owner-Occupied 1.7 0.6 0.6
Source U.S. Census
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(No Transcript)
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Rents and Prices
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1995-2000 63
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Advertised Rents for Two-Bedroom
Apartments in Boston-Area Cities and Towns
City/Town 1998 1999 2000 2001 Change 1998-2001
Winchester 1,050 1,300 1,350 1,750 67
Revere 788 950 1,250 1,288 63
Everett 775 863 1,000 1,200 55
Medford 950 1,100 1,200 1,400 47
Melrose 950 1,200 1,250 1,400 47
Malden 850 1,000 1,200 1,250 47
Quincy 850 1,100 1,350 1,250 47
Waltham 975 1,100 1,250 1,350 38
Cambridge 1,400 1,475 1,688 1,750 25
Watertown 1,200 1,250 1,400 1,500 25
Newton 1,300 1,400 1,500 1,600 23
Chelsea 1,100 1,050 N/A 1,350 23
Boston 1,500 1,550 1,600 1,700 13
Source Sunday edition of The Boston Globe, the
Department of Neighborhood Development, City of
Boston
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Change in Rents by Class of Property 2003
Survey Period Class A Apartments Change A Class B Apartments Change B Class C Apartments Change C
Effective Rent Per Unit August 2002 1,821 1,223 996
Effective Rent Per Unit August 2003 1,782 -2.1 1,212 -0.9 1.005 0.9
Source Northeast Apartment Advisors, Inc.
Boston Metro Apartment Research Report
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Median Single Family Home Price 1987-2003
1997-2003 104
2001-2003 26
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Median Selling Price 1998-2001
1998 2001 Change
Median Selling Price 186,000 273,000 46.8
By 2001, households earning the median income in
their city or town could not afford the median
priced single-family house in 112 of 161 towns
and cities in the region.
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Prices Rose Faster in Lower Income Areas
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Housing Prices Selected Communities
2001 2003 Change
Weston 968,000 1,060,938 9.6
Lincoln 861,805 975,000 13.1
Brookline 720,000 840,100 16.7
Dover 707,000 754,500 6.7
Carlisle 697,000 712,500 3.1
Lowell 168,500 218,000 32.9
Lynn 178,000 244,750 37.5
Brockton 164,000 229,900 36.4
Lawrence 149,900 203,000 39.5
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Housing Production
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Building Permits Issued in Greater Boston,
1980-2002 (161 Municipalities)
25,000
11,000
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Housing Production in Boston MSA vs. New Paradigm
Goals
Category Total Needed per Year 1995-99 Avg. Level of Production 1999 2000 2001 2002e

Market Rate 9,860 7,160 7,416 6,766 6,005 6,375
Subsidized - new construction 4,300 1,300 931 1,478 1,651 1,213

Dorm Units 1,500 256 165 704 606
Total Production Levels including Dorm Units 15,660 8,460 8,603 8,409 8,360 8,194
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Housing Production in Boston MSA vs. New Paradigm
Goals
Category 1999 2000 2001 2002 2003
of total goal met 55 54 53 51 60


of goal met (Market) 75 69 61 58 72
of goal met (Subsidized) 22 34 38 30 43
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Tools/Programs Used to Create Qualified
Affordable Housing in Communities with Subsidized
Housing Below Ten Percent
Excluding DMH/DMR group homes and units qualified by rehab or first-time homebuyer status Units Eligible for Inclusion on Subsidized Housing Inventory (40B List)
Comprehensive permit 77
All other 23
TOTAL 100
Source State Housing Inventory (1997 2002)
supplemented by DCHD and CHAPA
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Public Spending on Housing
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DHCD Spending -- State and Federal Funds 1989-2003
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Total State Spending Operating and Capital
Budgets 1989-2004
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Summary

• Housing Production has failed to meet the New
  Paradigm Goals
• Vacancies have fallen well below normal levels
• Rents and Prices have therefore skyrocketed
• Affordable Housing production is well below goal
• Comprehensive (40B) is helping to fill need
• State funding for housing is declining as a
  percent of total state spending

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Why Doesnt Supply Match Demand?

• Limited land availability prevents large
  developments.
• Expensive construction materials make affordable
  housing unaffordable.
• Labor costs are high.
• Soft costs are killing developers.
• Overzealous and inconsistent building codes
• Snob zoning laws restrict where and what
  housing can be built.

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Why Doesnt Supply Match Demand? (cont)

• Prop 2 ½ limits the revenue generated by housing.
• State and federal government. Subsidies for new
  housing are drying up
• Politicians. Our fearless leaders bemoan the
  housing crisis, but their hands are tied by
  budget constraints and constituent complaints.
• NIMBYism. We all want housing built to keep the
  Commonwealth economically viable, but Not In My
  Back Yard ... and not for the poor!

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A Housing Strategyfor Smart Growth and
Economic Development

• The Commonwealth Housing Task Force
• The Center for Urban and Regional Policy
• Northeastern University
• Edward C. Carman
• Eleanor White
• Barry Bluestone

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The Problem and its Resolution

• The shortfall in housing production results from
  insufficient land zoned for the development of
  apartments and single family homes on smaller
  lots.
• Enough land needs to be zoned so that the private
  sector can efficiently increase production to
  meet the demand for new housing when and where
  it is needed.
• The zoned land should conform to Smart Growth
  principles. It should encourage the provision of
  more open space and enhance historic preservation
  efforts.
• More housing affordability is essential.
  Massachusetts has been named the least affordable
  state for housing in the U.S. (CHAPA Press
  Release 9/8/03)

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The Proposed Program

• Provides incentives to local communities that
  will yield sufficient land, zoned as-of-right, to
  accommodate increased production.
• Requires that developments with over 12 units
  have 20 of the units affordable to those at 80
  of median income.
• Increases state funding commitments to pay for
  affordability in the districts, and to increase
  the production of affordable units outside the
  districts.

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Smart Growth Locations

• Overlay Zoning Districts in three locations will
  be eligible for incentives
• Transit / Commuter Rail Stations
• Town centers
• Underutilized industrial, commercial and
  institutional properties

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Proposed State Incentives

• Density Bonus Payment of 2,000 for each
  apartment and 3,000 for each single family home
  allowed by the zoning, paid when the Overlay
  District is enacted by the community.
• For those public school students from new housing
  actually built in an Overlay District, the
  states Chapter 70 share of school costs will
  increase to 100.
• Special priority for State spending of capital
  funds (schools, transportation, water, sewer,
  etc.).

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Link to 40B Reform

• Legislation now pending to Reform Chapter 40B.
• After reforms are in place, recommendations will
  be developed to integrate the Overlay Zoning
  District program with the provisions of 40B and
  assure consistency.

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Implementation Assistance

• 1 million per year for staffing for regional
  outreach, including community development
  corporations and other planning organizations.
• 4 million per year for professional fees for
  local communities
• Matching with local funds
• To pay for Planners, Engineers, Surveyors,
  Lawyers, Housing and Finance Experts, and the
  Preparation of Build-out Analyses.
• Administered by DHCD

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Summary of New Units
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Estimated Program CostsOverlay Zoning Districts

• Density Bonus Payments for Overlay Zoning
  Districts allowing 50,000 housing units are
  projected to cost approximately 12 million per
  year over ten years.
• After 10 years in operation, the cumulative new
  state school costs for 33,000 new housing units
  in Overlay Districts would be approximately 60
  million per year.
• The current Chapter 70 school reimbursement
  budget is 3.0 billion. The cumulative costs
  after ten years will equal only 2.1 of the
  current budget. It will be significantly less in
  earlier years.

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Program CostsBefore Revenue Offsets
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Proposed Revenue Sources

• Increased state revenues from income and sales
  taxes on construction related wages and the
  purchase of materials from 56 of the new units
  built are estimated to average 27 million per
  year after the fifth year.
• Increased state revenues from economic expansion
  due to increased housing availability are
  estimated to grow to 28,000,000 by the tenth
  year.
• Revenue from the sale of state land.
• New state appropriations.

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Revenues and Revenue OffsetsNet Program Costs
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Anticipated Results

• Substantial amounts of land zoned, as-of-right,
  for single family and apartment development, in
  Smart Growth locations
• 33,000 new housing units in Overlay Zoning
  Districts,
• Additional State funds for affordability
• will significantly improve basic housing
  conditions and moderate housing price increases
  in the Commonwealth.