By Barry Bluestone
Dean at the School of Public Policy and Urban Dev., Director of the Dukakis Center for Urban and Regional Policy at Northeast Univ.

The duration of this “post-recession” slump is due in large part to a collapse in the nation’s housing market and the resulting financial crisis. Unlike “normal” recessions stemming from an inventory build-up in manufactured goods or a steep rise in commodity prices, this current type takes a long, long time to unwind. But if we look out a few years, the real problem facing the Commonwealth will be its demographics.

 
Massachusetts is aging rapidly, more so than the rest of the nation, and this could pose serious problems for private businesses as well as the public sector. The key questions will be: “Who will be around to work?” and “Who will be here to pay the taxes we need for state and local services?” According to the U.S. Census Bureau, between 2010 and 2020, Massachusetts’ population is expected to grow by just 3.1 percent, only about one-third as fast as the nation’s (8.7%). Our birth rate is somewhat lower than the nation’s, but what really accounts for slow growth is that we expect to receive fewer immigrants than other states; that residents will move to other regions of the country; and that few from other states will choose to move here. Additionally, by 2020 the Census Bureau projects there will be over 180,000 fewer adults aged 18 to 54 in the Commonwealth and nearly 380,000 more adults aged 55 and above, two thirds of whom will be 65 or older (see figure).

The baby-boom/baby-bust demographic is setting us up for what I have dubbed the “Third Civil War;” the first civil war being between the North and the South over slavery and states’ rights. The North won. A century later, the equivalent of a second civil war was over where the industrial might of the nation would be located. The South won. Cities in the North like Detroit, Flint, and Buffalo lost. The current “civil war” is being waged over who will win the demographic battle. Those states, regions, and cities that can retain and attract young families will have a labor force for new business, investment, and jobs. Those areas that “lose” will be challenged to maintain their prosperity as firms locate where there is an abundant labor force and to fund their public services, because older taxpayers usually earn less, spend less, and pay less in income, sales, and property taxes.

With housing often taking up a third or more of a household’s income, the price of home ownership and the price of rental housing is a paramount cost consideration in location decisions. Massachusetts home prices have declined since 2005, but not as fast as other regions of the country. Rents in Greater Boston remain at an all-time high as a result of foreclosed families moving to rental housing, large numbers of young families postponing their move to home ownership, and a continuing rise in the number of graduate students who overwhelmingly live off campus.

As such, housing costs remain a major reason for the demographic trends projected by the Census Bureau. If we are to prove the Census wrong and win a better demographic future, we need to find ways to build affordable housing throughout the Commonwealth and especially in cities and towns with the best schools, where young families want to raise their kids.