Housing Supply: The Quiet Job Killer - June 15, 2006, Northeastern University
Opening Remarks - David Wluka, 2006 MAR President:
Massachusetts is headed for an economic crisis because of a lack of affordable housing, according to Wluka. He cited several studies, some produced within this year, that prove the demographic and employment predicament facing the state, as well as the link to regulatory barriers to housing.
Chapter 40A is broken, and punitive in its approach. The state needs enabling, clear, consistent legislation both for the regulator and those who are regulated.
NIMBY can be countered by a return to satisfying the needs of the many, as opposed to the needs of the few, which was once a part of the American ethic.
Wluka listed several development success stories around the state, and he believes Chapters 40R and 40S will produce more positive results.
But it remains important to retain the “authenticity of place” throughout Massachusetts.
Protecting the environment, preserving the character of our life, and promoting growth are not mutually exclusive, says Wluka.
Research Summary - Dr. Barry Bluestone, Director of the Center for Urban and Regional Policy, Northeastern University:
Bluestone set out to answer two questions: Is employment and population related to the cost of housing? Why should current homeowners support the creation of more housing, which could negatively impact their property values?
Employment in Massachusetts has not recovered from the 2001 recession, unlike the remainder of the country. There are 154,000 fewer jobs in the state, compared to five years ago. The state’s key sectors, financial services, computer services, health care, and educational services, have been especially hard hit.
Massachusetts has lost population for the last two years, the only state in the country to do so. Net internal migration has been a negative 60,000 people per year.
The prime labor force, 25- to 34-year-olds, are leaving in greatest numbers.
Why are they leaving? asked Bluestone. Housing prices appreciated at double digit rates from 1995 to 2005, averaging 13% to 14% per year.
The Family Budget Calculator, which tracks basic family costs, ranks greater Boston as the most expensive metro area in the U.S. in which to live, while smaller Bay State cities, including Lawrence, Pittsfield, Springfield and Worcester, are also among the top 20.
It costs $64, 656 for a basic budget for a family of four in Greater Boston, but in Raleigh-Durham-Chapel Hill, North Carolina, the cost is only $44,124. That allows a company to move and lower labor costs by $10,000, while at the same time providing a $10,000 higher standard of living to their employees.
Using data from metro areas across the country, it is clear that there is a correlation (non-linear relationship) between both employment growth/out-migration and housing prices.
What is the relationship between vacancy rates and housing prices? Below a 1.75% vacancy rate, prices begin to rise, and continue to rise at a faster rate. Last year, the vacancy rate in this area was .5%, according to Bluestone. From 1.75% to 2%, prices are relatively stable. But above 4%, prices fall sharply. Have we seen this type of dramatic decline in this area? Yes, says Bluestone. From the fourth quarter of 1988 to the second quarter of 1992, housing prices fell 12.2%. It took 9 years for the prices in metropolitan Boston to recover. The markets in Worcester and Springfield were off by over 14% and took 9 years and 11 years to recover, respectively.
How can we forestall the chain reaction of: employment growth decline, out-migration, and then the vacancy rate skyrocketing followed by a housing price collapse? There are answers, says Bluestone.
Increasing the housing supply now will inoculate the market from a dramatic downturn in the future.
He favors Chapters 40R and 40S. The monetary incentives provided communities in this legislation can lead to more housing, which includes educational funding.
Five communities have adopted 40R this year: Plymouth, North Reading, Chelsea, Norwood, Dartmouth. There are 30 more considering adopting the districting.
Bluestone cited statistics on the projection for housing. In 2005, home price appreciation in the state was 1% to 3%. The projection for 2006 is for prices to decline 3% at most. Between 2007 to 2009, the estimate is price growth of less than 3%.
Bluestone’s conclusions: 1) housing production has begun to improve; 2) levels are below what is needed; 3) the supply is currently enough to keep prices from collapsing; 4) in the long-term economic weakness, low job growth, and migration could lead to much weaker housing markets; 5) Chapter 40R and 40S are just one part of the solution.
Keynote - A. Bryant Applegate, Senior Counsel to the U.S. Dept. of Housing and Urban Development, Director of the America’s Affordable Communities Initiative:
Regulatory barriers can add 20% to 35% to the cost of housing, according to Applegate, and in some cases block its construction. Applegate does believe regulatory barrier reduction is an important issue, but it is not a silver bullet that will solve the housing problem.
Three years ago HUD began a national effort, “America’s Affordable Communities Initiative,” to encourage the reduction of regulatory barriers.
Regulatory reform must be done at every level of government, including at the federal level, says Applegate. But HUD has no desire to become a super zoning authority.
He applauded the efforts of Massachusetts state government in its work toward reform.
Applegate mentioned HUD’s Web site, www.regbarriers.org, as an excellent source of information on regulatory barriers across the country.
Panel I: Solutions and Best Practices in Response to Local Challenges & NIMBY
John J. Clarke, Director of Legislative Affairs, Massachusetts Audubon Society:
Development in the state should include Chapters 40R and 40Ss, open space residential design, and the Community Preservation Act, says Clarke. He is an advocate of the Community Planning Act II, a current bill in the Legislature, which would reform how planning is done and how subdivisions are developed. Clarke also commended the Legislature on the transfer of development rights to the local level, specifically mentioning cluster-by-right development.
One- and two-acre zoning does not work. Cluster zoning is the goal, according to Clarke.
Geoffrey C. Beckwith, Executive Director of Massachusetts Municipal Association:
The lack of power, engagement and involvement at the local level are the reasons for the rise of NIMBYism, says Beckwith.
Massachusetts has some of the weakest zoning laws in the country. The local communities have real obstacles trying to make changes and trying to be innovative. He is an advocate of CPA II, as well as 40R and 40S.
Local communities are receiving $900 million less in local aid than they did in 2002. The problem is fiscal aid, as well as regulatory reform.
Steven Sadwick, Vice President, Massachusetts Chapter of the American Planning Association:
Sadwick’s organization is focused on three things: community value, character and engagement.
Neighborhoods do not become engaged until an abutting project is proposed, according to Sadwick. In his experience, the more open a developer and the town government is with local neighbors, the more successful the project.
Theodore R. Tye, Managing Partner, National Development:
Permitting is a significant barrier to development, according to Tye, mentioning one of his firm’s projects that took eight years to go through the zoning process and has just reached the construction phase. In addition to high development costs, builders must incorporate linkage fees, litigation costs, union premiums, and affordable housing requirements into the total cost of building.
Aaron Gornstein, Executive Director, Citizens’ Housing and Planning Association:
Gornstein emphasized the untapped numbers of people supporting housing initiatives who are not vocal. He agreed with several speakers concerning the tendency of people to participate only in the circumstance when they are negatively effected.
Andrew Gottlieb, Chief, Massachusetts Office for Commonwealth Development:
Chapter 40R provides communities a tremendous amount of control, according to Gottlieb. He has seen the advantage of towns and cities being a “first-mover” in the acceptance of 40R and guaranteeing themselves access to funding.
Questions to Panel:
Q: Isn’t the issue of affordable housing a simple economic issue? If someone cannot afford a home, they should consider a less expensive house. People buy the homes they can afford.
Gorstein: There really are no affordable houses in this region. It is no longer a question of moving to the next town or the suburbs. The entire area has become unaffordable for low- and middle-income earners.
Q: Comment about solutions in zoning and master planning?
Clarke: The master planning in Gloucester, for example, revitalized the downtown area. The inclusion of residential housing over the commercial buildings in the downtown kept the town vibrant at night.
Panel II: Solutions and Best Practices in Response to State Challenges & Economy
David Begelfer, CEO, National Association of Industrial and Office Properties of Massachusetts:
He advocated that the government make the case, as this housing conference was doing, of educating the public about the connection between the economy and housing. The government needs to use its bully pulpit to broadcast this idea, according to Begelfer.
There is a demand for housing that goes beyond the transit-based model that is frequently favored by housing advocates. There are people who do not want to live around those areas, and they should be given alternatives, says Begelfer. And it should not include two-thirds acre zoning, for example.
Taylor Caswell, New England Regional Director, Dept. of Housing and Urban Development:
According to Caswell, the federal government has subsidized 300,000 units across New England. But the dilemma for HUD is the rising prices of housing. Section 8 vouchers represented 36% of the budget only a few years ago, but now they consume 64%. This limits HUD’s financial ability to pursue other programs.
Jim Gomes, President, Environmental League of Massachusetts:
Gomes suggested that municipal finance may be an area that needs to be looked at as a solution.
Finley Perry, President, The Home Builders Association of Massachusetts:
Perry described what he called two myths in Massachusetts. First, is the myth of home rule, which he considers non-existent with respect to finance.
The second myth is the idea of zoning control in this state. Perry is a strong advocate of the governor taking a very active role, and believes it is essential in the public policy arena.
Robert R. Ruddock, General Counsel, Associated Industries of Massachusetts:
There is a lack of affordable housing for the workforce in Massachusetts, says Ruddock, which was echoed by several of the speakers. It is very damaging to the economy of the state.
He is also a strong advocate of a complete cost-benefit analysis of any legislation.
Eleanor White, Co-Chair, Commonwealth Housing Task Force:
One answer suggested by White was that employers should exert pressure to pass housing legislation. She also urged employers to look at employer-assisted living.
Questions to Panel:
Q: Will the scarcity of natural resources, specifically water, play an important role?
Ruddock: The MWRA is currently undergoing a complete review process.
Q: Does gender play a role in the housing problem?
White: They play a very minor role.
Q: Is race and class an underlying issue in housing?
Gomes: It is a big issue. Municipalities block or restrict housing development for two reasons: the resources and funding is scarce or “community character.” And, according to Gomes, race and class can be a part of the community character issue.
Joe Molinaro, Manager, Smart Growth Programs, National Association of Realtors®
Molinaro commended Massachusetts for its housing legislation, including 40R, 40R and 40S. He believes they are excellent models for other states to follow.
Molinaro sees two housing trends across the country. First, is the increase in more participatory forms of community planning. This includes not just a “yes” or “no” vote, but active involvement. Second, is the formation of coalitions of non-traditional partners, including real estate people, environmentalists and housing activists.
He listed several success stories: the city of Baltimore, Ventura County, Calif., metropolitan Washington, D.C.
Amy Eichhorst, Manager, Housing Opportunity Program, National Association of Realtors®
Eichhorst stressed the research role of the National Association or Realtors® and the amount of valuable data available on their Web site, www.realtor.org.