The Greater Boston Housing Challenge

Barry Bluestone

Center for Urban and Regional PolicyNortheastern University

WBZ “Attaining the American Dream”October 27, 2005

How is Greater Boston doing … economically?

By the end of 2004, employment in Greater Boston was still down by more than 160,000 from its pre-recession peak

Real median household income dropped by 3.5% between 2000 and 2004

Employment Trend

United States

118.8117.7118.4

120.2

123.1124.9

126.7

129.6131.5

133.4

136.9136.9136.5137.7

139.3141.4

115

120

125

130

135

140

145

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

in M

illio

ns

Employment Trend

M assachusetts

3044

2875

2795 28152869

29502994

3083

31513200

3279

3371

3270

32113165

3190

2700

2800

2900

3000

3100

3200

3300

3400

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

in T

ho

us

an

ds

U.S. vs. Massachusetts

Employment Growth

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05

% C

han

ge

Sin

ce

Ye

ar

Earl

ier

U.S. Massachusetts

Source: Bureau of Labor Statistics, Payroll Employment

Greater Boston MSA Real Median Household Income 1969-1999 ($2004)

$45,496$47,371

$60,886$61,796

$40,000

$45,000

$50,000

$55,000

$60,000

$65,000

1969 1979 1989 1999

Greater BostonReal Median Household Income ($2004)

$60,784

$63,546 $63,496

$60,466

$61,333

$58,500

$59,000

$59,500

$60,000

$60,500

$61,000

$61,500

$62,000

$62,500

$63,000

$63,500

$64,000

in $

Do

llars

2000 2001 2002 2003 2004

How do the demographics look?

We are losing population to out-migration

The largest net losses in population were in the young prime age cohorts

Greater Boston Population 2000-2004

3310 3311 33043296

3275

3100

3150

3200

3250

3300

3350

in T

ho

us

an

ds

2000 2001 2002 2003 2004

Massachusetts Net Migration 2000-2004

32,268 32,244 31,555 31,535

-14,244

-28,074

-47,776

-58,910-70,000

-50,000

-30,000

-10,000

10,000

30,000

50,000

2000-01 2001-02 2002-03 2003-04

Figure 2.3

Population Change by Age Cohort Boston PMSA 2001-2003

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Un

de

r 5

yea

rs

5 t

o 1

9ye

ars

20

to

24

yea

rs

25

to

34

yea

rs

35

to

54

yea

rs

55

to

64

yea

rs

65

ye

ars

+

Change 2001-2003

Where did they go?

TX

CA

MT

AZ

ID

NV

NM

CO

IL

OR

UT

KS

WY

IA

SD

NE

MN

ND

FL

OK

WI

MO

AL

WA

GA

AR

LA

MI

IN

NY

PA

NC

MS

TN

KYVA

OH

SC

ME

WV

MI VTNH

MD

NJ

MA

CT

DE

RI

Net Migration* Betweeen Massachusetts and Competitor States1990-2002

*Thicker line represents more migration

State Net Migration from State

Florida -99,082 New Hampshire -78,201 California -23,978 Arizona -11,033 North Carolina -8,983 Washington -4,516

What’s doing with the Cost of Living?

According to a new measure of living costs, Greater Boston has the highest cost of living of any metro area in the United States

A family of four needs $64,656 to pay for the costs of housing, transportation, day care, health care, and other basic necessities.

This is more than $3,000 higher than in Washington, D.C; $6,000 higher than in New York City; and $7.000 more than in San Francisco

Monthly housing costs are 40% higher than in Austin, Chicago, and Miami and 63% higher than in Raleigh-Durham-Chapel Hill

Figure 2.1Total Annual Family Budget for a Family of Four

Boston, MA vs. Competitor Regions

$64,656

$61,440

$58,656 $57,624

$54,948

$47,520

$44,124 $43,704 $43,584 $43,452

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

$65,000

$70,000

Re gion

Tota

l Ann

ual F

amily

Bud

get

A Tale of Two CitiesBasic Budget

2 Parents, 2 Children

Boston

Monthly Housing $1,266

Monthly Food $ 587

Monthly Child Care $1,298

Monthly Transportation $ 321

Monthly Health Care $ 592

Monthly Other Necessity $ 500

Monthly Taxes $ 824

Monthly Total $5,388

Annual Total $64,656

Raleigh-Durham-Chapel Hill

Monthly Housing $ 779

Monthly Food $ 587

Monthly Child Care $ 866

Monthly Transportation $ 358

Monthly Health Care $ 368

Monthly Other Necessity $ 369

Monthly Taxes $ 350

Monthly Total $3,677

Annual Total $44,124

Rents and Prices With a vacancy rate of 6%, average effective rents

remained relatively stable in 2004 (February 2005) after declining from peak rents in 2000

$1,748 for Class A Apartments (-5.1% since October 2002)

$1,187 for Class B Apartments (-3.7% since October 2002)

$967 for Class C Apartments (-4.0% since October 2002)

From May 2004 to February 2005, rents have remained largely unchanged

2005Class A Apartment Rents

$1

,95

3

$1

,82

5

$1

,74

5

$1

,68

6

$1

,67

7

$1

,63

2

$1

,57

9

$1

,52

6

$1

,51

7

$1

,46

6

$1

,43

9

$1

,32

5

$1

,31

6

$1

,24

1

$1

,15

5

$1

,11

1

$1

,04

3

$1

,01

8

$1

,01

2

$9

87

$0

$500

$1,000

$1,500

$2,000

$2,500

Source: Forbes Magazine

Affordability Problem Persists for Renters in Greater Boston

The number of cost burdened renters in 2003 increased to nearly 50% of all renter households -- from 43.3% in 2002

The number of severely cost burdened renter households (those paying over 50% of income for rent) swelled to nearly 25% -- from 21.5% in 2002

Despite softening in area rents over past 2 years, rent levels remain high throughout most of the region

Although there were 34,000 fewer renter households in the Boston PMSA than in 2000, 19,000 more faced severe cost burdens

$169$159

$152 $146 $148 $150 $154$161

$168

$186

$210

$245

$273

$313

$343

$376

$165 $168

$100

$150

$200

$250

$300

$350

$400

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

(in

$th

ou

san

ds)

Median Single Family Home Price 1987-2004

Owner Occupied Housing Affordability

By 2004, households earning the median income of their city or town could afford its median priced single family home in only 27 of the 161 towns and cities in the region, down from 77 in 2002 and 148 in 1998.

In only 1 town in Greater Boston could first time homebuyers earnings only 80% of municipal median income afford a home that sold for 80% of the median priced house … down from 17 in 2002 and 116 in 1998.

1998 2000 2001 2002 2003 2004

Below $100,000 4 0 0 0 0 0

$100,000 - $199,999 82 41 14 5 0 0

$200,000 - $299,999 50 68 74 62 43 19

$300,000 - $399,999 16 32 42 52 61 74

$400,000 - $499,999 4 10 12 22 30 33

$500,000 - $999,999 4 9 18 19 25 33

$1,000,000 and Above 0 0 0 0 1 1

# of Communities with Median Single Family Sales Price

1998 2000 2001 2002 2003 2004

Below $300,000 85.0% 68.1% 55.0% 41.9% 26.9% 11.9%

$300,000 - $499,999 12.5% 26.3% 33.8% 46.3% 56.9% 66.9%

$500,000 and Above 2.5% 5.6% 11.3% 11.9% 16.3% 21.3%

% of Communities with Median Single Family Sales Price

Is it any wonder then ….

That we are losing young people who can’t afford Greater Boston’s cost of living

That we are losing jobs because firms have difficulty in finding sufficient labor for their enterprises at nationally competitive wage rates

New Housing Production – Some Good News

Building permit issuance increased by 12% in 2004 to 13,556 after increasing by 22% in 2003.

For the first time since 1998, permits for single family units increased ... to 7,000 in 2004 from 6,020 in 2003

BUT, total permits remain well below peak years of the 1970s and 1980s when more than 20,000 units/year were permitted

And, single units permits are still well below the number issued each year from 1998 through 2000.

Figure 3.1Housing Units Permitted

Boston PMSA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04

5+ units 1-4 units

Year Total Units Permitted

Units in Single Family

Structures

Single Family

Units as % of Total

Units in 2-4 Unit

Structures

Units in 5+ Unit

Structures

1998 10,846 8,639 79.70% 574 1,633

1999 10,662 7,775 72.90% 746 2,141

2000 10,342 7,102 68.70% 701 2,539

2001 9,701 6,313 65.10% 686 2,702

2002 9,520 6,408 67.30% 764 2,348

2003 12,121 6,020 49.70% 1,093 5,003

2004 13,556 7,000 51.60% 994 5,562

Table 5.1Units Built Under Chapter 40B Comprehensive Permits

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2001 2002 2003 2004

Total Units in Developments Built Under 40B Comp Permits

Units that Count on Subsidized Housing Inventory

Estimated # of Units Restricted to Low Income Occupancy

Some Good News … but

Category Paradigm Target

Production

2002 2003 Change2002-03

2004 Change 2003-04

Market Rate 9,860 5,952 7,525 26% 9,259 +23%

% of Category Goal Met

  60% 76%   94%  

Subsidized New Construction

4,300 1,114 1,514 36% 1,678 +11%

% of Category Goal Met

  26% 35%   39%  

Student Housing

1,500 951 500 -47% 367 -27%

% of Category Goal Met

  63% 33%   24%  

Total 3 Categories

15,660 8,017 9,539 20% 11,304 +19%

% of Overall Goal Met

  51% 61%   72%  

Housing Production in the Boston PMSA vs. Housing Goals in the New Paradigm Report …

Conclusion Greater Boston now has the highest living costs of any

metro area in the United States …. led by high housing costs (as well as by high medical and day care costs)

It is not surprising then that Greater Boston and Massachusetts are losing population, especially among young working families, to other regions of the country

Housing production has improved in Greater Boston over the past three years, but total production in 2004 was still at only 72 percent of the level needed to slow housing price appreciation to normal levels

We still need to encourage more housing production as a “moral imperative” and as an “economic necessity”

5 Solutions for Housing Affordability

1. Zoning for Housing Affordability Comprehensive Permit Statute (Ch. 40B)

40% of all new production80% of all new affordable housing in suburbs

Smart Growth Housing Production (Ch. 40R)Upfront bonus paymentsSchool costs reimbursements

Inclusionary Zoning (10-15% of market rate developments)

2. Increased State Investments

Affordable Housing Trust Fund for new

production Preservation of Existing Subsidized Housing

(public housing and expiring use)

3. Business Community Involvement Investments in state tax credits (housing,

historic preservation, brownfields) Employer assisted housing to increase

homeownership Support for local housing proposals

4. Compact Between State and Municipalities

Increased support for community planning

Technical assistance for housing development (Community Preservation Act)

5. Greater Public Awareness and Education

Home@Last Campaign:

Educate community members about the benefits and importance of affordable housing

Video, posters, brochures, media and advertisements

Community presentations to civic groups, municipal officials, and others

Conclusion: Ingredients for Success

1. Partnership between the public and private sector

2. Leadership from the Governor and Legislature

3. Greater local support and involvement