Housing, Smart Growth, & Economic Development in the Commonwealth Barry Bluestone Dean, School of Social Science, Urban Affairs, and Public Policy, Northeastern University Build Boston Housing Symposium November 13, 2007

The Economic State of the Commonwealth An Update on the Massachusetts Economy

Economic Activity Index: Massachusetts vs. U.S. ( ) January 1993 – October 2001 Leading the Nation October 2001 – June 2007 Lagging the Nation

Total Massachusetts Non-Farm Employment Employment in Massachusetts

Change in Total Non-Farm Employment (Seasonally Adjusted) (January August 2007)

Between 2000 and 2007, the population of Massachusetts increased by only 86,000 (1.4%) – the slowest increase in New England. Since 2000, Massachusetts has suffered a net domestic out-migration of over 280,000 residents. This outflow of people has been softened only somewhat by the arrival of about 186,000 foreign immigrants. Population Trends

U.S. Bureau of the Census

Population Trends in New England

Immigration & Net Domestic Migration

Who’s Leaving Massachusetts?

Where did they go?

Stagnant Incomes/Rising Poverty in Greater Boston Year % Change Real Median Household Income $62,481$65,569$64,060$62, % Real Median Homeowner Income $80,995$82,925$80,936$81, % Real Median Renter Income $38,780$39,602$39,762$35, % Families Below the Poverty Line 59,91358,88268,68768, %

: +156% : -6% Slow Growth … But Housing Costs Remain High Median Price of Single Family Homes and Condominiums : +61%

Effective Rents – Rising Again : +58% : +1% Q 2007: +6%

(Un)Affordable Communities in Greater Boston In 2007, only 6 communities out of 161 in Greater Boston – Bellingham, Blackstone, Bolton, Southborough, Stow, and Townsend – are affordable for a typical first-time homebuyer in 2007 Back in 1998, affordable housing was available in 116 Greater Boston communities

Year Communities Affordable to Median Income Homebuyer Purchasing Median Priced House (20% down payment) Percent Affordable Communities Communities Affordable to First Time Homebuyer Earning 80% of Median Purchasing House Priced at 80% of Median (10% down payment) First Time Homebuyer Percent Affordable Communities %11672% %8754% %4226% %1711% %53% %1<1% %00% %1<1% 2007* 4629%64% Summary of Affordability Gap Analysis Number of Affordable Communities

Housing Affordability in Greater Boston Renter Households paying >30% of Income 39.2%50.1% Renter Households paying >50% of Income 18.4%25.0% Owner-Occupied Households paying >30% of Income 26.7%39.3% Owner-Occupied Households paying >50% of Income 9.0%13.9%

YearTotal Units % Change from Prior Year Units in Single Family Structures % Change from Prior Year Single Family as %of Total Units in 2-4 Unit Structures Units in 5+ Unit Structures % Change from Prior Year ,846 8, %5741, , %7, %72.9%7462, % , %7, %68.7%7012, % 20019, %6, %65.1%6862,7026.4% 20029, %6,4081.5%67.3%7642, % , %6, %49.7%1,0935, % , %7, %51.6%9945, % , % 7, % 46.7%1,0157, % , % 5, % 39.5%1,2247, % 2007 est. 9, % 4, % 41.1%7135, % Single Family v. Multifamily Building Permits in Greater Boston Housing Production in Greater Boston Needed Production: 18,000 Units/Year

Housing Costs and Economic Development

Boston Family Budget – 4 Persons  Housing Costs: 7 th Highest MSA  Child Care: 7 th Highest MSA  Health Care: 7 th Highest MSA  Personal Care: 6 th Highest MSA  Fed/State Tax: 2 nd Highest MSA  Total Cost: 1 st Highest MSA Economic Policy Institute, Family Budget Calculator, 2005 Among 304 U.S. Metropolitan Areas

Top Decile: Metro Area Cost of Living Boston $ 64,656 Washington (D.C. portion) $ 61,440 Nassau-Suffolk, NY $ 60,780 Stamford-Norwalk, CN$ 60,720 Lawrence (Mass. portion) $ 59,280 New York, NY$ 58,656 Barnstable-Yarmouth, MA $ 58,236 San Francisco, CA $ 57,624 Worcester (Mass. portion) $ 55,704 Springfield, MA$ 55,320 Minneapolis-St. Paul, MN$ 54,948 Nashua, NH $ 54,852 Santa Cruz-Watsonville, CA$ 53,808 Oakland, CA $ 53,412 San Jose, CA $ 52,800 Pittsfield, MA $ 52,632 Rochester, MN $ 51,288 Monmouth-Ocean, NJ$ 50,736 San Diego, CA $ 50,088 Newark, NJ$ 49,992 New Haven-Meriden, CN $ 49,848 Honolulu, HI $ 49,824 Philadelphia (Pa. portion) $ 49,716 Boulder-Longmont, CO$ 49,596 Bridgeport, CN$ 49,272 Manchester, NH $ 49,152 Santa Rosa, CA$ 48,924 Albany-Schenectady-Troy, NY $ 48,900 Hartford, CN$ 48,684 Trenton, NJ$ 48,576 Rochester, NY$ 48,540 Economic Policy Institute: Family Budget Calculator Universe: 304 U.S. Metro Areas

A Tale of Two Cities Basic 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 A Tale of Two Cities Source: Economic Policy Institute, “Family Budget Calculator, 2005”

Low PriceHigh Price Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics Universe: 245 U.S. Metro Areas 0.95% 2.91% 2.29% 0.86% 1.53% 0.68% -0.68% 0.12% -0.62% 1.49%

Low CostHigh Cost Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics -0.21% 0.93% -0.02% 0.84% 1.06% 0.50% 1.09% 1.98% 0.62% 2.53% Universe: 245 U.S. Metro Areas

Boston MSA (-5.2%) Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census Universe: 304 U.S. Metro Areas

-2.12% 0.16% 1.54% 1.40% 2.19% 1.04% 0.60% 0.41% 0.19% 0.39% Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census Universe: 304 U.S. Metro Areas Boston

Key Point  Housing Costs – and more generally the cost of living – is a key economic challenge in the Commonwealth … and perhaps the #1 barrier to a full economic recovery

Progress on the Housing Front: Chapter 40R/40S Implementing Smart Growth to Meet the Commonwealth’s Housing Challenge and promote Economic Development

A New House  Local Costs: Loss of Open Space Increase in traffic More public services Education  State Benefits Sales Tax Income Tax Corporate Tax

Local and State Finance  Perverse Interaction Prop. 2 ½ Property Taxes Chapter 70

Single Family Home  Sale price - $400,000 Property taxes at.15 = $6,000 Half for school costs = $3,000 On average – 1 school child  Actual cost of education: $10,000

It’s no Surprise  Local communities do all they can to discourage the production of housing.  They are remarkably successful  The economy shows the results

Finding a Solution: Smart Growth Zoning with State Aid  Chapters 40R and 40S  Goal: a surplus of zoned land in smart growth locations  Additional State Aid to Local Municipalities to help them cover local costs if they implement Chapter 40R: Smart Growth Locations 20% of units affordable Minimum Densities

Incentives  Initial Payment - $1,000 per unit  Construction Payment - $3,000 / Unit  School Cost Hold Harmless  Design Standards

Progress on Chapter 40R/40S As of July 2007, 17 communities in Massachusetts towns have approved Chapter 40R “Smart Growth” districts. More than 30 others are considering such districts. Existing 40R Districts can provide over 6,000 new units of housing Over 3,000 more units in the pipeline

Public Policy Ingredients  A good idea  Institutional Support  Significant Funding  Intense effort  Broad and deep process

How Did it Happen? 18 months from concept paper to legislation The Commonwealth Housing Task Force The Center for Urban and Regional Policy The Boston Foundation The Legislature and Administration

Now we Need to Incentivize Starter Homes  Need Additional incentives for small single family homes on small lots.  Proposal in the works Added incentives for these homes Added school aid to cover cost of kids

Conclusion  Much Success, but, more to be done.