A New Approach to Affordable Housing: The Massachusetts Experience Barry Bluestone Dean, School of Social Science, Urban Affairs, and Public Policy Director, Center for Urban and Regional Policy Northeastern Univerity Surdna Foundation May 8, 2007

May The Housing Situation in Massachusetts  After years of spiraling housing costs, hundreds of thousands of Massachusetts households find housing unaffordable  Corporations, educational institutions, medical centers and non-profits have difficulty attracting workers to Massachusetts.  Many of the state’s 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.  Housing has become a moral responsibility and an economic necessity

May New Paradigm Report  The Boston Archdiocese and the Greater Boston Chamber of Commerce request that Northeastern University’s new Center for Urban and Regional Policy – a self- described “Think & Do Tank” - undertake a comprehensive report on the state of housing in Greater Boston

May A New Paradigm of for Housing in Greater Boston – The Challenge  242,000 Renter Households paying 30%+ of income to cover rent (48%)  118,000 Renter Households paying 50%+ (23%)  190,000 Owner-Occupied Households paying 30%+ of income to cover mortgages (25%)  85,000 Owner-Occupied Households paying 50%+ (11%)+

May A New Paradigm of for Housing in Greater Boston – The Problem  Locally controlled zoning, building codes, and NIMBYism have kept supply below demand by strictly limiting land for housing development  Need to involve for-profit developers, CDCs, and universities in the effort  With vacancy rates at record lows, need 36,000 new housing units over current production levels to moderate housing prices and rents

May September 2000 New Paradigm Forum  Urged by Cardinal Law and the President of the Greater Boston Chamber of Commerce, over 1,000 civic leaders attend the release of the New Paradigm Report  The Governor and Boston’s Mayor endorse the report and its goals

May Greater Boston Housing Report Card  To keep the focus on Greater Boston’s housing crisis, the Boston Foundation underwrites the development of an annual Greater Boston Housing Report Card.  Northeastern University’s CURP is charged with the task  Report to the community every September

May Housing Report Cards  Current Market Conditions  Housing Production in the Region  Rents, Home Prices, and Sales  Affordable Housing Production  Public Spending and Support for Housing  Community Rankings on production and meeting affordable housing goals

May Greater Boston Median Single Family Home Price Source: The Warren Group Publications

May

May Shrinking Supply of Low Rent Units Gross Rent Change % in Price Range 2004 Total543,574470, % Less than $30076,43257, %12.3% $300 to $49955,08738, %8.2% $500 to $749131,59252, %11.1% $750 to $999185,59182, %17.5% $1,000 to $1,49966,530155, %33.1% $1,500 or more28,34283, %17.8% Source: 2000 U.S. Census SF3 Table H62, 2004 ACS Table 25063

May Media Coverage  New Paradigm Report gets Boston Globe Headline  Broad coverage in print, radio, and TV  Strong editorial endorsements throughout the region  Every housing report card makes headlines  Scores of speaking engagements before business groups, churches, civic organizations  THE NEED FOR AFFORDABLE HOUSING STAYS FRONT AND CENTER IN THE NEWS

May The Commonwealth Housing Task Force  Formed in 2002, members of the Commonwealth Housing Task Force (CHTF) include business leaders, private and public housing developers, labor leaders, housing advocates, foundations, the academic community, the environmental movement and the leaders of many of the state’s cities and towns.  CHTF represents an historic coalition of diverse interests dedicated to coordinated advocacy for new ways to increase production for housing across all income levels in order to moderate double-digit housing price inflation

May Background of CHTF  Born out of conflict surrounding business-led defeat of affordable housing legislation in the City of Boston  Recognizing the severity of the housing crisis, business and housing advocates came together to find common ground  CHTF, convened by The Boston Foundation, grew by 2003 to over 100 members  In March 2003, the diverse group agrees on a broad policy agenda and appoints four co- chairs

May Staffing and Funding the CHTF  CHTF hires the Center for Urban and Regional Policy at Northeastern University (CURP) to staff the task force and develop specific legislative recommendations  CURP hires Ted Carman of Concord Square Development Co. and Eleanor White of Housing Partners, Inc., working with CURP Director Professor Barry Bluestone to refine a plan for legislative action first proposed by Ted Carman  Funding received from private corporations and foundations

May CHTF Report: “Building on our Heritage: A Housing Strategy for Smart Growth and Economic Development”  Prepared by Ted Carman, Eleanor White, and Barry Bluestone  Issued October 2003  Adopted by the CHTF as the framework for legislative advocacy  Legislative hearing devoted to the CHTF Report held in November 2003

May CHTF Report: The Issues  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.

May CHTF Report: Recommendations  Any program should be voluntary on the part of cities and towns  All 351 cities and towns in Massachusetts can choose to participate  Use state incentives to encourage cities and towns to adopt “Smart Growth Overlay Zoning Districts”  Density Levels: Multifamily – 20 units per acre; 2-4 Family – 12 units; Single Family – 8 units per acre  Minimum of 20% of housing affordable at less than 80% of area median income  Special priority for State discretionary funds from Executive Offices of Environmental Affairs, Transportation, DHCD and A&F (schools, transportation, water, sewer, etc.).  Proposed state aid to hold communities harmless from additional school costs

May Chapter 40R: State Incentive Payments  A new Smart Growth Housing Trust Fund is established under Ch. 40R. From it the State will pay a one-time “zoning incentive payment” within 10 days of state confirmation of approval of a Smart Growth Zoning District: up to 20 units-- $ 10, units -- $350, units -- $ 75,000 over 500 units -- $600, $200,000 In addition, a one-time “Density Bonus Payment” of $3,000 will be paid by the state for each new or rehabbed housing unit built within a smart growth zoning district, to be paid within 10 days of issuance of building permit.

May CHTF Proposal Adopted as Chapter 40R by Massachusetts Legislature and Governor  Chapter 40R passed and signed in June 2004, including all CHTF recommendations except for the school cost insurance component  Due to intense lobbying by CHTF, legislation enacted in record time

May The Need to Deal with School Costs  CHTF had predicted that municipalities would be hesitant to adopt 40R districts without insurance against increasing school costs  CHTF asked CURP staff to prepare a school cost study and legislative proposal  Ted Carman led this effort, along with Eleanor White and Barry Bluestone

May School Aid Study and Proposal  The Chapter 40R School Cost Analysis and Proposal, issued in May 2005, demonstrated that as many as two- thirds of Massachusetts municipalities would have school cost deficits due to new moderate priced housing production – disproving the assertion made by many that school costs were a phantom issue  The study proposed a School Cost Insurance Program to existing state aid for local public schools The Supplement would encourage communities to enact Chapter 40 R Smart Growth Districts by insuring local school districts that they would be held harmless against any increase in school costs in Chapter 40R districts not covered by additional local property tax

May Passing Chapter 40S  Following release of the School Cost Analysis, the CHTF coalition lobbied heavily for passage of the proposed “school cost insurance” plan  Chapter 40S, incorporating all of CHTF’s recommendations was passed unanimously by the legislature and signed by the governor in November 2005

May Funding Strategy Components for Affordability included in the CHTF Report  Maintain or increase the allocation for housing under the Private Activity Bond Cap at the current level.  Gradually increase the housing portion of the State Annual Bond Cap from its current level of 9.1% to 15%.  Gradually increase annual state outlays for housing by $120 million. In the next decade this would add nearly $675 million for housing affordability. The FY05 budget directed an additional $2 million into the Affordable Housing Trust Fund.  Sell surplus State property and use a portion of the funds for increasing State assistance for housing affordability. The FY05 budget requires that after the first $25 million in proceeds from surplus land sales, the next $25 million will be deposited into the Smart Growth Housing Trust Fund to fund Ch. 40R incentives to communities.

May Summary of Expected New Units

May Estimated Program Costs Smart Growth Zoning Districts  Incentive and Density Bonus Payments for Smart Growth Zoning Districts allowing 50,000 housing units are projected to cost approximately $15 million per year over ten years.  After 10 years in operation, the cumulative new state school costs for 33,000 new housing units in Smart Growth Zoning Districts at a “hold harmless” level would be approximately $35 million per year.  The current Chapter 70 school reimbursement budget is $3.0 billion. The cumulative costs after ten years would equal only 0.7% of the projected Chapter 70 budget. It will be significantly less in earlier years.

May Year Program Costs Before Revenue Offsets

May School Aid Formula Projected Single Family Costs

May School Aid Formula Projected Multifamily Costs

May Total Projected Additional State Spending on School Aid - 10 th Year - FY 2014

May 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 $32 million per year after the fifth year  Increased state revenues from economic expansion due to increased housing availability are estimated to grow to $34 million by the tenth year  Revenue from the sale of state land  Income Tax set-aside from residents in Ch. 40R districts  New state appropriations

May Revenues and Revenue Offsets Net Program Costs

May 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 Smart Growth Zoning Districts  Additional State funds for affordability will significantly improve basic housing conditions and moderate land and housing price increases in the Commonwealth

May Spreading the Word about 40R  On-going CHTF staff outreach to local officials, real estate groups, advocacy organizations, planning agencies, and professional organizations  Collaborations formed with Mass Municipal Association, Greater Boston/Mass Association of Realtors, Smart Growth Alliance, and universities  Creation of two websites with information about CHTF and Chapter 40R/40S

May Chapter 40R Housing Pipeline  40R Approved Districts (12 Districts) (5,000+ Units) Lunenburg, Norwood, North Reading, Grafton, Plymouth, Dartmouth, Lakeville, Natick, Chelsea, Kingston, Lynnfield, Haverill  Communities seeking 40R Letters of Eligibility (7 Districts) (4,000 Units) Amesbury, Boston (two districts in planning), Brockton, Gardner, Kingston, Lawrence, and North Andover  Communities Considering 40R (24 Districts) Ashburnham, Attleboro, Belmont, Chicopee, “Devens”, Easthampton, Fitchburg, Holyoke, Ipswich, Lowell, Medfield, Medway, Nantucket, New Bedford, Newbury, Newton, Northampton, Pittsfield, Reading, Sharon, Somerville, Spencer, Westfield, Westport, and Williamstown

May

May Why Communities Participate  Wish to address housing shortage and/or lack of affordability  40R and 40S provide incentives to what is seen as inevitable housing development  Vulnerable under the state’s anti-snob 40B zoning law and perceive 40R/40S as a way to avoid sanctions

May New CHTF Initiatives  Research on economic impact of housing costs  New “Starter” Home Legislation  Proposal for permanent funding of Chapter 40R/40S  Continued outreach and technical assistance to local communities

May Important Lessons  Ground issue in powerful, impeccable university-based research  Maintain attention through regular “report cards”  Keep news media in the loop  Create broad-based Coalition to press issue  Develop legislative proposal  Use Coalition to lobby for proposal  Follow up legislation with attention to local implementation

May Critical Coalition  University Research Center  Housing Advocacy Groups  For profit developers and CDCs  Business Community  Environmental Groups  Foundations

May Template for other issues  Local economic development  Health care access and cost containment  Urban transportation  “Emerald” cities  Education reform  Tax reform