Building on our Heritage A Housing Strategy for Smart Growth and Economic Development Report and Recommendations to The Commonwealth Housing Task Force from The Center for Urban and Regional Policy Northeastern University Edward C. Carman Eleanor White Barry Bluestone October 30, 2003

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force2 The Current Situation  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.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force3 The Problem and its Resolution  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. Massachusetts has been named the least affordable state for housing in the U.S. (CHAPA Press Release 9/8/03)

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force4 The Proposed Program  Provides incentives to local communities that will yield sufficient land, zoned as-of-right, to accommodate increased production.  Requires that developments with over 12 units have 20% of the units affordable to those at 80% of median income.  Increases state funding commitments to pay for affordability in the districts, and to increase the production of affordable units outside the districts.  Creates a priority for housing re-use on surplus state land.  Relies on the sale of surplus state land as a major source of funds for housing affordability.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force5 Smart Growth Locations  Overlay Zoning Districts in three locations will be eligible for incentives: 1.Transit / Commuter Rail Stations. 2.Town centers. 3.Underutilized industrial, commercial and institutional properties.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force6 Overlay Zoning Districts  Currently allowed under state law. Every community in the State may, but will not be required, to participate.  Design standards set and enforced locally.  Overlay Districts must have no restrictions on occupancy, and, at a minimum, provide for: Mixed Use. Single family development at 8 units per acre, and / or Apartments at 20 units per acre. Infill on non-conforming lots. Accessory apartments in large homes. 20% of the units to be affordable at 80% median income.  Approval of Overlay Districts, Build-out Analyses, and monitoring by DHCD.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force7 Proposed State Incentives  Density Bonus Payment of $2,000 for each apartment and $3,000 for each single family home allowed by the zoning, paid when the Overlay District is enacted by the community.  For those public school students from new housing actually built in an Overlay District, the state’s Chapter 70 share of school costs will increase to 100%.  Special priority for State spending of capital funds (schools, transportation, water, sewer, etc.).

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force8 Link to 40B Reform  Legislation now pending to Reform Chapter 40B.  After reforms are in place, recommendations will be developed to integrate the Overlay Zoning District program with the provisions of 40B and assure consistency.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force9 Implementation Assistance  $1 million per year for staffing for regional outreach, including community development corporations and other planning organizations.  $4 million per year for professional fees for local communities: Matching with local funds; To pay for Planners, Engineers, Surveyors, Lawyers, Housing and Finance Experts, and the Preparation of Build-out Analyses.  Administered by DHCD

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force10 Supplemental Programs  Establish a coordination section at the Office of Commonwealth Development Ensure Overlay District priority for state capital expenditures.  Establish a one-stop source of bond financing for: Water and sewer Parks; exterior improvement programs Transportation; parking garages  Use TIF, DIF, and other sources to repay loans.  Reform the School Building Assistance program to give priority to communities with Overlay Districts.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force11 Funding Strategy Components for Affordability  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 to $120 million. In the next decade this will add nearly $675 million for housing affordability.  Sell surplus State property, with a priority for housing and mixed use (where appropriate). Use the funds for increasing State assistance for housing affordability.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force12 State Action  Land Sale Proceeds are one part of the overall funding recommendation.  The state should commission a thorough inventory of state land to identify potential sale parcels;  The disposition process should be centralized at the Division of Capital Asset Management and Maintenance (DCAMM). An Auction Process should be used, prior to final land-use approvals. Housing use should be a priority, but not mandatory.  Other state regulations covering housing production must be made more efficient.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force13 Summary of New Units

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force14 Estimated Program Costs Overlay Zoning Districts  Density Bonus Payments for Overlay Zoning Districts allowing 50,000 housing units are projected to cost approximately $12 million per year over ten years.  After 10 years in operation, the cumulative new state school costs for 33,000 new housing units in Overlay Districts would be approximately $60 million per year.  The current Chapter 70 school reimbursement budget is $3.0 billion. The cumulative costs after ten years will equal only 2.1% of the current budget. It will be significantly less in earlier years.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force15 Program Costs Before Revenue Offsets

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force16 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 $27 million per year after the fifth year.  Increased state revenues from economic expansion due to increased housing availability are estimated to grow to $28 million by the tenth year.  Revenue from the sale of state land.  New state appropriations.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force17 Revenues and Revenue Offsets Net Program Costs

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force18 Underlying Assumptions  Greater Boston household growth for the decade is estimated at 10,300 per year (MAPC).  Average housing production from 2000 to 2002 was 8,300. (Housing Report Card)  The annual goal for incremental, new production equals the difference between the two, or 1,960 units.  The current soft economy has led to increased vacancy rates for both single family and multifamily housing. Rent decreases have been experienced; home price increases have been moderating – and held up largely by low interest rates.  In spite of this moderation, housing in Massachusetts is not currently affordable for 61% of renters.  Further, when the economy regains its vigor, excessive housing price inflation will resume unless there is net new production to absorb the increased household demand (just as in the late 90s).  This affords the Commonwealth several years to ramp up the increased production in order to moderate future price increases.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force19 Additional Assumptions  The amount of estimated production in Overlay Districts has been increased to include housing that would have been built even if there were no Overlay District Program (“Transfer Units”): 30% for Single Family, and 50% for Multifamily.  Transfer Units represent production that takes place in Smart Growth Locations (i.e. Overlay Districts) instead of in locations that contribute to Sprawl (and are estimated to equal 44% of total units within Districts).  Single Family homes are assumed to make up 40% of the total; Multifamily - 60%.  Production outside Greater Boston has been assumed to equal an additional 20%.  Using these assumptions, Baseline Production, Statewide, is 4,200 units within Overlay Zoning Districts. (1,832 = Transfer Units; 2,378 = new production units).  Baseline production is assumed to be reached in  For the purpose of estimated Density Bonus payments, it has been assumed that three units must be zoned as of right for each unit that is to be built in the succeeding year.  Revenue estimates for construction and economic growth have been adjusted to exclude Transfer Units.

10/30/03 A Housing Strategy presented to the Commonwealth Housing Task Force20 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 Overlay Zoning Districts,  Additional State funds for affordability will significantly improve basic housing conditions and moderate housing price increases in the Commonwealth.