Housing: Critical Element in Economic Development Barry Bluestone Director, Center for Urban and Regional Policy Northeastern University Dean, School of Social Science, Urban Affairs, and Public Policy Governor’s Conference on Affordable Housing Illinois Housing Development Authority October 18, 2006

Source: Economic Policy Institute, “Family Budget Calculator, 2005”

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 Universe: 304 U.S. Metro Areas Economic Policy Institute: Family Budget Calculator

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 Source: Economic Policy Institute, “Family Budget Calculator, 2005”

A Tale of Two Cities Basic Budget 2 Parents, 2 Children Chicago Monthly Housing $ 906 Monthly Food $ 587 Monthly Child Care $ 763 Monthly Transportation $ 321 Monthly Health Care $ 350 Monthly Other Necessity $ 403 Monthly Taxes $ 312 Monthly Total $3,642 Annual Total $43,704 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 Source: Economic Policy Institute, “Family Budget Calculator, 2005”

Source: Economic Policy Institute, “Family Budget Calculator, 2005”

CURP Study of Housing, Employment and Population Metro areas with highest cost of living are suffering slow employment growth or outright job loss Metro areas with the highest cost of living are suffering for net out-migration of domestic population Paradox: The shortage of housing supply can lead to a future sharp decline in housing prices … as jobs and workers leave the state

Employment Change (%) (2000-2004) -.1466 +.0000396 Housing Cost (4.07) -2.291E-007 Housing Cost SQ (4.04) N = 245 Adj. R Square = .056 Boston MSA Monthly Housing Cost

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

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

Internal Migration (% Change) - .146 + .000399 Housing Costs (7.03) - 2.475E-007 Housing Costs SQ (7.39) N = 304 Adj. R Square = .153 Boston MSA Monthly Housing Cost

Internal Migration (% Change) - .146 + .000399 Housing Costs (7.03) - 2.475E-007 Housing Costs SQ (7.39) N = 304 Adj. R Square = .153 Boston MSA San Francisco Stamford-Norwalk San Jose Boston Oakland Nassau-Suffolk Monthly Housing Cost

Universe: 304 U.S. Metro Areas Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census

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

Where is Illinois? Employment Change: 2000-2004 Chicago - 2.98% Springfield - 3.22% Peoria - 4.32% Rockford - 7.25% Decatur -10.72%

Where is Illinois? Net Migration: 2000-2004 Chicago - 3.57% Springfield - 0.60% Peoria - 1.40% Rockford +1.60% Decatur - 4.49%

Chapter 40R and 40S New Steps to Solve the Massachusetts Housing Crisis … and protect the Commonwealth’s economy

The Basics of “Smart Growth”Chapter 40R Allows local option to adopt Overlay Districts near transit, areas of concentrated development, commercial districts, rural village districts, and other suitable locations Allows “as of right” residential development of minimum allowable densities Provides that 20% of the units be affordable Allows Mixed Use and Infill Provide two types of payments to municipality Encourages open space and protects historic districts

Chapter 40R 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 DHCD confirmation of approval of a Smart Growth Zoning District: up to 20 units -- $ 10,000 201-500 units -- $350,000 21-100 units -- $ 75,000 over 500 units -- $600,000 101-200 -- $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.

Chapter 40 S School Cost Insurance Program Ch. 40S provides “insurance” that the State will pay for net additional school costs (if any) for students in new housing in Ch. 40 R Districts If there are no net costs, there is no payment By taking the school cost issue off the table, it should make it economically feasible for communities to permit modest prices single family home construction

Chapter 40R and S are Working Plymouth, North Reading, Norwood, Dartmouth, Chelsea have passed 40Rs More than 30 Communities have expressed interest or considering passage Already land is zoned for over 1,500 new units of housing … a strong start

Smart Growth Zoning under consideration LEGEND Filed w/DHCD or applied for PDF grant Under local consideration

Conclusion – Long Term Challenges In the long run, economic weakness, slow job growth, and demographic flight could lead to much weaker housing markets in the most expensive housing markets Chapter 40R and 40S mark the beginning of a solution to the economic and demographic challenge in Massachusetts We need not only to moderate housing price appreciation but produce housing affordable for young working families Everyone has a stake in solving the housing problems in the Commonwealth and in other high cost regions

Conclusions The high price of housing is indeed a significant factor in the decline in employment and population in many metro areas The high cost of living beyond housing – including health care, day care, and taxes – contributes to the decline in employment and population Housing affordable to young working families is the key to future economic prosperity