1. 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

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

3. 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

4. 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”

5. 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”

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

7. 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

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

9. 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

10. 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

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

12. Internal Migration (% Change)
- .146
Housing Costs
(7.03)
E-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

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

14. 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

15. Where is Illinois? Employment Change: 2000-2004 Chicago - 2.98%
Springfield %
Peoria %
Rockford %
Decatur %

16. Where is Illinois? Net Migration: 2000-2004 Chicago - 3.57%
Springfield %
Peoria %
Rockford %
Decatur %

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

18. 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

19. 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, units -- $350,000
units $ 75, over 500 units -- $600,000
$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.

20. 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

21. 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

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

23. 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

24. 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