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Sustaining the Mass Economy: Housing Costs, Population Dynamics, and Employment Barry Bluestone Director, Center for Urban and Regional Policy Northeastern.

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Presentation on theme: "Sustaining the Mass Economy: Housing Costs, Population Dynamics, and Employment Barry Bluestone Director, Center for Urban and Regional Policy Northeastern."— Presentation transcript:

1 Sustaining the Mass Economy: Housing Costs, Population Dynamics, and Employment Barry Bluestone Director, Center for Urban and Regional Policy Northeastern University May 2006

2 Key Questions  Are the recent discouraging trends in Massachusetts employment and population related to the cost of housing?  Why should current homeowners in Massachusetts who have enjoyed double- digit appreciation in the value of their homes support an increase in housing supply?

3 Presentation Outline  Employment Trends  Population Dynamics  Housing Prices  Cost of Living across U.S. Metro Areas  Impact of Housing Prices on Employment  Impact of Housing Prices on Migration  Housing Price/Vacancy Relationship

4 Employment Trend – U.S. U.S. Bureau of Labor Statistics

5 Employment Trend - Massachusetts U.S. Bureau of Labor Statistics

6

7 U.S. Bureau of the Census

8 U.S. Census Bureau

9 U.S. Bureau of the Census

10

11 Where did they go?

12 Greater Boston Median Single Family Home Price 1987-2004 Source: The Warren Group Publications

13 2005 Class A Apartment Rents Source: Forbes Magazine Calculations based on 900 Sq.Ft. Apartment

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

15 Boston $64,656 Source: Economic Policy Institute, “Family Budget Calculator, 2005” Universe: 304 U.S. Metro Areas

16 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

17 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

18 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”

19 Boston ($1,266) Source: Economic Policy Institute, “Family Budget Calculator, 2005”

20 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%

21 Boston MSA (-4.9%) Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics Universe: 245 U.S. Metro Areas

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

23 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

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

25 Internal Migration (% Change) Monthly Housing Cost Boston MSA %∆Internal Migration = -.1541 +.00043 Housing Costs (7.03) - 2.658E-007 Housing Costs SQ (7.39) N = 304 Adj. R Square =.153 Universe: 304 U.S. Metro Areas

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

27 Simulation Results The Impact of Employment Growth and Housing Prices on Net Internal Migration (Northeastern States) Monthly Housing Cost % Employment Growth $600$1,266 +5.0%+ 2.27%- 0.77% +2.5%+ 1.30%- 1.74% -4.85%- 1.54%- 4.58% Simulation based onNortheast Regression The -4.85% employment loss and the $1,266 monthly housing price refer to the values for Greater Boston, the former from the U.S. Bureau of Labor Statistics, the latter from the EPI Family Budget Calculator (4-Person Family with 2 Children)

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

29 And, finally, what is the relationship between housing prices and housing supply?

30 Housing Price Appreciation (1995-2005) Housing Price Appreciation vs. Vacancy Rates Office of Federal Housing Enterprise Oversight; U.S. Census Bureau Universe: 75 U.S. Metro Areas

31 Office of Federal Housing Enterprise Oversight; U.S. Census Bureau Universe: 75 U.S. Metro Areas Housing Price Appreciation (1995-2005)

32 Housing Price Decline – Metro Areas Peak Qtr.HPI IndexTrough Qtr.HPI Index%CHGRecovery Gary, IN1981:I63.421984:III56.68-10.6%7 years BOSTON, MA1988:IV112.951992:II99.2 -12.2% 9 years Duluth, MN1988:II114.181991:III99.27-13.1%11 years WORCESTER, MA1989:IV117.261995:I100 -14.7% 9 years SPRINGFIELD, MA1989:iv117.431995:i100 -14.8% 11 years Honolulu, HI1993:II101.551999:III84.69-16.6%9 years Detroit, MI1981:IV61.291982:IV49.69-18.9%5 years Hartford, CN1988:III126.41995:I100-20.9%13 years Los Angeles, CA1990:III127.161996:III99.7-21.6%12 years Lafayette, LA1982:iii115.271988:IV65.53-43.2%15 years U.S. Office of Federal Housing Enterprise Oversight

33 - 12.2% U.S. Office of Federal Housing Enterprise Oversight 1988:4 th Q – 1992:2 nd Q

34 Conclusions  The high price of housing is indeed a significant factor in the decline in employment and population in Massachusetts  The high cost of living beyond housing – including health care, day care, and taxes – contributes to the decline in employment and population  An increase in housing supply could “inoculate” Massachusetts homeowners against the possibility of a long-term precipitous decline in housing values

35 General Policy Implications  INCREASING the housing stock, particularly starter homes for young families is critical to the future economic development and prosperity of the Commonwealth  REDUCING the high cost of health care, day care, and reduce the tax burden (particularly the residential property tax which contributes to housing costs) is important as well … along with assuring that the quality of local public services encourages families to stay in the Commonwealth despite its relatively high cost

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