Lawrence’s Ayer Mill is seen through the gears of an old canal sluice gate. iStock photo
Gateway Cities could play a major role in addressing the state’s acute housing shortage, but Massachusetts needs to commit resources and support other strategies to address the unique challenges the communities face in boosting production, according to a new report.
The study, carried out by the MassINC Policy Center, said the state’s 26 Gateway Cities need to collectively build 83,000 new housing units over the next decade – double their pace of production over the last 10 years – in order to bring supply and demand into balance and stabilize prices. The state and local communities must embrace a multi-pronged approach to hit that target, tapping everything from financing subsidies to encourage private development to increasing state support for rehabbing vacant and blighted properties, the report says.
Gateway Cities – mid size urban centers, many of them former industrial cities – have long been one of the state’s main sources of affordable housing for families, but the report says that is under threat as the housing squeeze reaches all corners of the state. “There’s no question that the Gateway Cities are feeling housing pressures that they haven’t experienced before,” said Ben Forman, research director at the MassINC Policy Center. “There are no more communities of last resort at some point if prices keep rising.”
The Greater Boston housing crisis receives considerable attention. For more than two decades, the constrained supply and ever-rising cost of housing in the region have been the subject of an annual “Greater Boston Housing Report Card” issued by the Boston Foundation, the most recent one issued earlier this week. The newly released “Gateway Cities Housing Monitor,” which the MassINC Policy Center intends to update every year, represents the first attempt to take stock of the housing picture in the 26 cities that play key roles in regional economies across the Commonwealth.
The policy center is based at MassINC, the nonprofit civic organization that also publishes CommonWealth Beacon.
36K Needed Now, 83K Over 10 Years
Of the 83,000 new housing units the report says are needed in Gateway Cities over the next decade, there is immediate need for 36,000 new dwellings to address current housing demand. The most acute housing need is felt by extremely low-income renters, with the communities home to 35,000 more renters than apartments that are affordable to this group. There is also a housing shortage for the 50,000 middle- and upper-income renters, who could afford higher cost apartments with more amenities if those were available, or could readily move into home ownership with more supply available. Gateway Cities would need to see 16,600 of those higher income renters become homeowners to reach the state homeownership rate for that income bracket.
A large share of Gateway City residents are “cost-burdened” when it comes to housing, with half of all renters there spending more than 30 percent of their income and a quarter of renters spending more than 50 percent of their income on housing, according to the report.
At the same time, Gateway Cities rents remain much lower than those of other communities. As a result, the report says, the communities are home to almost two-thirds of what the report calls the state’s “naturally-occurring” affordable housing stock – housing that is affordable, without any subsidies or other assistance, to households earning 50 percent of the state median income, or about $48,00 a year.
While there is a “deep reservoir” of such naturally-occurring affordable housing, said Forman, “we’re going to deplete that resource” if the state continues to grow without addressing the housing shortage.
Cities’ Rents Don’t Support Construction Costs
Gateway Cities face particular challenges in boosting housing production. While property values in these communities have steadily increased, the cost of constructing and operating new rental units remains much higher than the rental income such housing will generate.
That financing gap is particularly large in Western Massachusetts. The report says the cost of building a new rental unit in Chicopee, Holyoke, and Springfield is nearly $300,000 more than the rental will support. The financing gap is narrower in Gateway Cities closer to Boston, which have higher rents, but it remains substantial, with developers still facing a gap of roughly $80,000 per unit, according to the report.
The financing challenge of building new units for home ownership in Gateway Cities is not as steep, and Forman said affordable housing efforts should focus more on home buying, which helps families build wealth and contributes to neighborhood stability.
The report says the financing gap for construction of a condominium unit across the 26 communities averages roughly $150,000, and in nine Gateway Cities, condos could be profitably built and sold with no gap-filling subsidy. The report found that home ownership rates for Black, Latino, and Asian residents in Gateway Cities ticked up slightly over the last decade, but remain far below those of white residents in the communities.
Zoning Reforms Called For
Gateway Cities could help spur more production by adopting more development-friendly zoning. Only four Gateway Cities allow construction of the state’s iconic triple-deckers by right on at least half of their land, according to the report.
Many have, however, established zones that allow for greater housing density. Also making a difference, said Forman, is a state program that provides “shallow subsidies” to spur market-rate housing construction in Gateway Cities.
One under-tapped strategy for growing Gateway City housing stock is rehabbing vacant and blighted properties. There are about 23,000 vacant units in these communities, or enough to address roughly two-thirds of the immediate shortage of 36,000 units identified by the report.
The costs of rehabbing a unit are far less than those of new construction. The state currently commits $7 million a year to rehabbing vacant property. “It’s way underfunded relative to the need and the opportunity in Gateway Cities,” said Forman. “We’d like to see those numbers go way up.”
Forman said state and local officials could also spur more housing construction in Gateway Cities by taking on the complex task of assembling large enough parcels to make development projects viable and addressing any needed environmental remediation. “It’s a very complicated, convoluted, risky process, and it doesn’t make sense to ask private developers to do that,” he said.
The report found little evidence to support fears that broad-based gentrification is taking place in Gateway Cities from newcomers driven out of high-cost Boston. With the exception of Everett, Malden, and Revere, the report found those moving into Gateway Cities have lower incomes than those already there. “A lot of the increase in demand is coming from immigration,” Forman said of the housing pressure from population growth in Gateway Cities. “We’re grateful to have those workers, but we’re not building enough housing to shelter them without prices rising.”
Forman said the key is for the state to develop a clear housing strategy that includes Gateway Cities, and for all those involved to be vigilant in executing it and hitting goals that it sets. “We’ve got to do a lot at once,” he said. “This is not a do-one-thing-and-see-what-happens situation. This is all hands on deck, throw everything in the pot and see what kind of progress we have.”
This article first appeared on CommonWealth Beacon and is republished here under a Creative Commons license.
