MAGGIE TOMKIEWICZ
Affordability a concern
Will the housing market finally take a long-anticipated breather in 2005? That’s a question on the minds of local real estate industry leaders who have witnessed years of record-breaking home sales and price increases.
Nationally and statewide, Realtors are expecting sales and price appreciation to moderate this year as interest rates edge upward. A significant bump-up in interest rates this year could spell good news for the local rental market, which has suffered as more and more tenants encouraged by the attractive rates have been able to become first-time homeowners.
Barring any major global disasters, many real estate experts do not foresee a housing market crash because the overall economy is improving and interest rates are likely to remain favorable. The National Association of Realtors is predicting that interest rates will climb slowly, with 30-year fixed-rate mortgages reaching an average of 6.4 percent in 2005.
In Massachusetts, Realtors are forecasting that home prices will continue to rise even if interest rates increase because the state is still struggling with a housing shortage. But real estate industry watchers say unlike the double-digit percentage increases of prior years, prices are more likely to go up anywhere from 5 percent to 9 percent.
“We expect them [home sales and prices increases] to slow down a little because you can’t keep breaking records,” said Maggie Tomkiewicz, president of the Massachusetts Association of Realtors.
Nationally, NAR is anticipating 6.38 million sales in 2005, down from the 6.58 million unit sales last year. The national trade association is also projecting the median existing-home price to increase 5 percent and the typical new-home price to grow 5.8 percent.
As for the rental market, some are optimistic that there may be some better days ahead. “I think the multifamily rental market will recover if there is a continued up-tick in interest rates,” said Ted Jankowski, chief executive officer of the Greater Boston Real Estate Board.
This year, leaders of groups representing Realtors and homebuilders say they want to continue focusing on boosting the state’s affordable housing supply.
“We’re still concerned about housing affordability and the lack of housing. Things have not changed over the last couple of years,” said Tomkiewicz, noting that the state is lagging in housing production by thousands of residential units annually.
One new law designed to increase the state’s housing supply that state officials, Realtors and homebuilders will be closely watching is Chapter 40R. Created last year, the measure is supposed to provide financial incentives to communities that create smart-growth zoning districts near public transportation and downtown centers where dense housing developments that include residential units for lower-income households can be built.
Mark Leff, vice president of the Home Builders Association of Massachusetts, which is a proponent of Chapter 40R, said he doesn’t expect much housing production under the new law this year because most communities aren’t likely to start establishing smart-growth zoning districts until the fall.
Leff said he believes that the success of Chapter 40R will depend on the fate of the state’s anti-snob zoning law, Chapter 40B. The controversial Chapter 40B has become the subject of much debate in recent years and lawmakers have filed dozens of bills to weaken it.
The law enables developers to go through an expedited permitting process in communities where less than 10 percent of the housing stock is considered affordable. As long as Chapter 40B is preserved, the incentives are there for communities to work with developers to promote housing in smart-growth districts, according to Leff, who noted that multifamily permitting increased last year and the prior year primarily because of projects that were permitted under Chapter 40B.
“Without a strong Chapter 40B, there won’t be much production under Chapter 40R,” said Leff.
Chapter 40B and Chapter 40R, respectively, have been described by some as the carrot-and-stick mechanisms that in combination may help overcome community resistance and spur more affordable housing production.
Homebuilders will also keep a close eye on efforts to reform the state’s zoning act, including a push by some for more local control. “I predict in 2005 there will be more focus than ever on local zoning practices. They are at the root of our housing shortage problem today,” said Leff.
Meanwhile, housing advocates are focusing on two legislative measures that they believe are critical for more affordable housing production. Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association, said two legislative priorities in 2005 will be a $200 million housing bond bill and recapitalization of the brownfields redevelopment fund, a program that has provided grants and loans to developers and communities for site assessments and cleanup of contaminated sites across the state, some of which have become the sites of new housing developments.
The bond bill includes funding for the Affordable Housing Trust Fund and the Housing Stabilization Fund. The trust fund has helped to create 2,600 housing units over four years – 40 percent of which have been for households earning 30 percent or less of the area median income – and the stabilization fund has preserved or produced 5,220 units over the past 10 years.
CHAPA also will advocate for a $10 million increase in funding for the state’s rental assistance program, which currently helps about 1,600 people with rental payments at private-market apartments.
And housing advocates will be pushing for more funds to preserve and improve the state’s 50,000 units of public housing. CHAPA is seeking at least a $10 million increase in funding for public housing maintenance, a program that has been chronically under-funded, according to Gornstein.
With public housing residents earning an average annual income of $15,000, many are in danger of becoming homeless if public housing units are lost. “These are developments that are housing low-income people who have few options in the private market,” Gornstein said.
Other issues that housing leaders will be pursuing are efforts to get statewide uniform Title 5 septic system code passed. Homebuilders in particular have been lobbying the Legislature to approve a uniform code, which they believe will make it easier to build housing in this state. HBAM leaders argue that too many communities are adopting septic system regulations that are stricter than the state’s without scientific proof that they’re needed. The homebuilders group has filed a bill that would force communities to seek approval and to provide scientific and engineering data to the state’s Department of Environmental Protection in order to adopt regulations that are more stringent than the state’s.
A top priority for Realtors will be fighting any attempts to create real estate transfer taxes. Through grassroots efforts, MAR members have been successful in defeating transfer tax proposals in communities like Hamilton, Plymouth and Upton. Realtors maintain that a transfer tax puts an unfair burden on homebuyers who are already struggling with high housing costs, and particularly because the tax money pays for services that benefit an entire community.
In addition, leaders of the Massachusetts Association of Realtors will be busy in the first few months of 2005 searching for a replacement for John Fridlington, the group’s outgoing executive vice president and top full-time employee, who is stepping down to take a similar post with the Florida Association of Realtors.
They will also be training Realtors on how to implement the new agency regulations that take effect in July. The Legislature approved new agency legislation last year and the Board of Registration of Real Estate Brokers & Salespersons is currently developing regulations for the implementation of the law.
Once the agency law goes into effect, Realtors will be required to get a home seller’s approval to allow subagency – the practice of allowing agents other than the listing agent to represent the seller during a real estate transaction – to occur. In addition, the law will enable real estate brokers to designate agents within the company to represent the seller and buyer in the same transaction. And Realtors will also have guidelines on how to practice as facilitators or transactional brokers who don’t represent the buyer or seller in a home purchase but instead help put the deal together.
“I think it’s a good measure as an alternative for some agencies as they design their own business models. Everyone’s going to make their own choices, but I think offering them choices is a good thing,” Tomkiewicz, MAR’s president, said.
Aglaia Pikounis may be reached at apikounis@thewarrengroup.com.
