Doug Howgate

Massachusetts has a housing problem that almost everyone acknowledges and almost no one can agree on how to fix.

The numbers are stark: Massachusetts Taxpayers Foundation research found the commonwealth ranks 47th nationally in the percentage of new homes added since 2020, permitting roughly 15,000 units per year against a recognized need of 22,000.

In Greater Boston alone, the Metro Mayors Coalition set a goal of 185,000 new units between 2015 and 2030, and by the end of 2021 had permitted less than 60 percent of what was needed to stay on pace.

MTF recently released a two-part series examining why we fall so persistently short and what a promising policy solution to building might look like.

The analysis suggests that closing the gap will require policymakers to make deliberate, sometimes difficult choices about which goals take priority – not because other goals are unimportant, but because trying to fully pursue all of them at once tends to be what keeps housing from getting built.

MTF’s proposed answer is a pilot program called Momentum Zones, which we believe offers a practical, data-grounded framework for doing exactly that.

The Cost Stack Is Real

Some of the forces driving up housing costs in Massachusetts sit largely beyond the reach of state or local government.

Construction material prices have climbed nearly 50 percent since 2020. Average weekly wages in Boston’s residential construction sector have risen 30 percent over the same period. Financing costs have more than doubled for many projects.

But our analysis finds that policy-driven costs, including zoning requirements, permitting timelines, affordability set-asides, and energy code compliance, still add meaningfully to the cost of a project, and unlike material prices or interest rates, they are within reach of state and local action.

The numbers illustrate the squeeze.

In urban markets, our research found per-unit development costs rose roughly 52 percent between 2019 and 2025, while apartment buildings’ net operating income grew only 13 percent. The estimated investment return on a new urban housing project is now approximately 3.7 percent annually, below what a certificate of deposit currently offers.

In suburban markets, the picture is more balanced: revenues outpaced costs, producing returns closer to 6 percent. That gap helps explain, in concrete economic terms, why so much new housing production is gravitating away from urban cores and toward the suburbs.

Trade-offs Are Difficult, and That’s Not a Failure

None of this is a critique of affordability goals, clean energy standards, or community input processes. These reflect genuine values and legitimate policy priorities.

The challenge is that in a market already stretched thin by construction costs and financing constraints, even well-intentioned requirements can collectively push a project past the point of viability.

Inclusionary zoning requirements that mandate a higher percentage of below-market units require cost increases to market rate units that can turn a project that pencils out into one that doesn’t. Energy codes that apply to commercial-to-residential conversions add upfront capital requirements at the moment developers need maximum flexibility. Permitting processes that extend timelines by months or years translate directly into carrying costs that accumulate against a project’s bottom line.

The MTF analysis is not arguing that these policy goals should be abandoned.

It is arguing that the current approach, in which every project must navigate the full weight of every requirement simultaneously with little flexibility, can produce an environment where the path of least resistance is no housing at all.

Momentum Zones: A Framework for Choosing Wisely

MTF’s Momentum Zone proposal would designate a small number of areas across the state, beginning with five, where a concentrated set of state and local policy tools would work together to make housing production financially viable.

Within a Momentum Zone, the state would provide direct equity investment in approved projects, offer benefits like a sales tax credit on construction materials, and fast-track access to existing programs like the Commercial Conversion Tax Credit, Historic Tax Credit and Low-Income Housing Tax Credit. Participating municipalities would commit to expedited permitting, flexible compliance options for certain local requirements and property tax abatements. The combination is designed to close the feasibility gap for projects that would otherwise stall.

Critically, the pilot framework also creates a controlled environment in which the tension between housing production and other policy goals can be managed transparently.

Rather than asking every community to adjust affordability or energy requirements broadly, Momentum Zones allow for calibrated flexibility in a defined area, for a defined period, with defined accountability, without requiring a wholesale reordering of policy priorities everywhere.

Momentum Zones wouldn’t be a silver bullet, but Massachusetts will not build its way to 220,000 new housing units by 2035 by chance. It will require the state and its communities to make clear-eyed choices about where flexibility serves the larger goal.

Doug Howgate is president of the Massachusetts Taxpayers Foundation.