BARRY BLUESTONE
Co-authored report
A new report shows that home prices have dipped in Greater Boston while housing production has gone up, but local advocates say the region’s housing woes are far from over and that more needs to be done to boost supply.
The Greater Boston Housing Report Card, which will be released Wednesday, also reveals that after at least three years of moderating, rents started to inch upward in the last several months. The report card, prepared by Northeastern University’s Center for Urban and Regional Policy, examines housing costs in 2005 and part of this year.
Bonnie Heudorfer, one of the authors of the report, cautioned that while the region has made progress in creating new housing units, young people and families are still struggling to find homes they can afford.
“Greater Boston remains one of the nation’s most expensive housing markets in which to live and do business,” said Heudorfer, who along with CURP Director Barry Bluestone wrote the report. “The softening of the overheated housing market and the increased production have not solved the housing problem.”
The report, commissioned by The Boston Foundation and the Citizens’ Housing and Planning Association, takes a look at housing production and costs in 161 cities and towns throughout Greater Boston.
Price appreciation slowed last year after values grew by double-digits in the previous six years. Statewide, the median selling price for a single-family home was $345,000 last year, a 5.8 percent increase from the $326,000 median selling price of 2004, according to The Warren Group, parent company of Banker & Tradesman.
But the median price for homes sold through August of this year has slipped to $332,500, down 4 percent from a year earlier, according to The Warren Group. The report card includes statistics from the company.
While home prices have stabilized, most families earning the median income are still priced out of the state, explained Aaron Gornstein, executive director of CHAPA. “It’s a more normal market but the prices are still extremely high. Someone earning the median income can still not afford a median-priced home,” he said.
“There’s some good news in terms of steady incremental progress of overall housing production but there still remains a great need for affordable housing for low- and moderate-income families,” said Gornstein.
Permitting for new housing construction in the Boston metropolitan area jumped in 2005. Some 17,442 permits for new housing units were issued in the Boston area last year, compared to 15,423 in 2004, according to information posted on the U.S. Census Bureau’s Web site.
But permitting has started to ease this year. As of July, 9069 housing permits were issued, down from 9,616 during the same months in 2005.
Heudorfer pointed out that many of the new residential units that have been permitted and constructed in the region are either high-end luxury apartments or condominiums, or age-restricted housing. And she emphasized that the permitting and building process in Massachusetts is still lengthy and cumbersome.
“The process in Massachusetts by which we bring units into production remains broken,” she said. “The process just takes too long and, as a result, when demand is rapidly increasing – as it was in the late 1990s – we were not bringing on units fast enough.”
Researchers and economists have illustrated that housing costs in the Boston area are beyond the reach of working families, and many young people as a result are leaving the region for cities where housing is cheaper.
Massachusetts was the only state in the country to lose population for the past two years. And the state has lost people between the ages of 25 and 34 at a greater rate than the rest of the country, according to research that Bluestone has presented in the past.
‘Just Not Healthy’
The region’s housing costs have made it difficult for companies and other local employers to retain and recruit new employees – making the region less competitive in terms of job growth.
“Our failed land-use policies have only served to cause tremendous volatility in the real estate market and they’ve also caused many young families to move out of this state – both of which have been documented to a great degree,” said Mark H. Leff, senior vice president of Salem Five. “We restrict supply so demand gets exaggerated, and then people panic and we send some of the demand out of state. And when people sense there is a problem in the market, they pull back.”
Through large-lot zoning and restrictive development regulations, cities and towns are encouraging the construction of large, expensive homes, he explained.
“Municipalities do not allow us to build reasonably sized homes for families. There’s an increase in production but much of that is condominium production – a lot of which is geared to the empty nesters. The remainder is very expensive housing, which does not serve our families,” said Leff, who is president-elect of the Homebuilders Association of Massachusetts.
Leff said there are two ways to lower housing prices. One is to increase the supply, he said.
“The other way is to just constrain production and send people out of state,” he said. “What will ultimately happen if people are not attracted to our state and if we lose people is that the existing taxpayers will pay more for services and at the same time they will see a decline in values. It’s just not healthy.”
Last year’s report card revealed that out of the 161 towns and cities examined, only one town – Millville – was affordable to a first-time buyer earning 80 percent of the town’s median income trying to purchase a home that was 80 percent of the median-priced home in the community. This year’s study shows that no communities are affordable to first-time buyers.
“I think the big picture is that we really shouldn’t be expecting much of any significant change in affordability as a result of where we are in the real estate cycle at this point,” said Henry Pollakowski, director of the MIT Center for Real Estate’s Housing Affordability Initiative.
“The issue is that house prices are so high relative to income that the fact that they level off or decline a little is not major with regard to affordability,” he added.
According to a housing affordability index released by the MIT Center for Real Estate earlier this year, there are only about a dozen Boston suburbs where at least 40 percent of all housing units are affordable to households earning no more than 80 percent of the area median income.
The index, which examined 142 communities surrounding Boston, took into account school quality, proximity to jobs and open space to determine which communities have the largest supply of affordable rental and owner-occupied units. Dracut, Billerica, Woburn, Waltham, Maynard, Marlborough, Millis, Norwood, Randolph, Stoughton, Whitman and Avon topped the list.
A family earning the median-income in the town in which they lived could afford to purchase a median-priced home in that town in 148 communities in 1998, according Heudorfer, but that number has dropped steadily throughout the years.
“Despite the softening of the market, the affordability problem has not eased for people making the median income or less, and in fact there’s evidence that it has gotten worse,” she said.
Housing supporters are urging state leaders to take action.
“We need leadership from a new governor next year to look at this housing problem Â… and come up with a way to encourage the production of reasonably sized homes on reasonably sized lots,” said Leff.
Gornstein echoed those remarks. “We hope the gubernatorial candidates take notice of the report and elevate the issue of affordable housing over the next month before the election,” he said.
