Michelle Landers

Boston’s shortage of housing that is affordable to middle-income households represents a threat to the region’s ability to attract and retain a sufficient workforce, according to the findings of a report recently published by the ULI Boston/New England Housing and Economic Development Council.

“Building for the Middle: Housing Greater Boston’s Workforce,” finds that Boston’s middle-income population has been shrinking steadily over the past two decades, while upper- and lower-income populations have grown, shifting the balance among these groups. To be specific, between 1990 and 2014, the number of middle-income households¬ – those earning between $68,000 to $113,000 – declined by 2 percent, while the number of high-income households rose by 33 percent and the number of lower-income households increased by 40 percent. More than half the growth in the lower-income population can be attributed to those considered extremely low-income.

“The middle class is being squeezed out of the market,” MassHousing Deputy Director Karen Kelleher told a recent ULI panel examining the report. She said the report “confirms for us things that we’ve seen from other studies that have been done, but really takes it to another level of trying to understand how the workforce is changing as opposed to just what’s happening in the housing market.”

Declines in the middle class are largely attributable to the reduction in the number of occupations providing middle-income wages. Office, administrative and maintenance jobs have declined, while low-wage jobs in sales and food preparation have increased. At the same time, the number of high-wage positions in management, health care and technology-related fields have jumped.

“When we talk about wage polarization in America, this is what’s happening,” according to Tim Reardon, data services director for the Metropolitan Area Planning Council, the regional planning agency that provided data analysis for the ULI report. “We are growing the number of working households who are low- and high-income while we are losing the middle.”

Rising housing costs have hit middle-income homeowners in Boston and inner-ring suburbs particularly hard. Data shows 36 percent of Greater Boston’s middle-income households are cost-burdened, which means they spend more than one-third of their income on rent, mortgage, or other home-related payments. That cost-burdened group has swelled 27 percent since 1990.

Boston’s problem is magnified by the overall scarcity of both for-sale and rental units that are affordable for middle-class earners throughout the region. Data shows only 22 percent of single-family homes and 39 percent of condominiums in Greater Boston are considered affordable for a household of four earning $75,000 per year. Only 12 percent of two-bedroom rental units in the region are affordable for that same household.

Those percentages decline further – to 10 percent or less – for both homeownership and rental units in more than three dozen of the region’s exclusive suburban communities, according to the report. Affordable opportunities do exist in some Gateway Cities, including Lynn, Brockton, Lawrence, Lowell, Chelsea and Revere, but many of those communities still need significant investment to improve the overall quality of life needed to entice middle-income households.

“There are pockets of opportunity, but not necessarily where middle-income folks feel like they want to live right now,” according to Reardon.

As local Baby Boomers age, more than 700,000 workers born between 1945 and 1970 will leave the Greater Boston workforce by 2030. In order for the region to maintain its current rate of employment growth – about 4 percent per year – it will need to add more than 800,000 new workers to replace those who will retire. The report finds accommodating these new workers will necessitate building at least 200,000 additional housing units in Greater Boston, including 21,000 units priced for middle-income households and 108,000 units priced for low-income households.

The bulk of that housing will have to come through multifamily development, but the vast majority of cities and towns in Massachusetts have historically restricted dense development. High development costs related to land acquisition, permitting and construction are choking new housing supply as well.

To ease those pressures on middle-income households, the report recommends policy makers at the local and state level make Gateway Cities more appealing to middle-income households; increase the amount of housing affordable in wealthier suburbs; and increase housing production affordable for households of all income levels.

“Across the country, we have a huge and growing shortage of housing,” said Stockton Williams, executive director for the ULI Terwilliger Center for Housing in Washington, D.C. “We’re not building nearly enough at any price point – except at the high end – and it really is having a trickle-down effect that is exacerbating rent growth and home price pressure that is hitting folks in the middle and lower end especially hard.”

Michelle Landers is the executive director of ULI Boston/New England.