Timothy C. Sullivan
Signs of our vibrant regional economy are everywhere: Employment in Massachusetts is at its highest level ever, new housing production was at a 10-year high in 2015, and GE’s relocation to Boston is emblematic of the strong ecosystem for doing business in the Bay State.
But the rising tide is not lifting all boats. Middle-income people are being squeezed out by unsustainable annual increases in housing costs. According to a May 2016 Wall Street Journal article, asking rents in Boston have increased 13 percent annually since 2010 and there is not a single neighborhood in Boston where the median income supports the median rent.
The Building for the Middle report from the Urban Land Institute’s Boston/New England District Council shines a light on the problem. More than one-third of middle-income households in the area are rent-burdened, paying more than 30 percent of their income for housing. Forty-two percent of lower-middle-income people, those earning between 80 and 100 percent of the area median income, are paying more than a third of their income for housing.
As a result, middle-class workers are moving away. From 1990 to 2014, the number of middle-income households (up to $90,300 for two people) shrank. During the same period, the number of high-income households grew by 33 percent and the number of low-income working households grew by 40 percent.
Michelle Landers
ULI projects that by the year 2030, the region will need 200,000 additional housing units – 21,000 middle-income, 108,000 low income and 74,000 high-income – to accommodate new workers and to prevent an increase in the number of housing-cost burdened families. The need will be driven not so much by new population growth as by a wave of retirements and generally smaller households.
As noted in the ULI study, there are more affordable apartments and homes in Gateway Cities like Lowell, Brockton, Lynn, Chelsea and Revere. These cities could draw prospective residents in greater numbers if various public investments were made.
Common sense dictates that no region, especially a thriving and competitive area like Boston, can succeed economically without housing the full spectrum of the workforce. The challenge is how to spur construction across income tiers. Historically, government programs have only subsidized lower income units. In a 2016 Boston Globe article, Northeastern University Professor Barry Bluestone said “nobody has figured out how to build housing the middle class can afford. We’ve got to come up with some new answers.”
Building For The Middle
To confront this challenge, MassHousing, in partnership with the Baker-Polito Administration, has created a new $100 million pool of funds to provide incentives for developers to build new rental housing for middle-income workers. Eligible builders can obtain deferred payment loans of approximately $100,000 per unit for apartments that will house people with incomes between 61 percent and 120 percent of area median income ($47,100 to $94,200 in Boston for a two-person household). These units will be reserved for middle-income renters for 30 years. These resources are in addition to an almost 20 percent increase for traditional affordable housing announced in May as part of the commonwealth’s five-year capital budget.
MassHousing, which has served as the commonwealth’s affordable housing bank for 50 years, will continue to finance low income units and the new middle income program is a supplement to those efforts, not a replacement.
The first development to receive funds from the program is a model for others going forward. The 71-unit Gateway Residences on Washington Street in Lynn is in construction and when completed will have 53 low-income units, 10 middle-income units and eight market-rate units, as well as retail space, a community room, a fitness center and solar panels. The apartments are near mass transit and short walk from the water. Monthly rent for a two-bedroom workforce unit will be $1,545, approximately 74 percent lower than the $2,688 that a new two-bedroom unit would rent for in Jamaica Plain, for example.
Developer interest in the program is growing. To date, MassHousing has closed loans for or committed to lend more than $31 million in workforce housing subsidies for 15 rental housing communities with 1,550 total apartments and 441 moderate-income housing units.
Despite a sizeable investment of $100 million, this program is only one part of the solution. The commonwealth must still grapple with other barriers to housing development. But this workforce housing initiative is a good start in an effort to keep a critical balance in the makeup of our workforce.
Timothy C. Sullivan is executive director of MassHousing. Michelle Landers is executive director of Urban Land Institute Boston/New England.
