While the Greater Boston Housing Report Card for 2013 indicated last month that the Boston housing market is undergoing a turnaround, the city is facing a declining home inventory and a lack of mid-range housing to serve both millennial and middle class families.
As housing sales picked up in the first six months of the year, closed home sales and the median sale prices rose 8.5 and 8 percent, respectively, said Lawrence Yun, the chief economist and senior vice president of research at the National Association of Realtors, at a recent conference focused on the housing forecast for 2014 at the Federal Reserve Bank of Boston.
Additionally, inflation through 2015 is projected to be minimal. Total inflation for 2013 is expected to hover around one percent, while it may rise four to six percent by 2015, reported Yun. While the number is higher than the Fed’s preferred 2 percent rate, it is far from the double-digit rises of the 1970s.
However, the inventory of available homes is low, reported Yun. While Massachusetts – and the rest of the country – was overproducing homes during its peak prior to the recession, it has been under-producing in the years since.
In Boston, there is the potential to use state, city, and MBTA-owned land for new developments, said Barry Bluestone. the director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University. Preexisting infrastructure issues have impeded development in some suburbs, he said, but could be resolved through state funding.
Just last year, Gov. Deval Patrick announced a program that aims to create 10,000 units of multifamily housing each year through 2020.
Bluestone also reported that he is meeting with Undersecretary for the Department of Housing and Community Development Undersecretary Aaron Gornstein in hopes of a “grand collaboration” that would move Boston’s many graduate students, medical students and recent grads out of multifamily housing which could better serve the middle class.
Bluestone said he has noticed a trend of graduate students outbidding families for multifamily housing units. His proposal would lead to the construction of housing to serve one-fifth of the post-grad population over the next five years.
“My developer friends tell me they know how to build housing for millionaires. They know how to get bank loans for it, so if you want to pay $4 million dollars for a high-rise condo, they’ll do it. We also have programs for low-income families. The problem is everybody else, working families, police officers, firefighters, teachers, you name it – they don’t have money for a $4 million condo, and they don’t qualify for affordable housing,” he said.
Additionally, rising labor costs — which increase about eight percent per year, currently — and the difficulty of getting loans for small developers has stunted housing projects for middle class families.
In addition, Bluestone hopes to meet with Patrick, outbgoing Boston Mayor Thomas Menino and Mayor-elect Martin Walsh, developers, architects and others to discuss affordable units for graduate students.
“This is the time we have to get everyone on board,” he said.
