JOSEPH KRIESBERG
‘Daunting challenge’

The results of a national study entitled “Paycheck to Paycheck: Wages and the Cost of Housing in America” released last week by the Center for Housing Policy has depicted another layer to the deepening rift between area housing and affordability. The study contrasts the salaries for more than 60 occupations and median home prices for nearly 200 metropolitan regions.

Nationally the study found that between the fourth quarter of 2003 and the first quarter of 2005 the median home price increased from $186,000 to $225,000, a jump of 20 percent. Between those same dates the annual income needed to qualify to purchase a median-priced home grew from $54,855 to $71,354. However, the wages for community workers such as elementary school teachers, licensed practical nurses, retail salespersons, janitors and police officers remained flat.

The study found that in many cities the salaries earned by such professionals are significantly below the amount needed to purchase a typical home. One such area is Boston.

According to the “Paycheck to Paycheck” findings, the average annual salaries for five selected professionals in Greater Boston are: elementary school teacher, $50,033; police officer, $48,419; nurse (LPN), $40,330; retail salesperson, $26,041; and janitor, $21,120.

The 2005 median price of a home in the area was $355,000, according to the National Association of Home Builders’ Housing Opportunity Index, on which the study based its findings.

The study also calculated the annual income needed to afford a median-priced home in the Greater Boston area at $112,581, well above the salaries of the working professionals mentioned.

To those in the area, which has long been notoriously known for its high-priced home market, the numbers may not come as much of a shock.

“The results are not surprising. Anyone who lives or works in Boston has been aware of this problem for a long time,” said Joe Kriesberg, president of the Massachusetts Association of Community Development Corps., although he noted that the study did tackle the issue with a different perspective.

“What the report does do is put the problem in stark relief because the gap between what hardworking professionals can make and what they need to make in order to buy a home is so great Â… it really portrays this as the daunting challenge that it is.”

The lack of affordable housing in and around Boston has been a concern of those living and working in the state for some time now. Years of unprecedented price appreciation combined with limited housing stock within the city have led to skyrocketing price tags, many of which cannot be met by the average buyer.

“This is something we’ve been aware of for quite some time. It’s a definite issue,” said Maggie Tomkiewicz, 2005 president of the Massachusetts Association of Realtors.

‘Comprehensive Approach’

According to many the best solution to the problem is to build more houses; by increasing supply to meet demand, prices would predictably fall, therefore offering more people access to homeownership. However, barriers to housing production locally are formidable, with land scarce and communities often resistant because of fears that school and public services costs will rise.

“We feel that the contributing factor to this issue is that there’s just not enough housing stock, so that’s where our focus has been,” said Tomkiewicz, who noted that MAR is by no means the only group to recognize and try to combat the problem. “[Gov. Mitt Romney] has talked about this, too, and wants to increase the housing stock by 50 percent, although they haven’t quite achieved that. The amount of new construction has gone up, but just not enough.”

In this case, however, more may not in fact be better.

“Obviously one solution is to produce more housing, but too often that’s represented as a panacea, that supply and demand would magically stabilize and everything will be fine. But according to this study, if you want to afford a home you need $112,000 [in salary]. You’d have to build a huge amount of homes in order to counteract that and prices would have to be cut drastically.” said Kriesberg. “And God forbid that would happen, because then all of us who do own homes would be in deep financial trouble. Even a 20 percent reduction in pricing would devastate families. The notion that we should try to drive prices down has a number of implications.”

It may not be an issue of simply building homes, but rather building the right type of residences.

“We’ve got to get back on track with the housing stock. We’ve increased permits over the last few years, but I’m not convinced it’s been the right kind of housing,” Tomkiewicz said. “We’ve increased the multi-unit housing stock, but it’s the single-family and workforce housing market that we should focus on. Because of restrictions on land, housing that’s being built doesn’t apply to those with lower incomes.”

A large part of what is currently being built on available land is larger, more expensive housing, which meets a different sort of demand.

“We’re building bigger and bigger houses because people want those. Nobody is building the three-bedroom starter home that most working families need unless it’s part of a special program. Building that kind of house is, in essence, discouraged,” Kriesberg said.

If it’s not officially discouraged, the economics of building in the current market work to provide financial disincentives for constructing smaller, starter homes.

“Restrictive zoning makes the land more expensive and therefore the housing that goes on that land has to be more expensive. In order for the builder to recover the funds they’ve expended home prices have to be up near half a million dollars,” said Tomkiewicz.

High single-family home prices also have altered one aspect of the Greater Boston housing market that “Paycheck to Paycheck” did not cover.
“Some of this has fueled the condo market in terms of entry-level housing. It [condominiums] gives this income bracket the opportunity for homeownership and an opportunity to build equity,” said Tomkiewicz.

Another notable aspect of the study is that the numbers given were for single incomes only; two-income households may have a better chance of affording a home.

“If you combine incomes, which most households are today, then that helps. Although, if you get into the lower incomes [cited in the study], then not even that helps Â… we recognize that,” Tomkiewicz said.

Perhaps with the issue of affordable housing, acknowledging the problem is the first step, one that area professionals in Boston have certainly done in recent years.

“I think compared to where we were five years ago in terms of having this issue on the city’s radar screen it’s night and day. It was a battle to get people to talk about housing, but at least now it’s out there,” said Kriesberg. “This study really does speak to the need for a broad comprehensive approach with a range of housing programs and options.”

Although certain steps are already in the works on statewide, citywide and local levels, providing affordable housing looks to be a long-term goal.

“It’s going to take many, many years to balance out, if ever. It goes beyond the housing market to the way wages and salaries are set in the area and the growing imbalance between the upper and lower ends of the population,” said Kriesberg.