Inflexible zoning and uncertainty about availability of state incentives are two factors that depressed housing production in Massachusetts Gateway Cities in the past decade. Pictured is construction of the 28-unit Millex apartment complex in downtown Lawrence, which opened in November. Photo by Steve Adams | Banker & Tradesman Staff

Suburbs are getting the lion’s share of the blame for Massachusetts’ colossal failure to produce housing. While their overtly exclusionary practices certainly merit a stronger response, myopically focusing on restrictive suburban zoning distracts from an equally pressing problem – the lack of residential investment in Gateway Cities. 

The commonwealth’s regional urban centers desperately want to contribute more housing, but the cost and complexity of urban infill and adaptive reuse projects makes residential development in Gateway Cities exceedingly difficult to finance. Both the Patrick and the Baker administrations deserve recognition for diligent campaigns to draw investment to Gateway Cities, however it is also critical to acknowledge that their efforts failed to stimulate the housing production we need from these communities. 

The state’s 26 Gateway Cities combined permitted nearly 30,000 new housing units between 2001 and 2010. This total is not much to celebrate, but it is far better than the 16,000 units that Gateway Cities permitted between 2011 and 2020. The 46 percent decline in Gateway City housing production in the 2010s as compared to the 2000s explains the entire 8 percent drop in the statewide count.  

Aversion to concentrating poverty by using affordable housing subsidies to finance projects may explain some of the decline in Gateway Cities, but this is not the driving force. While the number of Gateway City units supported with the low income-housing tax credit (LIHTC) fell 27 percent in the 2010s, as a share of new permits, LIHTC projects actually increased from 25 percent of Gateway City production in the 2000s to 34 percent in the 2010s. 

Some will argue that the downward trend is not real because the U.S. Census figures tend to undercount units in multifamily developments and adaptive reuse projects. There could be some truth here; the state Department of Revenue figures show a decline in residential investment in the 2010s, but it is not as sharp as what the census shows. 

However, any way you look at the numbers, this much is clear: Gateway Cities have an abundance of high-potential sites for dense urban infill; they are eager to produce more housing for their regions; and we have not exploited this opportunity. 

Three Tools for Promoting Growth 

With the right tools, Massachusetts can spur the development of hundreds of thousands of units that accommodate growth in a manner that is more equitable, environmentally sustainable and fiscally efficient.  

First off, we must provide developers with predictable incentives. It is foolhardy to expect them to acquire property and assume predevelopment risk without certainty that the state’s housing incentives will be available when they are ready to close. This is especially true in Gateway Cities, where the real estate market’s troughs and valleys are always deeper and longer. With so much uncertainty in the market today and many developers burned by their experience waiting for Housing Development Incentive Program (HDIP) tax credits that never come, it is more important than ever to make predictable state incentives available.   

Second, Massachusetts needs programs that maximize a site’s development potential. Gateway Cities are not always going to get the most value by drawing investment to a historic property. New construction that fills a vacant site is often more transformative than rehabbing an underutilized building. Similarly, when zoning allows six floors and developers are only able to finance a 4-story project without state incentives (because construction costs escalate with height), a smart housing production program will help a 6-story building pencil out.  

Benjamin Forman

Third, cities need a strategy to accommodate a range of housing needs and flexible programs that position them to work the entire plan. Some parcels can accommodate mixed-income projects, others 100 percent affordable and still others 100 percent market-rate. Striking the right balance is challenging for communities, especially with spiraling rents contributing to housing instability and homelessness. A state program designed to accelerate production in Gateway Cities must recognize that this complexity calls for maximum flexibility.  

Gov. Maura Healey has shown tremendous leadership by signaling out the housing crisis as her administration’s number one priority and calling for everyone to come to the table with solutions. Gateway City leaders and developers are eager to contribute. There have been numerous goals for housing production in Boston and the surrounding metro area in recent years, but never a target for Gateway Cities. Early on, the administration should establish an ambitious 2030 housing production target for our regional economic centers. Then the state must ensure that Gateway Cities have the necessary tools to hit their mark. 

Benjamin Forman is research director at MassInc. 

Three Ideas to Boost Gateway Cities’ Housing Production

by Banker & Tradesman time to read: 3 min