The Greater Boston Housing Report Card 20052006

1
The Greater Boston Housing Report Card 2005/2006
Bonnie Heudorfer Barry Bluestone Center for
Urban and Regional Policy Northeastern University
(CURP) The Boston Foundation Citizens Housing
and Planning Association September 2006
2
Assessing Housing Progress

• 4th Annual Report Card on the state of housing
  in Greater
• Boston
• Response to September 2000 New Paradigm for
  Housing in
• Greater Boston study that called meeting the
  regions housing
• needs (approximately 18,000 units/year)
• a moral imperative for all those who
  need decent housing
• at affordable prices and
• an economic necessity in order to sustain
  Bostons
• renaissance economy

3
What Did We Mean by This?

• Moral Imperative . . .
• Without an adequate supply of affordable housing,
  residents would have to pay a disproportionate
  share of their income for housing at the expense
  of other basic necessities. Today, more than
  half of all renters and nearly 40 of homeowners
  are cost burdened, including 15 of homeowners
  and 21 of renters pay over half their income for
  housing.
• Economic necessity . . .
• Without an adequate supply of affordable housing
  accessible to employment centers Greater
  Boston would lose skilled and talented workers,
  undermining its ability to compete. Today, we
  have lost both jobs and population especially
  in the critical 25-34 year old age group and
  our economy is growing more slowly than that of
  the nation.

4
Highlights from 2004 Housing Report

• Housing production up but still below what was
  required to bring supply into line with demand
  less progress on moderately priced family housing
  -- workforce housing
• Affordable production up largely result of 40B.
  Without additional subsidies, such units do not
  serve the very poor..and to build them,
  developers depend on strong and rising market for
  success
• Rents stabilized but Boston remained one of
  nations most expensive rental markets. While
  the number of renter households dropped by 34,000
  since 2000, the number paying gt 50 of income for
  rent increased by 19,000
• Home prices continued to rise although at a
  slower rate. Median single family home price
  rose to 376,000, among the nations very
  highest. Only 27 of the regions 161 communities
  deemed affordable, down from 148 five years
  earlier

5
More Highlights of 2004 Report

• Greater Boston continues to have the highest cost
  of living of any metro area in the United States,
  requiring a family of four to pay 64,656 for the
  costs of housing, transportation, day care,
  health care, and other basic necessities
• More than 3,000 higher than in Washington, D.C
  6,000 higher than in New York City and 7.000
  more than in San Francisco
• Monthly housing costs 40 higher than in Austin,
  Chicago, and Miami and 63 higher than in
  Raleigh-Durham-Chapel Hill

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The Greater Boston Housing Report Card 2005/2006

• This years report card evaluates the regions
  2005 (and early 2006) performance, including
• Economic and demographic changes
• Home prices, rents, and housing affordability
• New housing production
• Affordable housing production
• Public spending and support for housing
• Performance against goal

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First Report Card Since Market Softened
SourceMassachusetts Association of Realtors
Quarterly Reports
8
Economic Update

• MA economy improved but grew more slowly
  than the nation as a whole in 2005 (2.7 v 3.5
  for US)
• Income growth has lagged. In real dollars,
  Boston households saw incomes rise by less than
  1 between 2000-2004
• Employment growing, but at slow pace

9
2005/2006 Employment Growth Sluggish

• Boston metro area added just 9,100 new jobs
  during 2005. Job growth has been better in 2006
  (13,700 new jobs in the first 5 months), but
  employment in the region is still down by more
  than 111,000 from pre-recession peak
• Massachusetts remains one of only 13 states not
  back to their pre-recession peaks, joining
  Louisiana, Mississippi, and Michigan as the
  states with furthest to go
• As was true in 1990-1992, Bostons 2001-2003
  recession was deeper and more prolonged than the
  nations. Since the region emerged from
  recession, job growth has trailed the nation

10
Employment Growth, Boston v U.S.
11
Demographic Update

• In 2005, for second straight year, net domestic
  out-migration exceeded 60,000
• Foreign immigration has slowed and no longer
  offsets the domestic out-migration
• Massachusetts was only state to have lost
  population in each of past 2 years
• Slowest growing state since 2000 other than West
  Virginia and North Dakota

12
Massachusetts Population Shift 2000-2005
13
Population Loss is Greatest Among Young

• Prime working age cohorts experienced the
  largest
• net losses
• Between 2002 and 2004, the 20-24 year old
  cohort in the
• Boston PMSA declined by 2.3 while
  nationally it grew by
• 3.9
• The number of 25-34 year olds declined by
  4.8 during the
• same period in the Boston PMSA, but it
  dipped by
• less than 1/10 of 1 nationally
• Putting MA at a competitive
  disadvantage with other states
• Mass N.Carolina
• Change in 25-34 year-olds 2000-2004 -4.8
  2.3

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Regional Growth Highly Variable

• PRIMARY GROWTH AREAS, ESPECIALLY FOR FAMILIES
• Worcester County
• Southern New Hampshire
• of Families with Children
• Under 18 Rose by 6
• Between 2001-2004
• Outside PMSA, only 1.5
• Inside

• GROWING AREAS WITHIN
• GREATER BOSTON
• Plymouth County and Route
• 495 corridor
• Middleton, Raynham,Peabody,
• Abington, Lakeville, Hingham

15
High Housing Prices Slow Employment Growth
(2000-2004)

• Across 245 U.S. Metro Areas, employment growth
  was slowest in the decile with the highest
  housing costs (Top 10) and generally those where
  the economy was weakest
• While the top decile experienced only a 0.95
  increase in employment between 2000 and 2004,
  Greater Boston experienced a 4.9 loss.
• Other high cost, low job growth regions included
  San Francisco, San Jose, and Nassau-Suffolk, New
  York

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Impact of Housing Cost on Employment
17
2.91
2.29
0.95
1.53
1.49
0.86
0.68
0.12
-0.68
-0.62
Low Price
High Price
Universe 245 U.S. Metro Areas
Economic Policy Institute, Family Budget
Calculator, 2005 U.S. Bureau of Labor Statistics
18
Boston MSA (-4.9)

Universe 245 U.S. Metro Areas
Economic Policy Institute, Family Budget
Calculator, 2005 U.S. Bureau of Labor Statistics
19
High Housing Costs lead to Population
Out-Migration

• Housing Costs have an even more powerful impact
  on migration patterns.
• Of 304 Metro Areas, those in the top decile of
  housing costs experienced an average 2.1 loss in
  population between 2000 and 2004 a loss much
  greater than any other decile
• Bostons population loss was more than twice as
  large 5.1 percent loss

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Impact of Housing Costs on Internal Migration
(2000-2004)
21
Boston ( 5.1)
Universe 304 U.S. Metro Areas
Economic Policy Institute, Family Budget
Calculator, 2005 U.S. Bureau of the Census
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A Housing Bubble?

• The surge in housing prices in many parts of the
  country has led to concern about irrational
  exuberance in the housing market and fears of a
  housing bubble
• In most cases where major price declines occur,
  the drop is triggered by combination of
  overbuilding, job loss, and population outflow.
  Greater Boston has not experienced over-building,
  its vacancy rates remain low, employment is
  growing, and population loss while troubling
  has been modest
• As a result, an economic downturn or rising
  interest rates will likely lead to a slowdown in
  housing price appreciation, or a modest drop in
  prices, but a sharp across-the-board correction
  in home prices is unlikely

23
New Housing Production Some Good News

• Building permit issuance increased by 18 in 2005
  to 15,945 after increasing by 12 in 2004 and 27
  in 2003. Permitting through June 2006 was about
  1 above last year
• Multi-family permitting rose 38 in 2005 and
  another 5 through June 2006. Most of the
  multifamily production is rental, which is at its
  highest level since the 1970s
• Single family permitting rose only 4 in 2005,
  and is down by 9 through June 2006 to its lowest
  level in 5 years

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(No Transcript)
25
Housing Units Permitted in Boston PMSA
Source U.S. Census pre-1980 compiled by BRA
Research Department
26
New Student Housing
Source Units counted in year permitted,
reported by colleges and universities
27
New Affordable Housing Production
28
Rents, Home Prices and Vacancies

• Rents and home prices rose in tandem from
  1998-2001, then diverged as rents moderated but
  home prices continued to escalate. By year end
  2005, the situation had reversed. Now the rental
  market is tightening and the home buying market
  is softening

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Historic Rent Levels
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Changes in Rent by Property Class
Since February 2005, rents have begun to rise
again especially for moderate and lower priced
units
Source Northeast Apartment Advisors
31
Change in Rents by Class of Property
Source Northeast Apartment Advisors, Inc. Boston
Metro Apartment Market Research Report
32
Affordability Problem Persists for Renters

• More than 50 of all renter households were
  cost
• burdened in 2004, and 1 in 5 spent more than
  half their
• income on housing
• Renters face a twofold problem lower incomes
  and a
• declining supply of privately owned low rent
  apartments
• With 34,000 fewer renter households in the
  Boston
• PMSA than in 2000, 19,000 more faced cost
  burdens
• Despite the stabilizing of area rents over
  past 4
• years, rent levels remain high throughout
  most of the
• regionand they are once again rising

Source Northeast Apartment Advisors
33
Greater Boston Median Selling PriceSingle Family
Homes 2001-2006

Source Warren Group Publications
34
Greater Boston Median Single Family Home Price
1987-2005
Source Warren Group Publications
35
Greater Boston Median Single Family Home Price,
1987-2005
Source Warren Group Publications
36
Greater Bostons Housing Roller Coaster
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Massachusetts Cooling Housing Market
Source Massachusetts Association of Realtors
Monthly Reports
38
Massachusetts Homebuyers vs. U.S.
Source2005 Profile of Homebuyers and Sellers,
National and MA Assns. Of Realtors
39
of Communities with Median Single Family Home
Price
Source Warren Group Publications
40
of Communities with Median Single Family Home
Price
Source Warren Group Publications
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Owner Occupied Affordability

• By 2005, households earning the median income of
  their community could afford its median priced
  single family home in only 19 of the regions 161
  cities and towns, down from 77 in 2002 and 148 in
  1998
• And in no community could first time homebuyers
  earning only 80 of the municipalitys median
  income afford a home that sold for 80 of the
  median priced house down from 17 in 2002 and
  116 in 1998

42
Rising Delinquencies on Sub-Prime Mortgages
SourceMortgage Bankers Association of America
43
Affordable Housing Production by Type of Public
Support
44
40B Continues to Drive Affordable Production
Source CURP analysis of 40B pipeline
45
But New 40B Requests Have Slowed
46
Historical Construction Costs
Source R.S. Means Historical Cost Index
47
Subsidies Essential for Very Low Income
48
Public Spending on Housing

• State spending for housing dropped to 188
  million in FY 2004, its lowest level in nearly a
  decade. Year-over-year increases of 7, 10,
  and 8 since then have brought it back to 240
  million (FY 2007), its highest level since 1991.
  But in inflation-adjusted values, this remains
  42 less than in 1991 and 64 less than in 1989.
  
• Increases only begin to restore funding to
  programs that had been cut in recent years.
  State budget supports relatively little new
  development and only minimum necessary operating
  costs for existing housing.
• Federal support increased annually between FY
  1994 and FY 2004 before dropping back slightly in
  FY 2005. Vast majority of federal funds are
  earmarked for rent subsidies, home heating
  assistance and weatherization programs, not
  production.

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State and Federal Funding


50
Housing Production v New Paradigm Targets
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Summary

• Greater Boston now has the highest living costs
  of any metro area in the United States . led by
  high housing costs (as well as by high medical
  and day care costs)
• Not surprising, Greater Boston and Massachusetts
  are losing population, especially young working
  families, to other regions of the country and
  failing to attract large numbers of new jobs
• While housing production has increased over the
  past 3 years, and is now at 91 of the target
  established six years ago, almost none is priced
  at levels that young working families can afford
• We still need to encourage more housing
  production as a moral imperative and an
  economic necessity

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Summary Continued

• We are not yet out of the woods
• The process remains broken
• But we have made headway
• We are getting more production out of 40B
• Developers are contributing with increased
  multifamily production
• 40R and 40S are promising new tools that can help
  increase the supply of workforce housing, and at
  the same time protect the environment

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Report of the Commonwealth Housing Task Force

Update on Chapters 40R and 40S