Housing & Economic Development in the Commonwealth

1. Housing & Economic Development in the Commonwealth Kirk Sykes President, Urban Strategies for America Fund Barry Bluestone Dean, School of Social Science, Urban Affairs, and Public Policy, Northeastern University Ted Carman President, Concord Square Development Corporation Progressive Business Leaders Network October 26, 2007

2. The Economic State of the Commonwealth

3. Economic Activity Index: Massachusetts vs. U.S. (1993-2007) January 1993 – October 2001 Leading the Nation October 2001 – June 2007 Lagging the Nation

4. Employment in Massachusetts Total Massachusetts Non-Farm Employment

5. Change in Total Non-Farm Employment (Seasonally Adjusted) (January 2001 - August 2007)

7. Population Trends • Between 2000 and 2006, the population of Massachusetts increased by only 74,000(1.2%) – the slowest increase in New England. • Since 2000, Massachusetts has suffered a net domestic out-migration of over 280,000 residents. • This outflow of people has been softened only somewhat by the arrival of about 186,000 foreign immigrants.

8. U.S. Bureau of the Census

9. Population Trends in New England

10. Immigration & Net Domestic Migration

11. Who’s Leaving Massachusetts?

12. Where did they go?

13. Stagnant Incomes/Rising Poverty in Greater Boston

14. Slow Growth … But Housing Costs Remain High Median Price of Single Family Homes and Condominiums 2005-2007: -6% 2000-2005: +61% 1995-2005: +156%

15. Effective Rents – Rising Again 2005 - 1Q 2007: +6% 2000 - 2005: +1% 1995 - 2005: +58%

16. (Un)Affordable Communities in Greater Boston • In 2007, only 6 communities out of 161 in Greater Boston – Bellingham, Blackstone, Bolton, Southborough, Stow, and Townsend – are affordable for a typical first-time homebuyer in 2007 • Back in 1998, affordable housing was available in 116 Greater Boston communities

17. Number of Affordable Communities Summary of Affordability Gap Analysis

18. Housing Affordability in Greater Boston

19. Housing Production in Greater Boston Needed Production: 18,000 Units/Year Single Family v. Multifamily Building Permits in Greater Boston

20. Housing Costs and Economic Development

21. Boston Family Budget – 4 Persons Among 304 U.S. Metropolitan Areas • Housing Costs: 7th Highest MSA • Child Care: 7th Highest MSA • Health Care: 7th Highest MSA • Personal Care: 6th Highest MSA • Fed/State Tax: 2nd Highest MSA • Total Cost: 1st Highest MSA Economic Policy Institute, Family Budget Calculator, 2005

22. Top Decile: Metro Area Cost of Living Boston $ 64,656 Washington (D.C. portion) $ 61,440 Nassau-Suffolk, NY $ 60,780 Stamford-Norwalk, CN $ 60,720 Lawrence (Mass. portion)$ 59,280 New York, NY $ 58,656 Barnstable-Yarmouth, MA$ 58,236 San Francisco, CA $ 57,624 Worcester (Mass. portion)$ 55,704 Springfield, MA$ 55,320 Minneapolis-St. Paul, MN $ 54,948 Nashua, NH $ 54,852 Santa Cruz-Watsonville, CA $ 53,808 Oakland, CA $ 53,412 San Jose, CA $ 52,800 Pittsfield, MA$ 52,632 Rochester, MN $ 51,288 Monmouth-Ocean, NJ $ 50,736 San Diego, CA $ 50,088 Newark, NJ $ 49,992 New Haven-Meriden, CN $ 49,848 Honolulu, HI $ 49,824 Philadelphia (Pa. portion) $ 49,716 Boulder-Longmont, CO $ 49,596 Bridgeport, CN $ 49,272 Manchester, NH $ 49,152 Santa Rosa, CA $ 48,924 Albany-Schenectady-Troy, NY $ 48,900 Hartford, CN $ 48,684 Trenton, NJ $ 48,576 Rochester, NY $ 48,540 Universe: 304 U.S. Metro Areas Economic Policy Institute: Family Budget Calculator

23. Boston Monthly Housing $1,266 Monthly Food $ 587 Monthly Child Care $1,298 Monthly Transportation $ 321 Monthly Health Care $ 592 Monthly Other Necessity $ 500 Monthly Taxes $ 824 Monthly Total $5,388 Annual Total $64,656 Raleigh-Durham-Chapel Hill Monthly Housing $ 779 Monthly Food $ 587 Monthly Child Care $ 866 Monthly Transportation $ 358 Monthly Health Care $ 368 Monthly Other Necessity $ 369 Monthly Taxes $ 350 Monthly Total $3,677 Annual Total $44,124 A Tale of Two CitiesBasic Budget2 Parents, 2 Children A Tale of Two Cities Source: Economic Policy Institute, “Family Budget Calculator, 2005”

24. 2.91% 2.29% 1.49% 1.53% 0.95% 0.86% 0.68% 0.12% -0.62% -0.68% Low Price High Price Universe: 245 U.S. Metro Areas Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics

25. 2.53% 1.98% 1.09% 1.06% 0.84% 0.93% 0.62% 0.50% -0.02% -0.21% Low Cost High Cost Universe: 245 U.S. Metro Areas Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics

26. Boston MSA (-5.2%) Universe: 304 U.S. Metro Areas Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census

27. 2.19% 1.54% 1.40% 1.04% 0.60% 0.41% 0.39% 0.16% 0.19% -2.12% Universe: 304 U.S. Metro Areas Boston Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census

28. Key Point • Housing Costs – and more generally the cost of living – is a key economic challenge in the Commonwealth … and perhaps the #1 barrier to a full economic recovery

29. Progress on the Housing Front: Chapter 40R/40S ADD SLIDES FROM TED CARMAN

30. Chapter 40R/40S • As of July 2007, 16 communities in Massachusetts towns have approved Chapter 40R “Smart Growth” districts. More than 30 others are considering such districts. • Existing 40R Districts can provide over 5,800 new units of housing • Over 3,000 more units in the pipeline

32. Amesbury Brockton Chelsea Dartmouth Grafton Haverhill Kingston Lakeville Lunenburg Lynnfield Natick North Andover North Reading Northampton Norwood Plymouth Total: 5,813 Units Chapter 40R Communities

33. Meeting New Paradigm Targets Estimated 2007 Production Percent of Target: 55%

34. Conclusions • The “Perfect Storm” – Anxious homeowners, declining production … but no improvement in affordability • The weak economy is linked to the continuing housing crisis • We still have a lot to do to get us back on track toward economic prosperity equitably shared

35. Finding Solutions

36. A Model of Social Change (Annual Greater Boston Housing Report Card) (Housing Challenge) (CHTF) (Chapter 40R/40S)

37. The Nature of the Problem • With housing – Two Americas • The Midwest, the South, the Southwest. • The East Coast and the West Coast • Therefore – the problems are not inevitable

38. The Culprits • Zoning • Multiple Academic Studies • Govt. Regulations • Shortage of Land for building • Increases land costs • Extensive permitting delays

39. Local and State Finance • Perverse Interaction • Prop. 2 ½ • Property Taxes • Chapter 70

40. Single Family Home • Sale price - $400,000 • Property taxes at .15 = $6,000 • Half for school costs = $3,000 • On average – 1 school child • Actual cost of education: $10,000

41. A New House • Local Costs: • Loss of Open Space • Increase in traffic • More public services • Education • State Benefits • Sales Tax • Income Tax • Corporate Tax

42. It’s no Surprise • Local communities do all they can to discourage the production of housing. • They are remarkably successful • The economy shows the results

43. Smart Growth Zoning • Chapters 40R and 40S • Goal: a surplus of zoned land • Incentives if: • Smart Growth Locations • 20% of units affordable • Minimum Densities

44. Incentives • Initial Payment - $1,000 per unit • Construction Payment - $3,000 / Unit • School Cost Hold Harmless • Design Standards

45. How has it worked? • Zoned land for 6,000 units • 3,000 more in the pipeline • Diverse developments and communities • 17 of 17 communities have approved • A cooperative dynamic • But, all multifamily. • Starter Homes still not being built

46. Starter Homes • Credible long term funding for school costs. • Additional incentives. • Proposal in the works.

47. Public Policy Ingredients • A good idea • Institutional Support • Significant Funding • Intense effort • Broad and deep process

48. How Did it Happen? 18 months from concept paper to legislation • The Commonwealth Housing Task Force • The Center for Urban and Regional Policy • The Boston Foundation • The Legislature and Administration

49. Conclusion • Much Success, but, more to be done. • The Process can be replicated.