Affordable Housing Institute : US

As if it were a surprise, the Boston Globe reports on a remarkably predictable fact:

 

Massachusetts has created new housing more slowly than almost any other state in the nation over the past four years, a key factor behind the state’s soaring home prices.

 

The Census reported today that the number of housing units in the state has grown 1.9% since 2000, compared to 5.8% nationally.

 

“Set policy to specified point to choke housing.”

 

Massachusetts‘ supply is growing at one-third the national rate:

 

Only New York, Rhode Island, and Washington, D.C., added housing more slowly.

 

Losing to Boston is becoming such a habit ….

 

As a further un-surprise,

 

 

… lack of new supply is pushing up prices for existing homes:

 

This pace of housing production, analysts said, has been far too slow to keep up with demand fueled by low mortgage rates, resulting in the rapid price appreciation that has made Massachusetts‘ housing among the nation’s costliest.  Between 2003 and 2004, for example, the state’s housing units increased by just a half%; prices jumped 11%, according to the federal government.

 

Why is supply constrained?  Not, as you might expect, for lack of land, but for lack of building permission:

 

Mark Leff, senior vice president of the Home Builders Association of Massachusetts, said Romney has barely begun to address the key impediment to housing production: myriad local regulations restricting building.

 

 

Under the Chapter 21E environmental review process ….

 

Home builders recommend building homes?  Stop the presses! J

 

”We have some 2,000 land-use and regulatory agencies that control development, and they can act arbitrarily,” Leff said.  ”If the governor is serious about addressing the housing problem, he has to address this arbitrary power.”

 

 

Extricating ourselves from this pretzel hold by cutting down regulatory hurdles will do two things: (1) lower the per-home cost of new supply, and (2) increase total homes in circulation, thus moderating the scarcity premium now acting on Massachusetts home prices. 

 

Aaron Gornstein, executive director of Citizens Housing and Planning Association, an affordable housing advocacy group, said it’s unlikely increased production alone can provide housing within reach of young families and first-time home buyers.  

 

”We need more than just a pure supply strategy,” said Gornstein. ”Without a subsidy, there’s a huge gap, and we’re going to get homes that are still $400,000 and $500,000.”

 

True enough, and likewise true is this:

 

Ultimately, he said, the federal and state governments need to subsidize housing development to bring costs down, but Romney has sliced state affordable housing funds.

 

This never happened when I was at Bain …. 

 

Indeed, increasing supply is one plank — so it making sure that some of that supply is sustainable affordable housing delivered via public-private partnerships. 

 

In response, the Commonwealth’s spokesman shows a flair for the deflective non sequitur:

 

Phil Hailer, spokesman for the Office of Commonwealth Development, said … subsidies are not the answer, noting the state has spent hundreds of millions of dollars on housing subsidies over the years, but still ended up with spiking prices.

 

And if you had not spent those funds, sir?  Would prices now be lower than they are? 

 

Massachusetts’ housing costs are considered a major impediment to the state’s economic growth, making it increasingly difficult for businesses to attract and keep the talent they need. In the Boston area, home prices have been appreciating at double-digit annual rates since the late 1990s, pushing the median home price to $398,000 in the first quarter of this year, according to the National Association of Realtors.

 

The state’s constrained supply is the major culprit, economists said, helping to drive prices higher even as the state suffered one of its worst recessions.  In contrast, Denver, which was also hard hit when the technology bubble burst, has seen housing price appreciation moderate to low single-digit rates.

 

The difference: Denver County’s housing stock grew nearly 6% between 2000 and 2004, while Suffolk County’s grew by less than 1%, according to the Census.

 

 

There is only one silver lining, but it applies only to the owns, not the own-nots:

 

”Although double-digit appreciation can’t be sustained,” said Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard, ”the supply-demand environment would suggest that it’s very unlikely to assume there would be a widespread correction.”

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