Reality check: Housing and municipal budgets
Undoubtedly, cities and towns across Massachusetts face profound budget pressures and in some cases increased demands for services from residents who, in many cases, are already highly burdened by property tax costs and are facing substantial financial pressure in their own right.
But the common assumption that new housing development is always a net fiscal loser for cities and towns is not borne out in the actual experiences of communities that have agreed (or have been forced) to develop much needed new affordable and market-rate housing.
This seems very counter-intuitive. After all, new housing means new residents and those new residents need services and services cost money. In an environment where per pupil expenditures in some suburban communities are well in excess of the average property tax payment, how could it be otherwise?
The answer is that the cost of providing services to each additional resident doesn’t automatically add the per capita cost of these services to the community’s bottom-line but rather the marginal cost of providing these services.
In other words, adding new students to the school system only costs more money if you need to expand the capacity of your schools to serve those students. If you have extra seats in your classrooms and on your school buses, the marginal costs to the community of serving additional students are significantly less than the per capita costs and in many cases these costs are negligible.
According to a 2007 UMass Donahue Institute study, between 1999 and 2004, school enrollment in Massachusetts grew an anemic 0.2 percent while spending on schools rose over 28 percent. Clearly, enrollment is not the primary driver of school spending in Massachusetts. Rising health care and labor costs are a much bigger reason why expenses are rising even in communities with declining numbers of students. It is patently unfair to place the blame for these expenditure increases on new residents and their children.
Now to be sure, there are communities where adding additional housing, residents and school age children requires additional capacity to meet the service needs of the new members of the community. In these cases the state must be ready to step forward and help “make these communities whole” if it is to expect them to take on these new developments.
The relevant provisions of Chapters 40R and 40s (when properly funded) were designed in part for this purpose but, as currently written, they essentially accept the false premise that development is always a fiscal loser for cities and towns and that communities must be “paid off” in order to accept new developments.
A more effective policy would guarantee payments to any community that developed housing that served to meet a regional or statewide need and could be demonstrated to be a net fiscal cost to the community. This would ensure that the Commonwealth was not paying communities to develop housing that would have been developed anyway and would make a real difference for communities that were truly fiscally burdened by housing development.
It is high time that we recognize that the “fiscal impact” argument against housing development in Massachusetts is far too often a “red herring” that serves to distract us from a more thoughtful discussion of how we can manage development and growth in the Commonwealth in a manner that fairly balances local, regional and statewide needs.
We can do better.
(Michael D. Goodman, Ph.D, is an Associate Professor and Chair in the Department of Public Policy at the University of Massachusetts Dartmouth).