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Mar 142012

Abt analyzes costs, benefits of housing, job growth
by Clark Ziegler

MAR. 14, 2012 --- As part of its Foundation for Growth initiative, MHP engaged Abt Associates to evaluate the benefits and costs of increasing job growth in Massachusetts and of allowing sufficient housing production to support that growth. The higher growth scenario, which would represent a modest increase above our pre-recession employment growth rate, was outlined in a previous analysis for MHP by the Donahue Institute at the University of Massachusetts.

Baseline job growth projections are a moving target because of the sluggish national recovery, so the value of the Abt analysis is not predicting what specific outcomes are achievable by the year 2020 but rather understanding whether stronger job and housing growth would be preferable to our slow historical growth rate in Massachusetts.

Several conclusions emerge from the Abt analysis:

  • The net benefits of growth are strongly positive and are likely underestimated because the recurring economic benefits from higher permanent employment would continue well beyond the ten-year period that was analyzed,
  • Higher growth does not diminish the value of existing homes, and while it slows the rate of housing price appreciation relative to the baseline it actually helps stabilize home values over time.
  • Balancing rental supply and demand would substantially reduce monthly rents, with annual rent reductions relative to baseline totaling more than $1.3 billion by the year 2020. In metro Boston, for example, a competitive rental market would reduce apartment rents by an average $161/month by 2020.
  • New state and local tax revenue from higher job growth appears to significantly exceed increases in the cost of public services. While many state-level impacts are simply income transfers (e.g., using tax revenues from some residents to pay Medicaid costs for others), more analysis is needed of other state-level impacts resulting from higher growth such as increased public transportation costs.
  • Most of the increases in costs from higher growth are local while new revenue attributable to higher growth flows mostly to state government. A new state-local fiscal partnership is needed to share increased revenues with the communities that facilitate growth and that are most impacted by it.
  • Without a change in school funding higher growth would create significant inequities because of the way we fund public education in Massachusetts. With the greatest state economic growth potential concentrated in metro Boston, stronger job growth would impose school cost increases on some communities that are not adequately covered by higher local revenues and by state Chapter 70 education aid.

MHP welcomes comments and questions on the Abt report and suggestions for additional policy analysis relating to the benefits and costs of increasing housing and job growth in Massachusetts.

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