Blog
Phoenix argument doesn't apply
Any suggestion that Massachusetts needs more housing to support the economy usually gets the same basic response: “We don’t want metro Boston to become another Phoenix, Las Vegas or Orlando, with thousands of empty foreclosed homes and no end and sight. And if you’re saying more housing means more jobs, then how come these ‘growth cities’ are in so much trouble?”
These are reactions are understandable but they completely miss the mark.
The housing boom and bust that occurred in Sunbelt states in recent years would never have happened in Massachusetts. It’s certainly not going to happen now if we adopt more reasonable land use policies that both allow and encourage new housing.
Why not?
First, no one has suggested an “anything goes” approach to zoning in Massachusetts. To the contrary, the most ambitious proposal to date – the Land Use Partnership Act – would only require participating communities to allow housing growth at a 1/2 percent annual rate, which is well below historic norms and certainly below the rate needed to sustain the economy. Affordable housing developed through Chapter 40B, which bypasses the conventional zoning process, is also limited to a growth rate of ½ percent in communities that are implementing approved housing plans. There is simply no comparison between what’s being discussed here and what happened in places like Phoenix, where the housing growth rate peaked about five times higher than in metropolitan Boston.
Second, we are a northern state with a cold winter climate. Some of our northern counterparts have built more housing and achieved stronger job growth, yet the housing produced in these healthier northern economies still paled in comparison to the Sunbelt. A recent 10-year analysis found that our strongest northern competitors, who managed to add jobs when Massachusetts did not, were still only building housing at about half the rate of major growth cities in the Sunbelt.
Third, it is unimaginable that capital markets would fuel a wave of speculative housing development in Massachusetts. The factors that allowed a boom in the Sunbelt – substantial in-migration, below-average construction costs, few market barriers to entry – simply do not exist here. Those factors were exacerbated by reckless mortgage products (gone now and hopefully gone for good) that artificially inflated home prices.
In the current environment, development at any significant scale in Massachusetts will require competent developers willing to put themselves at financial risk and willing lenders and investors who see demonstrated market demand for the housing being proposed. That constraint by itself limits the potential rate of housing growth.
That leaves us with the question of jobs. Over the long run, there is an incredibly strong correlation between jobs and housing supply. In the short run, though, this balance can get seriously out of whack. As economist Ed Moscovitch concluded in a recent report for MHP, there is not a single region in the U.S. that built housing as slowly as Massachusetts and yet still managed to add jobs between 2000 and 2006. Cities like Phoenix are the opposite side of the same coin, where the housing bubble eventually bore no relation to actual or potential job growth. At the peak of the market, Phoenix was building housing about 50 percent faster than it was adding households. The “sweet spot” is somewhere in the middle: where land use regulations promote smart growth without arbitrarily restricting new housing supply and housing developers are thus able build new housing in reasonable anticipation of job growth. That’s been a successful strategy in other places and there’s no good reason why it can’t work in Massachusetts.
Blog Comments
-
As a REALTOR, developer, and community activist, I would say that Michael Goodman's comment hits the nail on the head. In Medway, the only residential property that can be constructed as a matter of right is a single family dwelling. This makes no sense and Medway is not the only community with this restriction. Zoning reform in the Commonwealth must require that every community provide multi-family zoning districts. There are too many communities where public employees cannot afford to live in the community they work because zoning does not permit the construction of multi-family dwellings and because lot size requirements make it cost prohibitive to build small single family dwellings.
-
I wonder if part of the research agenda could explore the following questions. What would have happened to Massachusetts home prices over the past two years had we built more housing during the 2000 – 2006 period? I wonder sometimes what would have happened had we achieved our production goals. Would our foreclosure crisis be even worse? Would we have lost even more home equity? Would we be Las Vegas or Florida? And clearly something was going on during that time period that goes beyond supply/demand since we were saying for years that we need more supply to slow price gains and then all of sudden we had a price crash without any significant increase in supply. I think these are serious questions that must be examined.
As part of this it seems to me that unfettered production can be good or bad. It matters a great deal not just how much gets built but what gets built and where – as your prior research shows. We also need to look at the issue of existing housing that is substandard and what impact that has on job growth, housing supply, housing markets, etc.
Joseph Kriesberg, President
Mass. Association of Community Development Corporations -
The issue may be less about growth and more about housing affordability and tenure options that can enhance economic competitiveness. Rather than looking West and South, perhaps we should look in the mirror. Notwithstanding our land use restrictions, the Commonwealth is not (and cannot be) insulated from housing cycles. Progressive land use policies need not be housing-centric, but should relate to other issues such as job growth and transportation.
Nicolas P. Retsinas
Joint Center for Housing Studies
Harvard University
-
Clark,
I agree that the Commonwealth is in no danger of becoming anything like Phoenix (or Las Vegas or Southern California and Florida for that matter) and that there is strong evidence to suggest that job growth in Massachusetts has been constrained by an inadequate supply of housing.
The inability of the market to meet the demand for housing in Massachusetts is largely due to our archaic zoning regulations and other regulatory restrictions that serve to artificially limit housing production in those parts of the state where market demand is high.
However, I think it is important to be clear that the production of more housing is a necessary but not sufficient condition for ensuring that Massachusetts is able to create the jobs it needs and enhance economic opportunities and the prosperity of its residents and regions.
In my view, hitting the policy "sweet spot", as you so nicely put it, will require both reforming relevant regulations to allow for the greater production of housing at densities and price points that will meet the needs of our population and other strategic state investments (particularly in the areas of economic development, transportation infrastructure and K-20 education).
Part of the way to satisfy unmet demand for jobs and housing in the population centers of the state is to help to make cities and regions outside of the immediate Greater Boston region more attractive places to live, work and do business.
Mike Goodman
Associate Professor and Chair
Department of Public Policy
UMass Dartmouth