The Costs and Hidden Benefits of New Housing Development in Massachusetts

1. The Costs and Hidden Benefits of New Housing Development in Massachusetts Michael D. Goodman, Ph.D. Executive Director, the Public Policy CenterAssociate Professor of Public Policy Co-Editor, MassBenchmarks June 2, 2016

2. Massachusetts has a major housing affordability problem Source: Citizens’ Housing and Planning Association

3. Inadequate housing production is a big part of the problem… Source: Federal Reserve Bank of St. Louis

4. …so are increasingly imbalanced development patterns Source: Federal Reserve Bank of St. Louis

5. The Challenges to New Housing Development in Massachusetts: • Archaic land use and zoning regulations • Local control of land use • NIMBYism • Concerns about fiscal impacts

6. Increases in expenditures are not always proportional to increases in enrollment: If a district is defined as having capacity when it can add more students without hiring additional teachers or increasing class size above the state average, we find that: • On average, a 1% increase in enrollment in a school district without capacity is associated with a 0.91% increase in expenditures. • On average, a 1% increase in enrollment in a school district with capacity is associated with a 0.65% increase in expenditures Source: Goodman, Korejwa, and Wright (2016), “The Costs and Hidden Benefits of New Housing Development in Massachusetts”. The Public Policy Center at UMassD

7. What about when new developments present a net fiscal burden for cities and towns? Presently, the Commonwealth’s local aid funding formula is not growth neutral. Also, while the costs of new housing development are disproportionately borne by municipalities, a significant share of the benefits accrue to the state. Chapters 40R and 40S have helped in some communities but, areclearly not moving the needle significantly and are therefore are clearly inadequate in their present form to close the production gap.

8. A careful look at six mixed-income developments reveals that net losses, when they occur, are usually modest Development Impacts * Assumes only 25 percent of new residents are "net new" Massachusetts residents and taxpayers Highlights: • Only 3 of the 6 developments experienced any negative local fiscal impact. • The net fiscal impact of the 6 developments is an additional $206k in state and local revenue annually. • To offset the losses experienced by the three communities with negative impacts would requiring shifting just 31% of the associated state revenue. Source: Goodman, Korejwa, and Wright (2016), “The Costs and Hidden Benefits of New Housing Development in Massachusetts”. The Public Policy Center at UMassD

9. Potential Policy Fix: • Our findings suggest that a state policy dedicating a portion of the net new state tax revenue generated by local mixed-income housing developments to communities experiencing a consequent net negative fiscal burden could be a sustainable source of financial relief. • As a result, this could alleviate some of hesitancy to permit new housing developments which help to meet pressing regional or state needs. Source: Goodman, Korejwa, and Wright (2016), “The Costs and Hidden Benefits of New Housing Development in Massachusetts”. The Public Policy Center at UMassD

10. For more information: The Public Policy Center at UMass Dartmouth: umassd.edu/ppc MassBenchmarks, the Journal of the MA Economy: massbenchmarks.org Twitter: @Mike_Goodman @PublicPolicyCtr