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The Greater Boston Housing Report Card 2004

The Greater Boston Housing Report Card 2004. Bonnie Heudorfer Barry Bluestone Center for Urban and Regional Policy Northeastern University (CURP) The Boston Foundation Citizens’ Housing and Planning Association September 2005. Assessing Housing Progress.

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The Greater Boston Housing Report Card 2004

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  1. The Greater Boston Housing Report Card 2004 Bonnie Heudorfer Barry Bluestone Center for Urban and Regional Policy Northeastern University (CURP) The Boston Foundation Citizens’ Housing and Planning Association September 2005

  2. Assessing Housing Progress • 3rd Annual Report Card on the state of housing in Greater Boston • Response to September 2000New Paradigm for Housing in Greater Bostonstudy that called meeting the region’s housing needs • a “moral imperative” for all those who need decent housing at affordable prices … and • an “economic necessity” in order to sustain Boston’s renaissance economy

  3. Highlights from 2002 Housing Report • During the 1990s, household growth exceeded housing production by more than 40 percent, driving prices up and vacancies down • By 2000, average monthly rent on typical 900 sq. ft. apartment was $1,565. In 60% of municipalities surveyed advertised rents rose more than 30% between 1998 and 2001 • Median sales price rose 50% to $298,350 during the same period • Notwithstanding skyrocketing rents and prices, housing production declined each year between 1998 and 2002 • Only 12 of 161 communities had achieved 10% threshold for affordable housing

  4. Highlights from 2003 Housing Report • Despitesluggish economy and decline in households, median home price increased by more than 9% in 2003… to$343,000 • Overall housing production was up for first time since 1998: multi-family housing more than doubled, but permitting of single family homes dropped to its lowest level in more than a decade • Rents decreased modestly as the rental vacancy rate rose to 6% … up from 4.4% in 2002 and 2.7% in 2000 … but reductions were mostly in expensive units • By year end 16 communities had achieved 10% threshold for affordable housing

  5. The Greater Boston Housing Report Card 2004 This year’s report card evaluates the region’s 2004 performance, including: • Economic and demographic changes • Home prices, rents and housing affordability • New housing production • Affordable housing production • Public spending and support for housing • Goals for new housing

  6. Economic Update • December 2004 unemployment rate stood at 3.8%, down from 4.5% a year earlier … but, due in large part to105,000 workers having left the region’s labor forceover the past 2½ years • By year end 2004, employment in Greater Boston was still down by more than160,000from its pre-recession peak • Realmedian household income dropped by 2.7% in 2003to $58,971 and only partially recovered in 2004, rising by 2.3% • By early 2005, there were some signs of renewed economic activity in Massachusetts

  7. Massachusetts Economic Activity Index Source: U.S. Census

  8. Demographic Update • While foreign immigration in Massachusetts remained at roughly 31,000 per year between 2000 to 2004, domestic out-migrationincreased from 14,000 in 2000-2001 to 59,000 in 2003-2004 … making Massachusetts the only state to lose population in 2004. • The young prime working age cohorts experienced the largest net losses -- • Between 2001 and 2003, the 20-24 year old cohort declined by 11.5% while the number of 25-34 year olds fell by 7.2% • Nationally, the 20-24 year old cohort grew by 5.6% while the 25-34 cohort grew by 0.7%

  9. Massachusetts Net Migration 2000-2004 Foreign Domestic Source: U.S. Census

  10. Population Change in Boston PMSA Source: U.S. Census

  11. Cost of Living Update • According to a new measure of living costs, Greater Boston has the highest cost of living of any metro area in the United States • A family of four needs $64,656 to pay for the costs of housing, transportation, day care, health care, and other basic necessities • This is more than $3,000 higher than in Washington, D.C; $6,000 higher than in New York City; and $7,000 more than in San Francisco • Monthly housing costs are 40% higher than in Austin, Chicago, and Miami and 63% higher than in Raleigh-Durham-Chapel Hill

  12. Total Annual Budget for Family of Four Source: Economic Policy Institute

  13. Rental Vacancy Rates • In 2000, the rental vacancy rate was less than 3 percent, half the rate considered normal • By 2002 – with 21,000 fewer renter households and several thousand new units coming on line – the rental vacancy rate had risen to 4.4%; by year end 2003, it had reached 6% • In 2004, the rental vacancy rate remained at 6%

  14. Rental Vacancy Rates US v Boston PMSA Source: U.S. Census

  15. Homeowner Vacancy Rates • An increase in owner occupied households and continued low mortgage interest rates kept home sales up in 2004 • As a result of strong sales, homeowner vacancy rates fell to 0.5% in 2004 from 0.6% the previous year– well below a normal 1.5 - 2% level • This is about 1/3 the national rate

  16. Homeowner Vacancy Rates US v Boston PMSA Source: U.S. Census

  17. A Housing Bubble? • The surge in housing prices in many parts of the country, has led to concern about “irrational exuberance” in the housing market and fears of a housing bubble • But in Greater Boston, unlike many regions, production levels have remained modest and vacancy rates abnormally low • As a result, an economic downturn or rising interest rates will likely lead to a slowdown in housing price appreciation, but a sharp across-the-board correction in home prices is unlikely

  18. New Housing Production – Some Good News • Building permit issuance increased by 12% in 2004 to 13,556 after increasing by 22% in 2003 • For the first time since 1998, permits for single family units increased to 7,000 up from 6,020 in 2003 • But, total permits remain well below the peak years of the 1970s and 1980s when more than 20,000 units/year were permitted • And single family permits are still well below the number issued annually between 1998 and 2000

  19. Housing Units Permitted in Boston PMSA Source: U.S. Census; pre-1980 compiled by BRA Research Department

  20. New Student Housing Source: Units counted in year permitted, reported by colleges and universities

  21. New Affordable Housing Production

  22. 40B Comprehensive Permit Production Source: CURP analysis of 40B pipeline

  23. Chapter 40B Housing Pipeline • At the end of 2004 there were more than 200 housing developments in the 40B pipeline in Greater Boston • 18,000 units in process at local level, Housing Appeals Committee or in the courts • 9,000 units had applied to MassHousing for determination of site eligibility or were preparing to apply • Historically, only about 60% of planned housing gets developed … and it can take many years to navigate the permitting process

  24. Historical Construction Costs Source: R.S. Means Historical Cost Index

  25. Impact of Rising Construction Costs Source: MassHousing, based on R.S. Means indices

  26. Rents and Prices • With a vacancy rate of 6 percent, average effective rents remained relatively stable through 2004 after declining from 2000 peaks • $1,748 for Class A Apartments (-5.1% since October 2002) • $1,187 for Class B Apartments (-3.7% since October 2002) • $ 967 for Class C Apartments (-4.0% since October 2002) • From May 2004 to February 2005, rents have remained largely unchanged

  27. Changes in Rent by Property Class Source: Northeast Apartment Advisors

  28. Affordability of Rental Housing • Housing is considered “affordable” when a household must pay no more than 30% of its annual income for rent or 33% for principal, interest, taxes and insurance • In 2004, median advertised rents in 16 of 20 Boston area communities and in every Boston neighborhood exceeded 30% of the median renter income for that city or town, unchanged from 2003 and only a slight improvement over 2002 when advertised rents were unaffordable in 18 communities

  29. Affordability Remains a Problem • Nearly 50% of all renter households were cost • burdened in 2003 – up from 43.3% in 2002 • The number of severely cost burdened renter • households (those paying over 50% of income for • rent) swelled to nearly 25% -- from 21.5% in 2002 • Despite softening in area rents over past 2 years, rent levels remain high throughout most of the region • Even with 34,000 fewer renter households in the Boston PMSA than in 2000, 19,000 more faced cost burdens

  30. Median Single Family Home Price 2001-2004 Source: Warren Group Publications

  31. Median Single Family Home Price 1987-2004 Source: Warren Group Publications

  32. # of Communities with Median Single Family Home Price Source: Warren Group Publications

  33. % of Communities with Median Single Family Home Price Source: Warren Group Publications

  34. Owner Occupied Affordability • By 2004, households earning the median income in their community could afford the median priced single family home in only 27 of the region’s 161 cities and towns, down from 77 in 2002 and 148 in 1998 • And in only 1 town could first time homebuyers earning only 80% of the municipality’s median income afford a home that sold for 80% of the median priced house … down from 17 in 2002 and 116 in 1998

  35. Public Spending on Housing • After having been cut 5% in FY 2004 to its lowest level since 1995, state fundingincreased by 7% in FY 2005 and is up another 7% for FY 2006. Still, at $215 million, it is 10% below what it was in 2002 • While state spending rose, the federal contributiondropped by nearly 4% so combined state and federal funding in FY 2005 declined slightly for the first time since 1992 • Moreover, nearly all federal money and a large share of state funds go for rent subsidies or the maintenance of existing housing. Only about $18 million out of the nearly $400 million federal contribution is available for new production

  36. Total State Funding for Housing 1989-2005 Source: DHCD

  37. Total DHCD Spending (State and Federal Funds) Source: DHCD

  38. Housing Production in Boston PMSA v. Housing Goals in the New Paradigm Report

  39. Conclusion • Greater Boston now has the highest living costs of any metro area in the United States …. led by high housing costs (as well as by high medical and day care costs) • Not surprising, Greater Boston and Massachusetts are losing population, especially young working families, to other regions of the country • While housing production has increased over the past 3 years, 2004 production was still at only 72 percent of the level needed to slow housing price appreciation to normal levels • We still need to encourage more housing production as a “moral imperative” and an “economic necessity”

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