October 23, 2017
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 2
West Virginia Arkansas Mississippi Kentucky North Dakota South Dakota Alabama Oklahoma Louisiana Montana Iowa New Mexico Tennessee South Carolina Indiana Missouri Nebraska Kansas Ohio Idaho Wyoming Michigan North Carolina Maine Wisconsin Pennsylvania Texas Georgia Arizona Florida Minnesota Oregon Nevada Utah Illinois Vermont Delaware Rhode Island Colorado Washington Virginia New York Alaska New Hampshire Massachusetts Connecticut California Maryland New Jersey Hawaii Monthly Housing Costs ($) Massachusetts median monthly housing costs is the 6 th highest in the nation. The median monthly housing costs represent 23.9% of the median household income in Massachusetts, the 8 th highest percentage among states. 1600 1400 1200 1000 800 600 400 200 0 Median Monthly Housing Costs Source: U.S. Census Bureau, American Community Survey, 2011-2015 5-year estimates. Monthly housing costs include mortgages, insurance, property taxes, condo or homeowner association fees, and utilities. Statistics for all occupied units. 3
Median Monthly Housing Costs ($) Among the 25 largest metro areas in the US, Boston has the 4 th highest median monthly housing costs. For the Boston Metro Area median monthly housing costs represent 24.3% of median monthly household income. 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Median Monthly Housing Costs 25 Largest Metro Areas Source: U.S. Census Bureau, American Community Survey, 2011-2015 5-year estimates, Monthly housing costs include mortgages/rent, insurance, property taxes, condo or homeowner association fees, and utilities. 25 Largest Metropolitan Statistical Areas based on 2016 population projections. 4
Home values have recovered from the recession and are steadily increasing across Massachusetts and the Boston Metro Area. $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Zillow Average Home Value 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Boston Metro Massachusetts Source: Zillow Research, accessed on 10/5/17. Boston Metro Area as define by Zillow.com. Cities in region include Boston, Newton, Cambridge, Somerville, Quincy, Lynn, Lowell, Brockton & Lawrence 5
Homeownership Rate (%) Nationally homeownership rates have declined for 12 consecutive years. The challenge in Massachusetts has been a rapid decline in homeownership rates since 2012. 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 Homeownership Rates Annual Averages 0.0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey US Massachusetts 6
Homeownership Rate (%) Nationally homeownership rates have declined more severely in those under 45. 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 US Home Ownership by Age 1982 1985 1988 1991 1993r1 1996 1999 2002 2004 2007 2010 2013 2016 Less than 35 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey 7
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 8
Housing for which the occupants are paying no more than 30% of their income for gross housing costs, including utilities. A household that is paying over 30% of its income for gross housing costs. A household that is paying over 50% of its income for gross housing costs. The median family income for an area. For Boston, AMI ranges from $72,400 for a 1-person household to $103,400 for a 4-person household. AMI is used by HUD in determining criteria for housing assistance programs. A family whose combined income does not exceeding 80% of the median income for the area. Households in these income brackets qualify for various housing assistance programs such as public housing and Section 8 vouchers. Housing that is affordable to the middle class families that make up much of Boston s workforce. Workforce housing projects are typically aimed to be affordable at 80% to 120% of AMI. Source: Department of Housing and Urban Development, Glossary, https://www.huduser.gov/portal/glossary/glossary.html 9
In a recent survey of Massachusetts businesses conducted by The UMass Donahue Institute on behalf of MassEcon, nearly all interviewees mentioned the cost and supply of housing as a challenge for their business and a barrier to retaining talent. Our survey of City Awake Delegates found that housing and economic mobility were the two most important issues for millennials. 80% of respondents disagreed with the notion that Greater Boston is made up of affordable neighborhoods. I m not sure I want to buy a home in Greater Boston because it seems so impossible. It would be helpful to be able to save money for a down payment. -City Awake Delegate 10
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it already doing? II. Case Studies 11
Percent Cost Burdened Younger and older Bostonians are significantly more cost burdened than those ages 30 through 74. 70.0% 60.0% 50.0% 40.0% 30.0% Cost Burden by Age 2015 20.0% 10.0% 0.0% Under 25 25 to 29 30 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+ Total Boston Metro Area Source: 2015 American Housing Survey, burden for all occupied units. The AHS Boston Metro Area differs from the Boston Metropolitan Statistical Area. Cost burdened defined as spending over 30% of gross monthly income on total monthly housing costs 12
Percent Cost Burdened In the Boston Metro Area, nearly half of all renters are cost burdened, compared to only 28% of owners. 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% Cost Burden in Boston Metro Area 2015 10.0% 0.0% Under 25 25 to 29 30 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+ Total Owner Renter Source: 2015 American Housing Survey, burden for all occupied units. The AHS Boston Metro Area differs from the Boston Metropolitan Statistical Area. Cost burdened defined as spending over 30% of gross monthly income on total monthly housing costs 13
Housing costs are more than Rent or Mortgage Payments. Other factors include: Property Tax Homeowners or Renters Insurance Homeowner or Condo Association Fees Utilities Private Mortgage Insurance 14
Mortgages with less than 20% down often require Private Mortgage Insurance (PMI), typically between 0.5% and 1% or the entire loan amount on an annual basis. $400,000 Home 20% Down Payment 30-Year Fixed, 4% Interest Rate Down Payment $80,000 Principal $320,000 Interest Paid $229,982 Total Cost $629,982 Average Monthly Payment $1,528 $400,000 Home 10% Down Payment 30-Year Fixed, 4% Interest Rate Down Payment $40,000 Principal $360,000 Interest Paid $258,730 Private Mortgage Insurance* $12,600 Total Cost $671,330 Average Monthly Payment $1,754 * Assumes PMI rate of 0.5% and the elimination of PMI after 7 years. PMI is typically eliminated once the buyer accumulates 20-25% equity. Monthly payments will be higher than average when paying PMI and lower once PMI is retired. 15
Boston median monthly housing cost for homeowners is made up of a number of factors: Mortgage Payment- Monthly costs of a mortgage, which covers principal and interest Real Estate Taxes: In Massachusetts, real estate taxes are charged by the municipality based on the assessed value of a home Real Estate Taxes $400 Utilities $323 Homeowner/Condo Association Fees: Fees charged by condo or homeownership associations usually for shared utilities, insurance or maintenance costs Insurance: Homeowners insurance is usually required for property that has a mortgage Utilities: Depending on the home utilities, costs include electricity, gas, fuel oil, other fuel, trash collection, and water Mortgage $1,365 Insurance $100 Homeowner/ Condo Fee $300 Source: 2015 American Housing Survey, burden for owner-occupied units. The AHS Boston Metro Area differs from the Boston Metropolitan Statistical Area. Mortgage costs only apply to homes with at least one mortgage. This analysis excludes lot/land rent costs, which apply to only 2.7% of homeownership in the Boston region. Size of bubble represent median monthly cost for individual cost factor, do not add up to median monthly housing costs. 16
Median Monthly Cost ($) While Boston has lower mortgage payments than some peer cities, it leads the way with high taxes, utilities, insurance rates and fees 2000 1800 1600 1400 1200 1000 800 600 400 200 Median Monthly Costs Factors Owners 0 Mortgage Amount Real Estate Taxes Homeowner or Renter Insurance Homeowner/ Condo Association Fee Utilities Boston San Francisco Philadelphia DC Seattle Raleigh Source: 2015 American Housing Survey, burden for owner occupied units. Mortgage costs only apply to homes with at least one mortgage. This analysis excludes lot/land rent costs, which apply to only 2.7% of homeownership in the Boston region. 17
Median Monthly Cost ($) Renters have a simpler cost structure, with factors such a real estate taxes, condo association fees and some utilities typically included in the price of rent 1800 1600 1400 1200 1000 800 600 400 200 0 Housing Costs Factors Renters Rent Homeowner or Renter Insurance Utilities Boston San Francisco Philadelphia DC Seattle Raleigh Source: 2015 American Housing Survey, burden for owner occupied units. Mortgage costs only apply to homes with at least one mortgage. This analysis excludes lot/land rent costs, which apply to only 0.1% of renters in the Boston region, condo association fees which are paid by 0.1% of renters, and real estate taxes which were paid by 0.0% of renters. 18
In additional to rising costs, younger homebuyers face a number of other barriers to homeownership: Increased cost of renting in desired locations Delayed formation of families Increased student debt More strict regulations of borrowing after subprime mortgage crisis Avocado Toast It would be great to have the option of buying a home here, but the costs feel so insurmountable. -City Awake Delegate 19
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 20
Total Units 50,000 Massachusetts Permitted Units Permitting in MA has been concentrated in single family and large multifamily units. Larger 5 or more unit buildings are key to creating affordable housing and work well in dense urban communities but are not well suited for every location 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 1 Unit 2 Units 3 and 4 Units 5 or More Units Source: US Census Building Permit Survey. Represent all units permitted by building type 21
Total Units Despite having the 10th largest populations among metro areas, Boston ranked 18 th in the number of units permitted in 2016 60000 50000 40000 30000 20000 2016 Units Permitted Metro Areas 10000 0 1-unit 2-units 3-4 units 5+ units Source: US Census Building Permit Survey 2016, largest 25 metro areas based on 2016 population estimates 22
Local zoning regulations in most towns overwhelmingly favors single family homes on larger lots. With 351 cities and towns all in charge of zoning, it is extremely challenging to create a regional approach to zoning. Boston has more than carried its weight with affordable housing production and needs help from the suburbs if we truly want to solve this problem. 23
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 24
The State has programs to promote housing creation, but most focus on affordable housing: Chapter 40B The state s main program for affordable housing creation, which exempts projects containing 20-25% affordable units from zoning regulations. Chapter 40R Smart Growth Districts - This program provides incentives to communities that create mixed-use smart growth districts in suitable locations. These districts require that 20% of housing created is affordable. New Starter Home Zoning District - An expansion of 40R programs that will encourage the creation of starter homes, with 4 units per acre. MassHousing s Workforce Housing Initiative- A $100 million dollar initiative to create rental units affordable to families with incomes of 61% to 120% of AMI. 25
Goal of 53,000 new units by 2030: 44,000 units of housing for the workforce 5,000 units of housing for our senior citizens 4,000 units to stabilize the market and bring rents and housing prices under control. As of Q2 2017 the city has permitted 21,963 units, surpassing its goal of 17,212 City uses a number of programs to promote housing development and maintain affordability : Inclusionary Development Linkage/Neighborhood Housing Trust Fund Community Preservation Fund Classification and the Residential Exemption Source: City of Boston, Housing a Changing City Boston 2030, Q2 2017 Report 26
Massachusetts Housing Partnership ONE Mortgage: covers first time homebuyers with incomes up to 100% AMI Allows for down payments as low at 3%, with no PMI Discounted 30-year fixed interest rate Mass Housing Mortgages: covers homebuyers with incomes from 100%-130% AMI Options for low down payments and mortgage insurance Six months mortgage payment protection due to job loss City of Boston Down Payment Assistance Program: covers first time homebuyers with incomes up to 120% AMI Provides up to 3% of purchase price for condo or one- to two-unit property No interest, deferred payments, and loans are forgivable after 10 years MyMassMortgage.org Source: MyMassMortgage.org & City of Boston, Department of Neighborhood Development 27
I. The Affordability Problem in Boston II. What is affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 28
The Challenge: Changes in Portland s zoning had created narrow 25 foot wide lots where housing was either not permitted or was being built in a manner that did not fit existing neighborhoods. Solution: Through a competitive design process the City identified two pre-approved models for skinny homes. The city passed the necessary amendment for these plans to meet zoning. Developers can receive these plans free of charge when they purchase building permits. Can receive housing permits through the City's Fast Track program in 10 working days if no modification are made. Source: US Department of Housing and Urban Development, Photo Credit Bryan Higgins 29
Accessory Dwelling Units (ADUs) can increase housing stock quickly and more affordably Vancouver, BC- 35% of units in Vancouver have an ADU due to relaxed regulations No requirement for owner occupancy or off-street parking Can have both detached and attached units on one site Portland, OR- The US leader in ADU s with 1% of homes having an ADU No requirement for owner occupancy Eliminated $11,000 development fee and parking requirements in 2010 Boston Pilot Program Allows ADUs in Jamaica Plain, Mattapan and East Boston Must be within footprint of owner occupied unit Residential structure cannot contain more than 3 dwelling units Provides assistance through a tool-kit and $30,000 zero interest loan Photo: Nancy Creek Guest House Source: Consciousbuild.com
Small studio apartments, typically less than 350 square feet Size is trade-off for lower rents, which are typically 20-30% below conventionally sized units Boston allows for units as small as 450 square feet if within one-mile of transit Development has been limited to a handful innovation units within Seaport projects. Rents have not been affordable to the average Bostonian. Photo Credit: Wikipedia.org 31
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