The first step in developing a housing production target is estimating how many homes it would take to address the existing shortage of homes.
Achieving a healthy vacancy rate
One expression of Massachusetts’ severe housing shortage is critically low vacancy rates of 1.6% for sales or rentals. The shortage creates intense competition for available units, driving up prices and fueling displacement. If more units were available, renters and buyers would have more options, and landlords would have less power to charge maximum rents. Vacancy rates that are too high, however, create their own issues, such as disinvestment. A study by the Joint Center for Housing Studies used historical trends to benchmark “natural” vacancy rates of 7.4% for rentals and 1.5% for ownership. These values correspond to rates in the mid-1990s before Massachusetts started seeing the most extreme price increases. EOHLC estimates the state needs 13,000 additional homes for sale and 38,000 additional homes for rent in order to achieve the target vacancy rates. This would provide more choices for people looking to move, would reduce bidding wars, and would give landlords less power to set prices at or near the maximum rate.
Families in the Emergency Shelter system
In addition, Massachusetts needs additional homes for residents who are not adequately housed. By the end of 2024, 6,800 families were living in the state’s family shelter system. Helping these families exit the system to obtain permanent, stable housing remains challenging because even with rental assistance and vouchers, there are very few homes available for rent.
Doubled up and overcrowded households
As discussed in the Needs Assessment, one way that households use to cope with high housing costs is by doubling up with other families, often in overcrowded conditions. EOHLC estimates there are approximately 16,000 doubled up and overcrowded households with children. An equivalent number of additional units are needed to allow those families to find homes more suitable for their needs.
“Missing Households”
EOHLC estimates that there is ‘latent demand’ for approximately 34,000 housing units from young adults currently living with roommates or parents, but who would prefer to live independently. If more affordable homes were available, these young adults would likely establish their own households, requiring even more homes to maintain the target vacancy rate.
Conversion to seasonal use
Another element of the target rate relates not to demand, but to supply. As noted above, EOHLC estimates that the Cape and Islands and Western Mass collectively lost about 9,600 year-round homes to seasonal conversions during the past decade. Preserving these homes from conversion or producing enough homes to compensate for their loss is essential to ensuring adequate supply in those regions.
Summary
In total, approximately 115,600 homes are needed over the next ten years just to solve our existing shortage. This figure doesn’t even account for the shifting housing needs of a growing and aging population.