A shortage of homes is the root cause of our housing cost crisis, but getting to a more abundant supply won’t be easy.
For decades, housing supply has fallen behind demand. Units for sale or rent are at historic lows. Limited options and stiff competition drive up housing prices, which have risen much faster than wages or inflation. Lack of housing supply also prevents people from moving when they want to, makes it harder to exit homelessness, and drives up the cost of vouchers.
When housing is more abundant, home buyers can shop around, landlords are less able to charge premium prices, and people find it easier to move when the need arises. While increased supply won’t necessarily reduce housing costs, it can slow the rate of increase so that wages have a chance to catch up.
This plan identifies the need to add 222,000 homes over ten years, including homes of all types, sizes, and affordability, in all regions of the Commonwealth. Meeting this goal will accommodate our current population as it ages, reduce overcrowding and homelessness, and maintain a strong labor force.
There are significant obstacles to achieving this however. Local zoning lacks the capacity to develop the types of homes we need in the places we need them.Developers face difficult approval processes at both the state and local levels, alongside challenging financial constraints. Construction costs and operational expenses are also on the rise, with increasingly stringent requirements for energy efficiency, accessibility, inclusionary zoning, and design specifications.
No home can be built without capital investments, but securing those investments is difficult for both affordable and market-rate developments. Federal low-income housing tax credits are limited, and even the record amount of funding authorized by the Affordable Homes Act can’t build all the homes we need. For market-rate developers, rising costs make it difficult for developers to build anything but high-end housing to accomplish the investment returns expected by many capital investors, creating an additional obstacle to the development of affordable housing.
Cities, towns, and regions have few revenue-raising tools to meet localized housing needs. Even homeowners wishing to build an ADU may have trouble accessing the financing for it. There is a limited supply of skilled labor and firms in the construction industry, arguably not enough to build 222,000 homes in ten years; but training new workers and growing new firms takes time.
We are at risk of losing the homes we have, especially the affordable ones.
Thousands of homes are at risk due to increasingly severe coastal and riverine flooding. But homes are also being lost for reasons beyond flooding. An estimated 9,000 homes were converted to seasonal homes or short-term rentals between 2010 and 2020 and are no longer available to year-round residents in those communities. The availability of modestly priced homes and apartments is dwindling as they are acquired and upscaled by investors who sell or rent at a much higher price point.
The state can be proud of its strong public housing portfolio and robust stock of affordable housing, yet the usefulness and affordability of these assets must be maintained. The state public housing system has an estimated $4B backlog, but the process for making improvements is not always efficient. Many homes need investments to protect them from natural disasters and to make them accessible for residents with disabilities. Achieving the pace and scale of public housing reinvestment will require new and innovative approaches and partnerships that bring private capital and expertise to the table.
In addition, 6,000 privately-owned affordable housing units are at risk of being converted to market rate as deed restrictions expire. Preserving the affordability of these existing homes is generally more cost-effective than building new homes elsewhere, but it’s a complicated process.
A growing share of residents cannot afford the cost of living in Massachusetts and need assistance.
Housing prices already exceed what is sustainable for most low-income working households, not to mention fixed-income seniors, disabled individuals, and new residents. Add on the cost of utilities, transportation, insurance, and home maintenance, and the problem gets worse.
While housing abundance can create more affordable options and slow the increase in housing prices, these vulnerable residents can’t wait that long. Furthermore, many don’t have enough income to afford even modest rents or mortgages. Housing vouchers can help close the gap between rental fees and household income, but there is a long waiting list and voucher holders have difficulty finding units that meet their needs. The current process of applying for a privately-owned affordable housing unit is complicated and time-consuming, adding to the burdens these households face. Heating assistance can help in winter months, but for those with drafty homes and inefficient appliances, this assistance doesn’t go very far; nor does it provide any support for cooling during our increasingly hot summers. The growing senior and disabled populations often can’t afford accessible housing and do not have the finances to make improvements in their current homes.
The population with complex housing and medical needs is growing.
Many Massachusetts residents have unique challenges that make it hard for them to acquire conventional housing, even with financial support. Chronically homeless individuals, people with substance use disorders, individuals with cognitive disabilities or severe medical conditions, and families fleeing unsafe conditions, all require special assistance to achieve stable housing.
The need for these services currently exceeds the resources available. Supportive housing has been proven to be effective in helping chronically homeless individuals, but there is simply not enough capacity or coordination to serve all those who need it. Stable housing can reverse the spiral of worsening health conditions; but complicated funding requirements make it difficult to provide solutions that can ultimately reduce health care costs. Massachusetts’ commitment to shelter for families reflects our values, but the EA shelter crisis demonstrated the limitations of the system, and the actions needed to make it operationally and fiscally sustainable. Additional planning and capacity are needed to prepare the EA system for future crises, if and when they occur. The senior population has specialized health needs and is rapidly growing. Massachusetts needs new programs and approaches to help maintain housing for these seniors and reduce the number of premature or unnecessary nursing home admissions.
The housing crisis affects everyone in Massachusetts, and we all have to work together to solve it.
The most immediate impacts of the housing crisis affect people who are having trouble locating or affording housing. But no one is immune, including those who are comfortably housed (for now). The cost of housing is driving away young people, including Massachusetts natives who represent the future of our communities and economic livelihood. Without course correction, the resident labor force is projected to decline. Employers will find it harder to hire workers, discouraging them from locating or expanding here; and there will be fewer working taxpayers to support a growing senior population. Remote work may mitigate some of these losses, but remote workers can’t deliver critical in-person services such as auto repair or critical medical services. Nor does remote work foster the entrepreneurial energy that drives our economy.
Ratepayers and taxpayers end up bearing the burden of housing instability. Evictions and frequent moves affect individual health and childhood wellness, driving up health care costs and educational expenditures. Health care expenditures are also rising due to premature nursing home admissions and high utilization of emergency rooms by those who are homeless.
The housing crisis affects communities: People who can’t find homes near work have to endure longer commutes, creating more traffic congestion in the cities and towns along the way. Renters who move frequently due to rent increases don’t have the opportunity to establish roots in a community. Many city and town centers and commercial districts are struggling economically due to lack of foot traffic and resident customers.
It’s well documented that these widespread impacts occur because many communities view new housing as a problem and seek to discourage development. Some are concerned that new housing will change a community’s character and worry that denser development and different demographics will degrade the quality of a community. Others worry about the financial impacts on school budgets or property taxes. Many lower-income and Environmental Justice communities posit that new development is the reason rents are going up in existing homes nearby. Environmental stakeholders are concerned that new housing will degrade the natural environment in the surrounding neighborhood and globally.
These are valid concerns, yet some are often overstated or not supported by the evidence. For example, research shows no correlation between housing production and school enrollment changes in Massachusetts communities; and many new multifamily developments provide net positive fiscal benefits to their municipality. Leading research shows that the creation of new homes in gentrifying areas is associated with lower rent increases in surrounding areas.
More importantly, these are all solvable problems. The state can support infrastructure improvements and adjust funding formulas to account for communities doing more than their fair share. Designers and developers can create buildings and landscapes that enhance the local and global environment by mitigating heat, absorbing water, and facilitating sustainable transportation choices.
Massachusetts cannot achieve these win-win solutions unless everyone is working together. Too often progress has been stymied by a lack of coordination between different government levels and agencies, unrepresentative decision-making processes, disputes regarding the fundamental scope of land use regulatory authority, and disagreements about essential facts. All of these issues undermine our collective ability to address the crisis. Finding consensus on these complex issues won’t be easy, but Massachusetts has a strong record of solving difficult problems.