Report Shows Town-by-Town Impact of New Housing on School Costs

June 27, 2005

Boston - A new analysis of the impact that increased production of moderately priced single-family housing will have on local school budgets shows that more than two-thirds of the Commonwealth’s 351 communities will face significant increases over and above the amount of additional property and excise tax generated by the new housing, the Commonwealth Housing Task Force reported today.

However, the report also shows that the cost of holding communities harmless from the additional school costs are modest and easily absorbed by the state’s existing Chapter 70 school aid budget.

A bill designed to incorporate the Task Force’s recommendations – Senate Bill 149 – was introduced by Sen. Harriet Chandler (D-Worcester) in December 2004. The Task Force -- an ad hoc coalition representing a wide range of civic, business, foundation, housing, and public sector leaders working to address the state’s housing crisis on a coordinated basis -- today called on legislative leaders to include the detailed funding formula, now called Chapter 40S, in Chandler’s bill and move its immediate passage.

“This research completes the work of Chapter 40R and unlocks the power of this new housing legislation,” said Paul Grogan, President of the Boston Foundation, the convener of the Commonwealth Housing Task Force. “We know we need the housing. Now we know the cost is minimal compared to the incredibly significant benefits that will accrue to our economy when it is built. Everyone involved in this important project today calls on the legislature to complete the promise of this legislation and pass Senate Bill 149.”

The school costs analysis, which was conducted by the Center for Urban and Regional Policy at Northeastern University for the Task Force, provides a comprehensive picture of what effect the production of new moderately priced single-family and multi-family housing under the state’s Chapter 40R Smart Growth Housing law would have in each of the state’s municipalities if public school children were to live in the houses.

If the new single-family houses are built in a so-called foundation aid community – which constitute 113 out of 351 cities and towns in Massachusetts – the community will experience no new net costs because Chapter 70 school aid payments increase to cover any additional enrollment, the town-by-town analysis shows. However, when new single-family homes costing $550,000 or less are built in a non-foundation aid community – the remaining 238 cities and towns – the community will experience an average of $5,000 per home in increased school costs, the study found.

Chapter 40R, which was passed by the legislature and signed by Gov. Romney last June, provides incentives to communities to allow high density multifamily and single-family housing in Smart Growth locations (near transit stations, in town and city centers, and at underutilized commercial properties). The strategy was developed by the Commonwealth Housing Task Force in response to the economic crisis that has been created by the extremely high cost of housing in the state. Less expensive housing is needed if the Commonwealth is to encourage economic expansion and job growth.

In particular, it is essential to stimulate the production of modestly priced single-family housing as the best way to moderate the exorbitant home price inflation of the last 10 years in the Commonwealth. However, many Massachusetts cities and towns have typically resisted housing production of this type, primarily through large lot zoning, claiming that school costs associated with the housing will cause hardship for the community.

The Task Force study demonstrates that this claim is well-founded. However, the report also proposes an “insurance policy,” called Chapter 40S, which holds communities harmless from any net school costs arising from housing production in new Smart Growth districts. This program, which will only be used when and if new school costs are triggered beyond the community’s current level of spending, will remove the issue of school costs as a reason to oppose housing production.

The study also shows that the financial impact of Chapter 40S to the state is not substantial. In fact, no costs are anticipated before FY 2008. Then, assuming that 31,000 housing units are built in Smart Growth Districts during the next 10 years – and assuming that 40% of those are single-family homes – the incremental new costs for Chapter 40S are projected to be approximately $35 million in 2014. This amount is less than 1% of the projected Chapter 70 School Aid budget in that year.

“What we found was that local control, combined with the structure of Chapter 70 Education Funding and Proposition 2½, perversely work against the production of housing in most communities,” said Ted Carman, President of Concord Square Development Co. Inc. and one of the authors of the report. “For modest single-family homes, property tax receipts generally don’t cover the cost of educating the anticipated number of school-aged children who will live in the housing.

“Typically, Chapter 70 funds don’t increase if there are additional school children in the community, and Prop. 2 ½ mandates that the community-wide tax levy can’t increase. That leaves communities in a bind.”

Barry Bluestone, who is the Stearns Trustee Professor of Political Economy at Northeastern University and the head of the Center for Urban and Regional Policy, wrote the report with Carman and Eleanor White, president of Housing Partners Inc. and co-chair of the Commonwealth Housing Task Force.

“Adopting Chapter 40S to provide for a Smart Growth School Cost Insurance Supplement to be paid to communities which pass Chapter 40R district is one of the most cost-efficient solutions the legislature could employ to break the stranglehold that high housing costs has on the economic viability of the Commonwealth,” Bluestone said. “Unless we immediately begin to produce a substantial supply of moderately priced housing in Massachusetts, our state’s ability to attract and retain workers will continue to be in peril.”

The goal of Chapter 40R is to spark production of 31,000 units of new housing, both single-family and multifamily, in smart growth locations by providing incentives to communities that pass high density zoning in eligible locations. It has been praised as “the most innovative plan to increase the housing stock in Greater Boston since the run-up of prices two decades ago.”

Regulations for towns and cities to apply to use Chapter 40R were issued in March of this year and already dozens of communities are working on applications for the incentives. However, when it was enacted last year, Chapter 40R did not include provisions to provide financial assistance for school cost increases. Instead, the legislature instructed the Department of Housing and Community Development to study the impact on educational systems of adopting the Smart Growth Zoning Districts. The Commonwealth Housing Task Force, which is convened by The Boston Foundation, engaged the Center for Urban and Regional Policy to conduct the analysis, a move supported by DHCD.

The complete report, “Chapter 40R School Cost Analysis and Proposed Smart Growth School Cost Insurance Supplement,” can be downloaded at the Boston Foundation’s website, or at

* * *

The Boston Foundation, one of the nation’s oldest and largest community foundations, has an endowment of almost $675 million, made grants of $51 million to nonprofit organizations, and received gifts of $41 million last year. The Boston Foundation is made up of 750 separate charitable funds, which have been established by donors either for the general benefit of the community or for special purposes. The Boston Foundation also serves as a civic leader, convener, and sponsor of special initiatives designed to build community. For more information about the Boston Foundation and its grant making, visit , or call 617-338-1700.