Boston Foundation releases third annual Housing Report Card

September 7, 2005

Boston – Greater Boston has become the most expensive metropolitan area in the United States with high housing costs playing a significant part in that development, according to a report released today by the Boston Foundation. The report, The Greater Boston Housing Report Card 2004: An Assessment of Progress on Housing in the Greater Boston Area, is the third annual analysis and review of the state of housing production in the region, created by a collaboration of the Boston Foundation, the Center for Urban and Regional Policy at Northeastern University, and the Citizen’s Housing and Planning Association.

Highlights of the report include the following:

• It now costs a family of four $64,656 to pay for basic necessities in Greater Boston, $6,000 more than in New York City and $7,000 more than San Francisco, making Greater Boston the most costly metropolitan region in the country for family living. Monthly housing costs in Greater Boston are 40 percent higher than in Chicago or Miami, and 63 percent higher than in Raleigh-Durham-Chapel Hill. (Research and analysis provided by the Economic Policy Institute, a national think tank based in Washington, D.C., and accessible at .)

• Homeowner vacancy rates fell to 0.5 percent in 2004, compared to a normal level of 2 percent and a national average of 1.6 percent. According to economist Barry Bluestone, Director of the Center for Urban and Regional Policy at Northeastern University, this suggests that a “real estate bubble” with rapidly decreasing housing prices is highly unlikely in Greater Boston in the near future.

• The median price of a house in Greater Boston has increased more than 37 percent between 2001 and 2004, and has doubled since 1998.

• State funding for housing was cut by 7 percent in Fiscal Year 2005 after being cut by 5 percent in Fiscal Year 2004. However with a 4 percent cut in federal funding, total public funding for housing was slightly down last year.

On the housing production side, there was some positive news. The number of building permits increased by 12 percent in 2004, and the number of permits for single family homes increased for the first time since 1998, from 6,020 to 7,000 between 2003 and 2004. In addition, with the rental vacancy remaining at 6 percent, rents remained close to 2003 levels, including small reductions at in apartment rentals in some cases in 2004.

This growth has not had a significant impact on the cost of housing because the supply of housing—in particular of affordable housing—is so small that incremental increases such as those that occurred in 2004 cannot make up for years of inadequate production.

“There have been newspaper reports of a softening of house prices recently, but that will not bring relief for those who are being priced out of the market,” said Bluestone. “Because production has been so limited and vacancy rates are well below normal, it is unlikely that prices will plummet. In other areas of the country, overbuilding was the normal response to rising house prices and a real housing bubble phenomenon is possible. Here, housing will remain out of reach for vast numbers of households in Greater Boston.”

The impact of this sustained increase in costs can be seen in the region’s changing demographics. According to the Housing Report Card, young skilled residents are leaving the state in increasingly large numbers. While net foreign immigration has remained fairly constant from year to year, with between 31,000 and 33,000 annual arrivals between 2001 and 2004 — domestic net migration has increased sharply from 14,222 in 2001 to more than 58,000 in 2004. As a result, the total population of the Commonwealth actually shrank in 2004 — the only state in the nation to post such a loss.

By way of comparison, the number of people between the ages of 20 and 24 increased by 5.6 percent in the nation as a whole; in Massachusetts, that cohort decreased by 11.5 percent.

“This is not just a story about equity,” said Bluestone. “It is about the future prosperity of the region. We are losing exactly the young men and women we need to help our economy to grow—why would they remain here and struggle to find affordable housing when then can move to Chapel Hill and have a substantially higher standard of living on the same or lower income than they now get in Massachusetts?”

According to the Housing Report Card, the tight housing market extends far beyond the city. As recently as 2000, more than two-thirds of Greater Boston communities offered single family homes with a median price below $300,000. In 2004, that number dropped to less than 12 percent. Assessing the impact of the market on first-time homebuyers, the report notes that in 1998, in 116 communities in Greater Boston, a first-time homebuyer earning 80 percent of the local median income could afford a home that sold for 80 percent of the median price. In 2004, only one town in the region offered that possibility—tiny Millville on the Rhode Island border.

Meanwhile the region continues to recover from the recession that ended in March of 2003. While the region lost more than 100,000 workers in the past two and a half years, early indications are that employment will pick up in 2005. Bluestone warned that this poses a potential crunch.

“If the economy heats up, we will see a growing gap between workers available and jobs we need to fill,” he said. “And we face the very real possibility that the ‘brain drain’ of the last few years will short-circuit a full recovery as well as the chance for vigorous long-term economic growth.”

Impact of 40B

The production of affordable housing continued to improve modestly in 2004, in large part because of the stimulus of Chapter 40B Smart Growth Housing. More than 2,000 units of affordable housing were added in the region, restricted to residents with a total of household earnings of $59,500 or less for a family of three. Outside the city of Boston, more than 80 percent of these new units represented 40B housing. Many of these were mixed cost developments, in which some units are set aside to be affordable.

“This report demonstrates in clear terms the importance of Chapter 40B as way to increase affordable housing opportunities in Boston’s suburbs,” said Aaron Gornstein, Executive Director of the Citizen’s Housing and Planning Association, a statewide organization that represents all interests in the housing field and sponsors research on the subject. “Policy plays a critical role in developing affordable housing, and Chapter 40B has proven its effectiveness.”

Traditional state and federal funding sources for affordable housing declined in 2004, making 40B increasingly important. The percentage of affordable housing using the comprehensive permit allowed under 40B increased from 37 percent to more than 54 percent of the total. This reflects the fact that while the combination of state and federal funding reached its highest level in fifteen years, much of that money was spent either on rent subsidies or to maintain existing housing. The result was that only $18 million out of nearly $400 million in federal government subsidy was available for new housing production and that sum.

One result is to place more significance on 40S, which would hold communities harmless for school costs that resulted from new Smart Growth Housing. This would complete the legislative work begun successfully last year and create a powerful tool to encourage the development of affordable housing in communities throughout the Greater Boston region.

“Our housing problem is rapidly becoming a housing crisis,” said Paul Grogan, President and CEO of the Boston Foundation. “But we know what has to happen next to begin to fix the situation—enact 40S so that we stop punishing area communities for allowing new development. In the big picture, we know we have to find the political and civic will to solve this problem and provide homes for the rising generation. The alternative is that Greater Boston faces slow and certain economic suicide.”


The Boston Foundation, one of the nation’s oldest and largest community foundations, has an endowment of almost $675 million. In 2004, the Foundation made $51 million in grants to nonprofit organizations, and received gifts of $41 million. 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.