Economy strong, but appropriate housing dearth pitting Millennials against working families

Greater Boston Housing Report Card 2014-2015 says area’s housing stock is woefully out of step with demographic housing needs.

Boston – Greater Boston’s widening gulf between the housing needs and wants of residents and the types of homes available in the region is being driven by a new “demographic revolution,” that has working families and Millennials battling for the same housing stock, and aging Baby Boomers demanding multi-unit housing in the suburbs, according to The Greater Boston Housing Report Card 2014-2015: Fixing an Out-of-Sync Housing Market.

The report, the 12th in the series authored by Professor Barry Bluestone and his team at the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University, was released Wednesday at The Boston Foundation, which featured a presentation by Bluestone and a discussion moderated by Becky Koepnick, Director, Neighborhoods & Housing, the Boston Foundation, with panelists Marc Draisen, Executive Director, MAPC, Christopher Herbert, Managing Director, Harvard Joint Center for Housing Studies, Michael P. Hogan, CEO, A.D. Makepeace Company & Chair, Massachusetts Business Roundtable, and M. David Lee, FAIA, Partner, Stull and Lee, Inc.

“For a variety of reasons, including a desire to stay where they’re comfortable, Baby Boomers don’t want sprawling suburban homes, but they do want to remain in the communities they’ve known for many years,” Bluestone says. “We need zoning reform in the suburbs to allow that type of construction. And in the city we need multi-unit housing built to accommodate 20- and 30-somethings, in order to free up older, more traditional and affordable multi-unit structures for working families. This will allow working families to remain in the city and not get forced and priced further and further away.”

The report found that a most natural solution to the burgeoning housing battle – new construction of multi-unit housing – slowed in 2014, after several years of increases.

“This year’s report highlights the growing importance of variety in housing to the city, the region, and the state’s economic competitiveness,” said Paul S. Grogan, President and CEO of The Boston Foundation. “Without affordable options, younger talent may not continue to see Greater Boston as a top place to work and live. And older workers and retirees could be forced to re-settle elsewhere, as well.”

2014: A Convergence of Needs

Even as the Greater Boston economy grows and simultaneously leaves middle-class residents behind, the area’s new demographic revolution, like its predecessors in the late 1800s and post-World War II, is tied to unique housing construction needs: Suburban Baby Boomers, and urban working class families and Millennials alike want more multi-unit housing. But they’re not getting it.

A review of permitting data revealed that developers in Greater Boston not only failed to meet general housing demands in 2014, but that they also failed to meet demand for housing variety, particularly for multi-unit housing. The year concluded with single-family constructions on the rise, construction of five-units-plus buildings down by 6.2 percent over the past year, and rents up more than 17 percent between 2009 and fall 2014.

Public Policy Solutions

As glum as some of the numbers may be, state and local officials are paying attention. Former Governor Deval Patrick, former Boston Mayor Tom Menino, and current Mayor Marty Walsh have put forth plans aimed at closing income and housing pricing gaps and increasing the amount and variety of housing units.

Mayor Walsh recommends the construction of 53,000 new housing units by 2030, from subsidized moderate- and low-income housing to affordable rental units.

The Commonwealth has created a Transformative Development fund to incentivize mixed-use development in Gateway Cities and has provided new sources of funding for the Chapter 40R and Compact Neighborhood programs, allowing developers to build homes on smaller lots in already dense communities.

Bluestone recommends construction of “millennial villages” of 10,000-plus small apartments and “micro” housing units.

A Mixed Recovery

Generally, Massachusetts has experienced a greater economic recovery than the nation as a whole, since the Great Recession of 2007-2009. By November of 2014, the unemployment rate in the Commonwealth was just 5.8 percent, down from 9.5 percent in 2010. And real average weekly earnings increased by 3.8 percent in the first half of 2014 – the largest increase in at least 12 years.

On the other hand, the percentage of homeowners who are “cost burdened” or spend more than 30 percent of their incomes on housing has risen from less than 27 percent in 2000 to more than 38 percent by the end of 2014. And in the same period, the number of cost burdened renters shot up from 39 percent to 50 percent.

Sustaining Growth

If Greater Boston is to continue and begin positive growth trends in the areas of job creation, lower unemployment, and a more balanced rental housing market, it is imperative that developers, policy and civic leaders, and financial institutions shift their focus from single-family homes to affordable multi-unit housing.

The upside and incentive to this necessity should be the good news that because the area’s economy is driven by jobs and careers in life sciences, health care, financial services, and higher education, millennials want to live here.

The downside is until the need to change housing-type resumes in a meaningful way, the question will remain of where to put the millennials who want to call Boston home.

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The Boston Foundation, Greater Boston’s community foundation, is one of the largest community foundations in the nation, with net assets of some $1 billion. In 2014, the Foundation and its donors made more than $112 million in grants to nonprofit organizations and received gifts of nearly $112 million. In celebration of its centennial in 2015, the Boston Foundation has launched the Campaign for Boston to strengthen the Permanent Fund for Boston, Greater Boston’s only endowment fund supporting organizations focused on the most pressing needs of Greater Boston.  The Foundation is proud to be a partner in philanthropy, with nearly 1,000 separate charitable funds established by donors either for the general benefit of the community or for special purposes. 

The Boston Foundation also serves as a major civic leader, provider of information, convener and sponsor of special initiatives that address the region’s most serious challenges.  The Philanthropic Initiative (TPI), an operating unit of the Foundation, designs and implements customized philanthropic strategies for families, foundations and corporations around the globe. For more information about the Boston Foundation and TPI, visit www.tbf.org or call 617-338-1700.