Moment of reckoning for housing and state economy

THE MASSACHUSETTS ECONOMY is the envy of the nation. We quickly rebounded from the recession and are home to the nation’s best educated workforce and one of its largest and most diverse innovation economies. Unemployment is down to 4.5 percent and our growth is outperforming the national economy.

That success is worthy of celebration, but we can’t celebrate for too long. Unless we address the supply and cost of housing in Massachusetts it will be impossible for that strong economic performance to continue.

A bill approved earlier this month by the Legislature’s Joint Committee on Housing would confront that problem head-on. The bill would require that every city and town plan for multifamily housing and designate areas where it is allowed as-of-right. It would also require every community to allow single-family homes clustered on modest lots in compact, walkable neighborhoods surrounded by open space. Cities and towns would be compensated for any net increases in school costs that result from their approval of multifamily and cluster developments.

These may seem like simple legislative changes, but they will not be easy to achieve or without controversy. The only way to appreciate the importance of the bill is to understand how dramatically the housing development landscape has changed in Massachusetts over the last few decades.

In 1980 our housing costs were close to the national average, ranking us 26^th of the 50 states. Since then, steadily increasing local resistance to new housing development has kept us from building enough housing to meet the needs of our population. As a result, home prices and rents in Massachusetts are now among the highest in the US, our state is no longer an affordable place for young workers to launch careers and start families, and we are losing talent to places that offer good jobs and better housing choices.

Metro areas like Denver, Seattle, and Portland, Oregon, have been building two to three times as much housing per capita as metro Boston and growing their employment in innovation industries more than twice as fast.

We tend to ignore the housing problem by convincing ourselves that Massachusetts is special — that people with career options will always make sacrifices to work for great employers or to be in exciting places like Boston and Cambridge. The data tell a different story, though. It is already a struggle to attract and retain talent in Massachusetts. Some of our closest competitors in the innovation economy now attract as many as three new workers from metro Boston for every worker we attract from them.

Our inability to produce enough housing to fuel the economy results from the fragmentation of local government in Massachusetts. In many other parts of the country land, use regulation is managed at the county or regional level. In Massachusetts, it is handled by a multitude of local boards in each of 351 individual cities and towns, most of which serve a population of less than 11,000 residents. It’s understandable that elected officials take steps to slow or stop housing development because that’s what voters ask and expect of them: “please don’t allow more residents into our community,” “please don’t add any more kids to our schools,” “please don’t approve any more development in our part of town.”

Resistance to new housing often comes in the form of “downzoning” – allowing housing development in fewer places or at lower densities than was allowed in the past. It also comes in the form of discretionary zoning codes (as opposed to zoning “by right”) that make local decision-makers especially susceptible to community pressure. Available land zoned for multifamily housing used to be relatively commonplace in Massachusetts and now it has become a rarity. Many of the most desirable neighborhoods in the Commonwealth could not be built again today because local zoning has become so restrictive.

In recent years, we have defied the odds and managed to prosper without confronting our housing supply problem, but at some point our luck will run out.  The Commonwealth is now facing its greatest demographic challenge since the end of World War II, with a million older workers expected to retire from our workforce over this and the next decade. That includes about 747,000 baby boomers who are expected to remain in the Massachusetts housing market after they retire, many of whom will stay in their existing homes.

Those changes will make our current housing situation significantly worse. There isn’t nearly enough housing being built for new workers to fill existing jobs as they become vacant, let alone to support new job growth. Demographic projections from the Metropolitan Area Planning Council show that we need to produce nearly half a million new housing units in Massachusetts by the year 2040 to prevent job losses and achieve only minimal growth. Two-thirds of that projected demand is for multifamily homes, such as townhouses and apartments, much of it in cities and close suburbs with good access to jobs and transportation.

It may seem like a lot of housing construction is going on, especially in and around downtown Boston, but we’re still building less than half as much housing as we did when we had a smaller population in the 1960s, 70s and 80s. It’s a positive sign that more multifamily housing was permitted in Massachusetts in 2015 than at any time since the late 1980s. Yet if we sustained last year’s housing production for each of the next 24 years it would still only be sufficient, as baby boomers exit the labor force, to support annual job growth over the long term of less than a quarter of one percent. Our own analysis of metropolitan growth patterns across the US confirms that current housing production is a prerequisite for future job growth.

It is not a lack of high-level concern that brought us to this point. For more than three decades, Massachusetts governors have used their bully pulpit and their discretion over state funding to encourage cities and towns to allow more housing. Gov. Edward King’s Executive Order 215 required that state grants be withheld from cities or towns found “unreasonably restrictive” of new housing growth. Local housing partnerships were formed statewide under Gov. Michael Dukakis to foster the production of new housing. Gov. Paul Cellucci’s Executive Order 418 prioritized state funding for cities and towns that planned for housing growth. Gov. Mitt Romney implemented Chapter 40R, giving cities and towns millions of dollars in state incentives to zone for new housing. Gov. Deval Patrick created MassWorks infrastructure grants to support local growth projects.  Gov. Charlie Baker launched new community compacts while expanding MassWorks and making housing production a top priority.

These gubernatorial initiatives have all been thoughtfully conceived and implemented. With state support, some cities and towns have shown terrific leadership in planning for housing growth. Yet despite these positive results, no one has been able to solve the underlying problem: Individual communities still have little motivation to support new housing. The new Housing Committee legislation represents something entirely different: It would shift the debate from whether to how our cities and towns allow the housing production we need to support a strong and economically viable Commonwealth.

Defenders of the status quo talk about the “fundamental right” of cities and towns to regulate land use. Without saying so, they are defending the right to obstruct well-planned development simply because it’s politically unpopular.  That argument is ironic because local government has the most to lose. Without more robust growth in our housing stock, total employment will decline, the state’s tax base will erode, and there will not be nearly enough revenue to support local schools and other existing city and town services.

Massachusetts can do better than that. It is possible to set minimum local zoning standards in a way that promotes local planning, protects local budgets and respects our tradition of home rule. The Housing Committee chairs, Rep. Kevin Honan and Sen. Linda Dorcena Forry, have taken just that approach with the bill they advanced. It sets the stage for a public debate that is long overdue.

Clark Ziegler is executive director of the Massachusetts Housing Partnership. Christopher Oddleifson is chairman of the Massachusetts Housing Partnership board and president and CEO of Rockland Trust.

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