WITH THE COST of buying a home in Eastern Massachusetts continuing to soar further out of reach for many families, a Baker administration plan designed to spur construction of affordably priced “starter homes” seemed just the thing to provide hope for would-be homeowners.
The new Starter Home Zoning District was launched in 2016 amid hopes it would encourage suburbs to loosen up restrictive development rules. Under the plan, communities that opened the door to modestly-sized and affordably-priced single-family homes on small lots by revamping development regulations would be rewarded with cash bonuses from state coffers.
But four years after it was approved by the Legislature, the program is stuck at the starting line, having yet to produce a single home.
The kind of housing envisioned under the program would be a lifeline for middle-income buyers priced out of the American dream of home ownership in one of the country’s most expensive housing markets. What’s more, it would be a boon to the state’s economy, where employers say their growth is often hamstrung by the lack of reasonably priced housing for mid-level employees.
State officials insist it’s too early to pass judgment, noting that Gov. Charlie Baker’s proposed Housing Choice bill, separate legislation that would make it easier for communities to adopt the zoning changes needed for the starter home program, has languished on Beacon Hill for well more than two years.
But it’s not clear that the Housing Choice bill would make a difference for the starter home initiative. Meanwhile, even some of those who were early fans of the program have soured on it, saying it is simply not poised to deliver on the promise of reasonably priced housing in a market that has become badly skewed toward high-end homes.
Jeff Rhuda, business development manager of Symes Associates, a Beverly-based homebuilding company, who pushed for the program, is now a leading critic. He says the state erred when it folded the starter home initiative into a long-established “smart growth” program, known as 40R, designed to spur apartment and condo construction near transit hubs.
That tie-in means developers would be forced to build starter homes near train stations and suburban downtowns, a requirement that Rhuda says is not practical under today’s land use economics. The proof, he says, is the absence of any housing construction under the program.
“There is such a demand for this type of housing,” said Rhuda. “If the regulations were incentivizing, there would be 20 projects like this.”
ZONED OUT
The problems being encountered by Rhuda and other homebuilders highlight a facet of the overall housing debate that has been overshadowed by the dire shortage of affordable apartments and soaring rents. While suburban resistance to new apartment buildings and developments often dominates headlines, suburbs and towns across the state have also effectively zoned out single-family starter homes.
The rules have made all but impossible construction of the types of relatively densely-packed subdivisions of modest homes on small lots that transformed the landscape outside of Boston and other cities across the country in the 1950s and 1960s.
Once targeted at a solidly middle-class market, new home construction today has become a luxury product in the Boston area, with houses fetching seven-figures in many suburban communities that once saw affordable homes being built.
And far from slowing down in the wake of COVID-19, home prices in Massachusetts and the Boston area have set new records over the past six months.
Statewide, the median price of a single-family home jumped 18 percent in September to $472,000, an all-time record for the month.
The median home price in Middlesex County, which covers the western suburbs, and Suffolk County, which is dominated by Boston, rose 8.8 percent to $615,000 and $620,000, respectively, according to real estate publisher and data tracking firm, The Warren Group
“It’s like searching for a unicorn,” said Steve Leavey, a broker at Berkshire Hathaway in Natick, of starter homes priced at less than a half a million dollars. “It doesn’t exist.”
Yet to understand how the middle-class starter home became an endangered species, one needs to understand how Massachusetts, where housing costs were at one time fairly average for the country, got to where it is today.
STARTER HOME HAVEN
In the post-war years, subdivisions with hundreds of relatively affordable ranches, capes, and colonials took shape in suburbs across Greater Boston, with streets not infrequently named after World War II heroes like MacArthur, Nimitz, or Halsey.
That was enough to keep up with demand, keep prices in check, and make Massachusetts roughly average in the United States in new housing production.
“We were doing unfinished capes for $139,900,” said Thomas DiPlacido, a home builder in Wrentham and other suburbs near the Rhode Island border, of his start in the business more than three decades ago.
But residential construction in Massachusetts dropped sharply in the 1990s, kicking off a decades-long decline.
From the 1960s through the 1980s, Massachusetts had issued building permits at a rate of nearly 283,000 housing units per decade, the majority of them for single-family homes, US Census Bureau figures show.
But by the end of the 2010s, housing production had fallen off to just about half that pace.
Just 142,431 building permits were issued in the 2010s, many of them for multifamily apartment and condo projects, Census Bureau numbers show.
That number includes a steep drop-off in the construction of single-family homes. More than 25,000 building permits for single-family homes were issued annually in Massachusetts in 1985, 1986, and 1987.
By comparison, just over 7,300 single-family homes were permitted in Massachusetts in 2014 in what turned out to be the high point of the decade, declining to 6,292 by 2019, according to federal stats.
And the decline has come even as the state’s population has grown substantially larger, rising to nearly 6.9 million in 2020, up from just under 5.7 million in 1970 in the heyday of the middle-class housing boom.
The relatively few single-family homes still built in Greater Boston are affordable only to those with deep pockets, with prices often starting at $700,000 to $800,000 and rising quickly into the seven figures, builders and housing experts say.
Since the start of 2018 through early 2020, no new homes were built for sale under $500,000 within Route 128, and just a dozen went up within I-495, according to the Multiple Listing Service database.
One way to measure housing affordability over time is to compare income and typical home prices. Such an exercise underscores the grim reality facing would-be homebuyers today.
“I grew up in Medfield, and in 1980 the house my family bought cost about 50 percent of one-year’s income,” said Leavey, the Natick real estate agent. “That same house today would cost most people three times a year’s pay. We are way off on affordability.”
The big decline in housing construction, meanwhile, coincided with an attitudinal shift on part of local communities, especially in the suburbs, toward new development.
The wave of suburban development in the 1950s, 1960s, and 1970s, coupled with the rise of the environmental movement, sparked concern about the loss of fields, forests, and wetlands to new housing, office parks, and malls. That led to restrictive new zoning rules that have choked housing construction.
“It really happened around the end of the 1980s,” said Rachel Heller, CEO of Citizens’ Housing and Planning Association, a Boston-based affordable housing nonprofit. “We had been producing double the amount of housing we are now. It was in that time communities put a lot of measures in place to limit growth.”
Anxiety over rising school costs also prompted some communities to boost the size of building lots, with the thinking that more expensive homes on larger lots would yield more local property tax payments and fewer school children.
By the early 2010s, one acre – roughly the size of football field — had become the average-sized lot for new homes in the 155 suburban communities inside I-495, according to the Massachusetts Housing Partnership, a public nonprofit housing agency.
Combined with what has been a relatively thriving local economy, housing supply has far outstripped demand.
While Massachusetts gained 421,000 new jobs in the 2010s and added another 336,000 residents, just 114,000 new housing units of all types were built, Clark Ziegler, executive director of the Massachusetts Housing Partnership, testified last year at the State House on behalf of Baker’s stalled Housing Choice Bill.
“Those trends are simply unsustainable,” Ziegler said.
In addition, the supply of easily developable land shrank, leaving sites that are more difficult to win approval to build on, while also driving up their price.
It costs at least $600,000 to build a standard, four-bedroom, 2,000-square-foot home, a 2015 study by the Boston Foundation found, a number that has only continued to rise.
“The cost structure is so high you cannot build for the typical middle-class and working-class family,” said Barry Bluestone, professor emeritus of political economy at Northeastern University and a leading housing expert.
STARTER HOME VISION
It was against that backdrop that veteran homebuilder Jeff Rhuda and John Smolak, a real estate attorney, began a decade ago to push for state legislation to help resurrect the affordably-priced starter homes.
Prominent members of the Home Builders & Remodelers Association of Massachusetts, the pair watched with dismay as the number of homes built in the state steadily dropped over the years.
“I have three adult children and only one can afford to live in this state, and he’s a lawyer,” said Rhuda.
Rhuda and Smolak helped draft a proposal to provide incentives to communities that open their doors to subdivisions of less-expensive starter homes. Rhuda viewed the effort as good for business – and good for young people in the same boat as his children. “There are good, altruistic reasons to do it — and make a dollar while you do it,” he said.
Rhuda and other developers say there is a huge market opportunity in building a subdivision of 50 or 60 $400,000 homes, as opposed to 16 homes on two- or three-acre lots priced at $1 million each, a more typical scenario today.
“The buyer pool in that range is huge,” Rhuda said. “I don’t think you could keep up with the demand.”
Rhuda and Smolak were briefly elated when the Legislature in 2016 amended the state’s multifamily housing incentive program, known as 40R, to include the Baker administration’s starter-home provision. But their enthusiasm faded quickly.
The pair said they were turned off by a complex application process geared toward major apartment developers with the financial resources to slog through months or even years of state and local red tape. However, maybe the biggest turnoff was the state’s insistence that starter homes be subject to the same smart-growth rules as large apartment and condo projects, requiring them to be built near a rail station or other transportation hub, or, failing that, a commercial district.
That all but rules out the construction of a subdivision of starter homes in a more outlying area of town, where land is less costly and there is a more natural fit, the builders contend. Instead, Smolak said, they found themselves competing with big apartment developers for more expensive, semi-urban sites near town centers.
“We had great hopes,” Smolak said. “It ultimately has become a disappointment, to say the least.”
Of the more than 1,000 single-family homes he has helped build during this career, Rhuda said, none would have met the state’s smart-growth requirements.
“It’s a classic example of a well-intended law getting completely botched up by the regulators,” he said. “It’s trying to fit a square peg in a round hole,” he said of the attempt to join smart-growth principles with the starter-home initiative.
So far, it’s not just developers who are giving the new program a cold shoulder, but local officials as well.
A spokesperson for the state Department of Housing and Community Development was unable to point to any community in Massachusetts that has either created a new starter home district or has taken serious steps toward rolling one out. Asked if there has even been any serious interest, the spokesperson pointed to Salem.
Tom Daniel, Salem’s planning director, said he was intrigued by new initiative, only to find out the site he hoped to use – small lots set aside in the 1940s for returning World War II veterans – had been reclassified as conservation land in the 1980s.
“That is one of the things you run into in a community like Salem,” said Daniel, adding he couldn’t comment on the starter-home program’s rules because he never got that far. “The easy sites are pretty much all developed.”
Pushing back, state officials note that while Legislature cleared the way for the new program in 2016 with its amendment, the final regulations governing the starter home program only went into effect in December 2017.
The rules governing the new starter home initiative were hammered out by a “diverse coalition of municipal and regional planners, builders, subject matter experts in transportation and housing development, and other government agencies,” a spokesperson for the state housing department wrote in an email. “It’s only been two years – not a lot of time for municipalities to respond,” she said in an interview earlier this year.
State officials contend there is no negotiating away the smart-growth guidelines and that there is no appetite for subsidizing new single-family home construction on fields or other outlying green space.
“If the state is going to provide incentives for this kind of development, they should hold true to their principles,” the state housing department spokesperson said. “There are many places within municipalities where these can be placed.”
Andre Leroux, former executive director of the Massachusetts Smart Growth Alliance, said he understands the state’s concern. Still, Leroux questions the decision to fold the starter home initiative into the larger and much more well-established 40R program, which was designed to encourage construction of apartments and condos near train stations.
Under the 40R program, communities earn incentive payments based in part on the number of units permitted and developed. That gives apartment developers with plans for dozens or even hundreds of units an advantage over homebuilders looking to build, say, 10 homes on two acres.
Leroux, now an independent housing consultant, wonders whether the starter home program needs to be reconstituted as a separate initiative, focused on sites just outside of 40R development zones around train stations and downtowns that are zoned for larger, multifamily projects.
“Why would a developer come forward or a municipality go through all that effort to create a 10-home starter district?” Leroux asks.
Steve Sadwick, assistant town manager in Tewksbury and the former community development director there, served on the panel that helped advise the state on the rules for the starter home program. Sadwick at the time represented the state chapter of the American Planning Association. He says the document he reviewed was already in draft form. He agrees that requiring single-family homes to be built near train stations – a key tenet of 40R – is a mismatch.
“To try and put a four-unit-per-acre subdivision near a train station is a challenge,” Sadwick said.
The rules governing the initiative are too complex in his view, making it difficult to explain to town meeting voters, who ultimately would have to approve plans for a starter home zoning district.
“They are very lengthy and complicated and, from a municipal planning perspective, when we have to take things like this to an open town meeting, it’s hard to explain the ins and outs of the program,” Sadwick said.
The failure of Baker’s Housing Choice legislation to break free from legislative limbo has not helped the starter home program’s chances, say both supporters and critics of the program.
Baker’s proposed Housing Choice legislation would give communities the option to make zoning changes with a simple majority vote. That’s a big change from the required two-thirds majority that now reigns across the state, and which makes any zoning change – including launching a starter home zoning district – that much more difficult.
“The state had the right idea – it was trying to increase the number of homes for young families,” said DiPlacido, the Wrentham homebuilder. He said getting two-thirds approval for such a plan at a town meeting “is incredibly difficult.”
But Angus Jennings, the town manager in West Newbury, said the flaws in the program are significant enough that he doubts the single-family home initiative would draw much interest, either from communities or developers, even if the governor’s Housing Choice legislation passes.
A consultant at the time working with the state homebuilders’ association, Jennings served on the advisory panel for the starter home regulations.
He thinks the deal killer is the requirement that any new starter home subdivision be walkable to either a train station or a local store or town building. Jennings recalled some members of the panel advocated, as an alternative, for the evaluation of walkability to include pedestrian amenities built as part of the overall housing development. But he said program administrators at the state housing and economic development office refused to give ground on walkability.
“It seemed like a very narrow-minded understanding of how things work,” Jennings said. “They wanted the neighborhood to be walkable to a pharmacy or a library. I get that philosophically, but this is the real world.”
Scott Van Voorhis is a freelance reporter and writer who lives in Natick. He has reported on housing issues for the past 25 years for the Boston Herald, Boston Business Journal, Banker & Tradesman and Boston Globe.