This story ran on page D1 of the Boston Globe on 10/1/2002.
© Copyright 2002 Globe Newspaper Company.

Home costs tied to construction dip
Prices rise by 50% in region since '98

By Anthony Flint, Globe Staff, 10/1/2002

A drop in construction of new homes spurred a 50 percent rise in home prices in Greater Boston since 1998, and a nearly 40 percent spike in rents since 1995, a new report set to be released today shows.

The decline in housing creation converged with a booming real estate market that invited buyers and prospective tenants to engage in bidding wars for those precious few homes and apartments available, according to the Greater Boston Housing Report Card, prepared by The Boston Foundation, Northeastern University, and a housing advocacy group.

Most housing construction in Eastern Massachusetts is taking place in wealthy outer suburbs along Interstate 495, the report also found, while rents in what have been considered lower-cost communities - Everett, Medford, and Malden, for example - have been steadily climbing. Only 12 of the 161 cities and towns studied, from Salisbury to Plymouth, Pepperell to Blackstone, have housing stocks that are more than 10 percent affordable.

Twice as many housing units would need to be produced to moderate prices in the region, said Northeastern University economist Barry Bluestone, chief author of the report. But instead, the production trend went in the opposite direction over the last few years - leaving homebuyers and tenants to fight over a smaller pie.

''Despite all the talk about the need to produce more housing, we didn't, so prices went through the roof. It's exactly what economics predicts,'' said Bluestone, head of Northeastern's Center for Urban and Regional Policy.

In the last four years, median home prices in the area climbed from $198,500 to $298,350, while rents rose from $744 to $1,035 between 1995 and 2000.

Meanwhile, the average number of new housing units of all price ranges created annually from 1995 to 1999 was 8,460, the report says. The market would need to create 15,660 units per year to ease the affordable housing crisis, according to a 2000 report on housing sponsored by the Archdiocese of Boston and other organizations. But from 1999 to 2002, the new report found, housing production declined slightly, to the current rate of 8,194 new units per year.

Without market growth, the ''vacancy rate'' - the portion of homes and apartments that are available in any given year - declined from 6.7 percent in 1990 to 2.7 percent in 2000 for apartments, the report says, and from 1.7 percent to 0.6 percent over the same period for homes.

As fewer homes and apartments became available, the number of people looking for housing in Massachusetts continued to rise, the report says. Demand was also boosted by people looking at real estate as an investment alternative to the stock market, Bluestone said.

Housing growth varied by community, rising significantly in towns such as Bolton, Boxborough, Mendon, Kingston, and Hopkinton - where the number of housing units climbed by 38 percent from 1990 to 2000. In those communities, many along I-495, most of the homes are large, single-family units, with prices commonly in the $500,000 to $600,000 range.

More than three-quarters of the affordable housing added to the suburbs was built under the state's affordable housing law, known as Chapter 40-B, which speeds housing projects in communities where less than 10 percent of the housing is deemed ''affordable,'' said report coauthor Bonnie Heudorfer.

In traditionally lower-cost communities closer to Boston, meanwhile, rents climbed with the demand, though they remained relatively low. While the average monthly rents advertised in Boston and Cambridge hover around $1,700 for a two-bedroom, in Everett, for example, the average rent is $1,200 - a 55 percent increase from the $775 average rent in 1998.

These ''inner ring'' communities, historically a lower-cost alternative, could rapidly become expensive and desirable urban neighborhoods, similar to Somerville, the report's authors said.

Only 12 communities have a substantial number of homes and apartments that would be considered ''affordable'' to those making 80 percent of the community's median family income. Boston leads this group with nearly 20 percent of its housing considered affordable, followed by Chelsea, Cambridge, Lawrence, Lowell, and Lynn. ''Those communities are doing all the work,'' Bluestone said.

State funding for housing programs, the report also found, remained flat through the 1990s. Relative to the entire state budget, money for housing has fallen by a factor of four. ''Despite all the talk about the need for affordable housing, the state is not putting much money into it, and we're depending more on the federal government,'' Bluestone said.

The effects of this dearth of affordable housing ''runs the spectrum, from an increase in homelessness, to people who work at hospitals, child-care providers, even skilled professionals, who can't afford to live here,'' said Aaron Gornstein, executive director of the Citizens Housing and Planning Association, a housing advocacy group and one of the report's sponsoring organizations. ''It's why the business community is increasingly concerned,'' because the high cost of shelter is preventing good workers from relocating to Massachusetts, he said.

Paul Grogan, president of The Boston Foundation, said that the report card showed ''the tremendous resistance to dense forms of transit-oriented development'' much more common in Europe. Most people don't want to live in multifamily housing, and there is also great concern among neighbors about the effect of new residents on local school systems. More nonprofit community development organizations could help dense, multifamily and affordable housing gain acceptance in the suburbs, he said.

The housing report is part of the foundation's ''Indicators'' project, a regular collection of data and trends on issues facing the Greater Boston region. ''We want the region to be able to hold a mirror up to itself,'' Grogan said.

The housing report, to be released today, will be included in the next ''Indicators'' report, due out next year.

Anthony Flint can be reached at flint@globe.com.

This story ran on page D1 of the Boston Globe on 10/1/2002.
© Copyright 2002 Globe Newspaper Company.

Your comments as a visitor to the SAND website would be appreciated and forwarded for discussion.