The Greater Boston Housing Report Card 2002, issued in October 2002, was the first assessment of how the region was doing against the New Paradigm goals. It concluded that, despite the call for a concerted effort to expand the region’s housing supply, production continued to lag substantially behind demand, leading to even higher housing prices and rents throughout the region.
With the region still experiencing slow economic growth and having shed tens of thousands of jobs, with the rental market the softest it has been in three years, and home price appreciation moderating, the question may be asked, “Is 15,600 new units per year for the Boston PMSA (equivalent to about 18,000 units per year for the larger area covered by the Housing Report Card) still an appropriate goal?” The 2003 Report Card addresses that question. It examines the issues that influence housing markets and analyzes recent trends and production levels. It also probes the characteristics, as well as the level, of federal, state and local support for housing. And it takes a closer look at which communities within the region are taking steps to expand the supply and preserve and improve the existing inventory.
Between 1990 and 2000 the Boston region experienced an economic boom in which unemployment fell, household income rose and workers were attracted to the region, resulting in an increase of nearly 13,000 households per year. Then during the Recession of 2001, the number of jobs in the Boston PMSA declined by 165,000 between December 2000 and August 2003, raising the unemployment rate again. During this time, the net number of household declined, however homeownership increased while renter households experiences a large decrease. An economic upturn was observed between August and December 2003 where 17,000 jobs were added in the Boston PMSA, to suggest more growth in 2004 and 2005.
Following significant increases in rents in the latter half of the 1990s, typical rents paid by existing renters declined about 10% since 2000. The median advertised rents in the City of Boston and many of the surrounding communities experienced a decline in rents as well, between 2001 and 2003. Although rents became more affordable during this time, in 16 of the 20 Boston area communities, advertised median rents still exceeded 30% of that communities median renter income. Unlike rents, home prices continued to rise through this period of recession and weak growth. As a result, in 2003 the median income homebuyer could afford to purchase a median priced home in only 70 of the 161 communities in Greater Boston.
Overall production increased in 2003 from the previous year, but there was a shift in production from single family homes to multi-family. The number of affordable units also increased significantly from 2002 as well. Vacancy rates of rental units increased which led to a drop in prices, however, homeowner vacancy rates continued to decline up to 2003, causing the continues rise in home prices. There is also evidence that homebuyers are moving further from Boston to find affordable homes.
The improvement in affordable productions owes much to the role of Chapter 40B and the Affordable Housing Trust Fund. The total 40B comprehensive permits issues continued to increase between 2000 to 2003. The Affordable Housing Trust Fund also increased usage between this time as well.
Total combined spending by the State and Federal government remained essentially flat since 2001, but overall numbers mask significant cuts to increase new housing supply. The Federal contribution rose from 2001 to 2003 but mostly for rental assistance, not new housing. In 2003 the State portion now only supports 35% of the combined funding, down from 45% in 2001.
The September 2000 New Paradigm report indicated a need to boost production to roughly 15,600 housing units per year, in order to moderate rents and housing prices with the median income. Because of a lag in the economy and production levels between 2000 and 2003, this report recommends an even higher annual production of 18,000 units per year.