Despite a great deal of hand-wringing about the current Greater Boston housing market and dire warnings of a potentially deflating housing bubble, the market in 2005 and the first half of 2006 has actually remained fairly stable in the face of rising interest rates, a continued net out-migration of the region’s population, and a relatively weak economy. Meanwhile, rents actually increased a bit, for the first time in three years, a likely response to the slowly improving job market.
Moreover, there is some good news on the production front including building permits for 16,000 housing units issued in 2005. And permitting through the first six months of 2006 is about 1 percent above the rate for the same time period in 2005. However, the improved annual production levels should not suggest to anyone that the region has met its housing challenge, as Greater Boston continues to under-produce single-family homes in any but the highest price ranges, and the development process in Massachusetts remains broken.
Even with the region’s high home prices beginning to moderate, Greater Boston remains one of the most expensive home-buying markets in the nation with a median selling price of nearly $382,000. Likewise, it remains one of the costliest rental markets. With rents stabilizing at an average of $1,500 per month, more than half of all renters in the region are paying more than 30 percent of their incomes for rent and 21 percent are spending more than half.
Most importantly, while the region’s housing supply is growing, what continues to be missing in the mix, except where permitted under Chapter 40B, is “workforce housing:” single-family and townhouse units for young families with children. The lack of housing for this important market segment continues to discourage 25- to 34-year-olds from remaining in the region or moving here in the first place. And this raises a cautionary barrier to businesses that want to expand in the state or relocate here. The result: housing continues to be the No. 1 economic development challenge facing the Commonwealth.
The overall conclusion of The Greater Boston Housing Report Card 2005-2006 is that significant progress is being made to increase new housing production in the region, but a great deal more remains to be done. We are building more of the housing for the demographic we are becoming—age-restricted for retirees and smaller apartments for young singles and couples before they have children—and not the housing for the demographic we need—young families and middle-income wage-earners—if we are to maintain a healthy economy with rapid employment growth.