Detouring the Mass Exodus: Housing as an Economic Development Strategy

Detouring the Mass Exodus: Housing as an Economic Development Strategy

Barry BluestoneDean, School of Social Science, Urban Affairs, and Public Policy

Director, Center for Urban and Regional Policy Northeastern University

Northeast Association of REALTORS

Holiday Inn

Tewksbury, Massachusetts

October 3, 2007

Presentation Outline

Employment Trends Population Dynamics Housing Prices Cost of Living across U.S. Metro Areas Impact of Housing Prices on Employment Impact of Housing Prices on Migration Housing Price/Vacancy Relationship Chapter 40R & 40S

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Jan-9

3

Jan-9

4

Jan-9

5

Jan-9

6

Jan-9

7

Jan-9

8

Jan-9

9

Jan-0

0

Jan-0

1

Jan-0

2

Jan-0

3

Jan-0

4

Jan-0

5

Jan-0

6

Jan-0

7

US MA

Economic Activity Index: Massachusetts vs. U.S. (1993-2007)

January 1993 – October 2001

Leading the Nation

October 2001 – June 2007Lagging the Nation

Total Massachusetts Non-Farm Employment, Seasonally Adjusted

2800

2900

3000

3100

3200

3300

3400

3500

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Feb 2001 - Dec 2003: -205,100

Dec 2003 - Dec 2006: +79,100

Jan 2007 - Jun 2007: +29,200

Feb 2001: 3,384.0

Dec 2003: 3,178.9

Jun 2007: 3,281.2

Jan 1996: 2,997.9 Jan 1996 - Feb 2001: + 386,100

Massachusetts Employment Picture1996-2007

Percent Change in Total Non-Farm Employment (Seasonally Adjusted) (January 2001 - April 2007)

-3.3%

0.2%

1.3%1.5%

1.7%

3.6%3.9%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

MA CT ME VT NH RI U.S.

-111,400 jobs

+5,213,000 jobs

Source: U.S. Bureau of Labor

Employment Growth (2000-2006) Massachusetts vs. U.S.

-30%

-20%

-10%

0%

10%

20%

30%C

on

stru

ctio

n

Hig

h T

ech

Mfg

Fin

anci

alS

ervi

ces

Co

mp

ute

rS

ervi

ces

Ed

uca

tio

nS

ervi

ces

Hea

lth

Car

e

Per

cen

tag

e C

han

ge

Mass

U.S.

U.S. Bureau of Labor Statistics

Massachusetts Population

5737.0

6016.4

6349.1 6394.8 6411.6 6417.6 6407.4 6398.7 6402.5

5000.0

5200.0

5400.0

5600.0

5800.0

6000.0

6200.0

6400.0

6600.0

1980 1990 2000 2001 2002 2003 2004 2005 2006

Popu

latio

n (in

thou

sand

s)

U.S. Bureau of the Census

Massachusetts Net Migration (2000-2006)

33,292 33,347 31,78529,041

26,51530,285

-22,892

-39,506

-48,514

-61,980-60,053

-49,528

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006

Foreign Immigration Internal Migration

Percent Change in Population by Age Cohort 2000-2005

-0.55

-8.02-8.69 -8.91

-0.03

21.96

-7.37

5.69

-2.35

1.79

-2.77

2.97

24.09

-0.66

-15

-10

-5

0

5

10

15

20

25

30

Under 5 5-19 20-24 25-34 35-54 55-64 65+

MA

US

Where did they go?

TX

CA

MT

AZ

ID

NV

NM

CO

IL

OR

UT

KS

WY

IA

SD

NE

MN

ND

FL

OK

WI

MO

AL

WA

GA

AR

LA

MI

IN

NY

PA

NC

MS

TN

KYVA

OH

SC

ME

WV

MI VTNH

MD

NJ

MA

CT

DE

RI

Net Migration* Betweeen Massachusetts and Competitor States1990-2002

*Thicker line represents more migration

State Net Migration from State

Florida -99,082 New Hampshire -78,201 California -23,978 Arizona -11,033 North Carolina -8,983 Washington -4,516

The Cost of Living Challenge

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007*

Pri

ce

Single Family Home Prices (1996-2007

1996-2005: +139%

2005-2007: - 10%

2005Class A Apartment Rents

$1

,95

3

$1

,82

5

$1

,74

5

$1

,68

6

$1

,67

7

$1

,63

2

$1

,57

9

$1

,52

6

$1

,51

7

$1

,46

6

$1

,43

9

$1

,32

5

$1

,31

6

$1

,24

1

$1

,15

5

$1

,11

1

$1

,04

3

$1

,01

8

$1

,01

2

$9

87

$0

$500

$1,000

$1,500

$2,000

$2,500

Source: Forbes Magazine

Calculations based on 900 Sq.ft. Apartment

Housing Affordability in Greater Boston

2000 2005Renter Households paying >30% of Income

39.2% 50.1%

Renter Households paying >50% of Income

18.4% 25.0%

Owner-Occupied Households paying >30% of Income

26.7% 39.3%

Owner-Occupied Households paying >50% of Income

9.0% 13.9%

Housing Costs - 4 Person Family

$1,539$1,437

$1,313 $1,266$1,187

$1,124

$929$847 $834 $805 $779

$673

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

Mo

nth

ly C

ost

s

Source: Economic Policy Institute, “Family Budget Calculator, 2005”

Annual Cost of Living: 4 Person Household

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

$65,000

$70,000

1 2 3 4 5 6 7 8 9 10

Cost of Living Decile

De

cil

e A

ve

rag

e C

os

t o

f

Liv

ing

Boston$64,656


Universe: 304 U.S. Metro Areas

Boston Family Budget – 4 Persons

Housing Costs: 7th Highest MSA Child Care: 7th Highest MSA Health Care: 7th Highest MSA Personal Care: 6th Highest MSA Fed/State Tax: 2nd Highest MSA

Total Cost: 1st Highest MSA

Economic Policy Institute, Family Budget Calculator, 2005

Among 304 U.S. Metropolitan Areas

Top Decile: Metro Area Cost of Living

Boston $ 64,656Washington (D.C. portion) $ 61,440Nassau-Suffolk, NY $ 60,780 Stamford-Norwalk, CN $ 60,720 Lawrence (Mass. portion) $ 59,280 New York, NY $ 58,656 Barnstable-Yarmouth, MA $ 58,236 San Francisco, CA $ 57,624 Worcester (Mass. portion) $ 55,704Springfield, MA $ 55,320Minneapolis-St. Paul, MN $ 54,948 Nashua, NH $ 54,852 Santa Cruz-Watsonville, CA $ 53,808Oakland, CA $ 53,412 San Jose, CA $ 52,800 Pittsfield, MA $ 52,632 Rochester, MN $ 51,288

Monmouth-Ocean, NJ $ 50,736San Diego, CA $ 50,088Newark, NJ $ 49,992New Haven-Meriden, CN $ 49,848Honolulu, HI $ 49,824Philadelphia (Pa. portion) $

49,716Boulder-Longmont, CO $ 49,596Bridgeport, CN $ 49,272Manchester, NH $

49,152Santa Rosa, CA $ 48,924Albany-Schenectady-Troy, NY $ 48,900Hartford, CN $ 48,684Trenton, NJ $ 48,576Rochester, NY $ 48,540

Economic Policy Institute: Family Budget Calculator


A Tale of Two CitiesBasic Budget2 Parents, 2 Children

Boston

Monthly Housing $1,266

Monthly Food $ 587

Monthly Child Care $1,298

Monthly Transportation $ 321

Monthly Health Care $ 592

Monthly Other Necessity $ 500

Monthly Taxes $ 824

Monthly Total $5,388

Annual Total $64,656

Raleigh-Durham-Chapel Hill

Monthly Housing $ 779

Monthly Food $ 587

Monthly Child Care $ 866

Monthly Transportation $ 358

Monthly Health Care $ 368

Monthly Other Necessity $ 369

Monthly Taxes $ 350

Monthly Total $3,677

Annual Total $44,124

A Tale of Two Cities


Regional Average Monthly Housing Costs (2004)

$892.60

$708.46 $692.82$617.23 $616.29 $566.14 $583.67

$720.00

$914.63

-$100

$100

$300

$500

$700

$900

$1,100

$1,300

Hou

sing

Cos

ts

Boston ($1,266)


New Housing Research

New England Public Policy Center Alicia Sasser, Bo Zhao, and Darcy Rollins

The Rappaport Institute for Greater Boston Edward L. Glaeser

The Center for Urban and Regional Policy Barry Bluestone

New England Public Policy Center Region-wide Analysis of Housing Affordability Owner-Occupied Housing is often not affordable and the

problem is getting worse Young professionals are having a more difficult time

buying their first homes Very low income families being squeezed out of the

market by working and middle income families seeking housing

Easier access to mortgage money increased demand Strict regulations on building is constraining supply Need policies to increase supply of working and middle

income housing

Rappaport Institute Study Limits on housing construction are responsible

for the recent loss in population in Massachusetts

Restricting the production of housing leads to greater volatility in housing prices

Significant price increases associated with restricted supplies of housing subsequently appear to lead to declines in employment and incomes

CURP Study of Housing, Employment and Population

Metro areas with highest cost of living are suffering slow employment growth or outright job loss

Metro areas with the highest cost of living are suffering net out-migration of domestic population

Paradox: The shortage of housing supply can lead to a future sharp decline in housing prices … as jobs and workers leave the state

Employment Growth (%) (2000-2004)

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

1 2 3 4 5 6 7 8 9 10

Housing Price Decile

Per

cent

Cha

nge

Low Price High Price

Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of Labor Statistics


0.95%

2.91%

2.29%

0.86%

1.53%

0.68%

-0.68%

0.12%

-0.62%

1.49%


-6.00%

-5.00%

-4.00%

-3.00%

-2.00%

-1.00%

0.00%

1.00%

2.00%

3.00%

4.00%

1 2 3 4 5 6 7 8 9 10

Housing Price Decile

Per

cent

Cha

nge

Boston MSA (-4.9%)



0.20

0.10

0.00

-0.10

-0.20

$1,600$1,400$1,200$1,000$800$600$400

Quadratic

Observed

Monthly Housing Cost

Employment Change (%) (2000-2004)

Boston MSA

%∆Emp(2000-2004) =

-.1466 +.0000396 Housing Cost (4.07) -2.291E-007 Housing Cost SQ (4.04)

N = 245 Adj. R Square = .056


-1%

0%

1%

2%

3%

1 2 3 4 5 6 7 8 9 10


Per

cent

Cha

nge

Low Cost High Cost


-0.21%

0.93%

-0.02%

0.84%1.06%

0.50%

1.09%

1.98%

0.62%

2.53%


Internal Net Migration (%) (2000-2004)

-6.00%

-4.00%

-2.00%

0.00%

2.00%

4.00%

1 2 3 4 5 6 7 8 9 10

Housing Cost Decile

Decil

e P

erc

en

t

Boston MSA (-5.2%)

Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census


0.1500

0.1000

0.0500

0.0000

-0.0500

-0.1000

-0.1500

$1,600$1,400$1,200$1,000$800$600$400

Monthly Housing Costs

Quadratic

Observed

Internal Migration (% Change)



Boston MSA

%∆Internal Migration =

- .146 + .000399 Housing Costs (7.03) - 2.475E-007 Housing Costs SQ (7.39)

N = 304 Adj. R Square = .153

0.1500

0.1000

0.0500

0.0000

-0.0500

-0.1000

-0.1500

$1,600$1,400$1,200$1,000$800$600$400

Monthly Housing Costs

Quadratic

Observed




Boston MSA

%∆Internal Migration =

- .146 + .000399 Housing Costs (7.03) - 2.475E-007 Housing Costs SQ (7.39)

N = 304 Adj. R Square = .153

San FranciscoStamford-NorwalkSan JoseBostonOaklandNassau-Suffolk

Internal Net Migration (2000-2004)

-2.50%

-2.00%

-1.50%

-1.00%

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

1 2 3 4 5 6 7 8 9 10


Dec

ile

Per

cen

t

-2.12%

0.16%

1.54%1.40%

2.19%

1.04%

0.60%0.41%

0.19%

0.39%

Economic Policy Institute, “Family Budget Calculator, 2005”; U.S. Bureau of the Census

Universe: 304 U.S. Metro Areas Boston

What is the relationship between housing prices and housing supply?

Hou

sing

Pric

e A

ppre

ciat

ion

(199

5-20

05)

Housing Price Appreciation vs. Vacancy Rates

Office of Federal Housing Enterprise Oversight; U.S. Census Bureau


350.00

300.00

250.00

200.00

150.00

100.00

50.00

6.005.004.003.002.001.000.00

Average Vacancy Rate (2002-2004)

Cubic

Observed

Housing Price Appreciation vs. Vacancy Rates

Office of Federal Housing Enterprise Oversight; U.S. Census Bureau


Hou

sing

Pric

e A

ppre

ciat

ion

(199

5-20

05)

Housing Price Decline – Metro Areas

Peak Qtr. HPI IndexTrough Qtr.

HPI Index %CHG Recovery

Gary, IN 1981:I 63.42 1984:III 56.68 -10.6% 7 years

BOSTON, MA 1988:IV 112.95 1992:II 99.2 -12.2% 9 years

Duluth, MN 1988:II 114.18 1991:III 99.27 -13.1% 11 years

WORCESTER, MA 1989:IV 117.26 1995:I 100 -14.7% 9 years

SPRINGFIELD, MA 1989:iv 117.43 1995:i 100 -14.8% 11 years

Honolulu, HI 1993:II 101.55 1999:III 84.69 -16.6% 9 years

Detroit, MI 1981:IV 61.29 1982:IV 49.69 -18.9% 5 years

Hartford, CN 1988:III 126.4 1995:I 100 -20.9% 13 years

Los Angeles, CA 1990:III 127.16 1996:III 99.7 -21.6% 12 years

Lafayette, LA 1982:iii 115.27 1988:IV 65.53 -43.2% 15 years

U.S. Office of Federal Housing Enterprise Oversight

Chapter 40R and 40S

New Steps to Solve the Massachusetts Housing Crisis … and protect the Commonwealth’s economy

Chapter 40R Communities Amesbury Brockton Chelsea Dartmouth Grafton Haverhill Kingston Lakeville

Lunenburg Lynnfield Natick North Andover North Reading Northampton Norwood Plymouth Total: 5,813 Units

Filed for 40R Filed for Technical Assistance

Belmont Boston Gardner Lawrence

Total: 2,101 Units

Holyoke Newbury Reading Westport

Total 1,024 Units

Grand Total: 8,938 Units

Conclusions The high price of housing in Massachusetts is indeed a

significant factor in the decline in employment and population

The high cost of living beyond housing – including health care, day care, and taxes – contributes to the decline in employment and population

An increase in housing supply could “inoculate” homeowners against a long-term precipitous decline in housing values by improving the job climate and discouraging outmigration

Chapter 40R and 40S are the beginning of a solution

New Starter Home Legislation will help as well

Documents

Detouring the Mass Exodus: Housing as an Economic Development Strategy