The Continuing Housing Crisis and Strategies for Affordability
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Benjamin Tafoya
January 22, 2024
There is a continuing housing crisis in the United States for both the availability and affordability of apartments and single-family homes. According to information from the US Bureau of Labor Statistics, the shelter index in US cities has risen by about 20 percent since the onset of the COVID-19 pandemic in March 2020. In a column from eight years ago, I commented on the same development, and now, if anything, the inflationary pressures in housing are only worse. Eastern Massachusetts is a relatively expensive location for purchasing or renting housing, and the state and local governments are urgently developing policy solutions.
We see this problem even as housing units have increased over the past two decades. As reported by the U.S. Census, the number of year-round housing units significantly increased from 2000 to 2020. Overall, Massachusetts experienced an increase in housing of approximately 14.4 percent. Ignoring the tiny Dukes and Nantucket counties, the most significant changes are in the most populous counties:
- Suffolk 19%
- Plymouth 19%
- Worcester 18%
- Middlesex 14%
- Essex 14%
- Norfolk 14%
This expansion is consistent with population growth. So why the stress?
The phrase “housing market” is an abstraction, as there are, in fact, many housing markets. For example, people come into the market as they move away from family after completing their education, when they build a household with a partner, when children come, or when couples want to downsize at retirement, etc. Consumers also factor in geography when looking for housing that meets their needs as they want to be near employment, family, friends and cultural amenities. These factors make for many markets which consumers then look toward to meet their changing needs.
A significant explanation for stress in the market results from the private sector building types of units inconsistent with needs across these ranges of consumers. While overall supply is increasing, it needs to catch up with the demand in the categories of affordable housing, starter homes, duplexes/two-decker/three-decker units. In recent years, the multi-family units built across the Boston metro area have been for higher-income consumers. This mismatch increases homelessness and drives prices up for lower-income communities, increasing housing insecurity.
The other likely issue is the investment funds’ purchase of homes and multifamily dwellings. This has been documented recently by the Metropolitan Area Planning Commission (MAPC) in a recent report, “Homes for Profit,” which makes the stunning observation that 21 percent of residential property transactions between 2004 and 2018 were made by investors—entities looking to purchase property for profit rather than shelter.
Massachusetts Governor Healey has proposed a housing bond bill of $4 billion. The most significant portion of funds will go to rehabilitating and maintaining existing state-run and municipally-run public housing. This investment is deemed as long past due by the Administration. Other money goes to tax credits, energy efficiency mechanisms and subsidies to encourage affordable production. The goal is 22,000 new affordable units and 12,000 middle-income units. As a ten-year bond, the substantial investment is not enough to address the scope of the problem.
The National Low Income Housing Coalition estimates that Massachusetts lacks 175,000 affordable housing units for very low-income families. The Boston Globe has run a series on the housing crisis in Massachusetts, featuring an article about construction costs that is very relevant to this discussion. The article clarifies that the dual nature of the markets for housing—as shelter for a basic human need and as an investment asset for those with capital—creates a market failure. The financialization of housing causes distortions in the market, making it more expensive for those looking for shelter to meet their needs.
The question arises regarding whether it is good public policy to continue transferring housing funds to the same private sector, profiting from housing speculation and making various housing types unaffordable for working families. For example, Massachusetts offers rental vouchers through a program underfunded by hundreds of millions of dollars annually. Small amounts of funding each year flow through low-income housing tax credits. Other programs are rather complex to navigate and community action agencies, such as in Somerville, helps applicants navigate the system.
Maryland’s Montgomery County has created a housing construction vehicle, allowing the government to act as the housing developer and owner. The financing is self-sustaining for the agency, which can borrow using public rates. Aggressive government action can reduce the cost of housing by reducing land acquisition, approvals, financing and elimination of profit.
The government is responsible for stepping in and providing services when the private sector is unable or unwilling to deliver such services at a rate that meets societal needs. Housing is as critical to an acceptable standard of existence as health care, food and safety.
Author: Dr. Ben Tafoya is an adjunct faculty member teaching economics at Northeastern University in Boston. Ben is the author of a chapter on social equity and public Administration in the recently published volume from Birkdale, Public Affairs Practicum. He can be reached at [email protected] or on Threads at bentafoya . All opinions and mistakes are his alone.
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The Continuing Housing Crisis and Strategies for Affordability
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Benjamin Tafoya
January 22, 2024
There is a continuing housing crisis in the United States for both the availability and affordability of apartments and single-family homes. According to information from the US Bureau of Labor Statistics, the shelter index in US cities has risen by about 20 percent since the onset of the COVID-19 pandemic in March 2020. In a column from eight years ago, I commented on the same development, and now, if anything, the inflationary pressures in housing are only worse. Eastern Massachusetts is a relatively expensive location for purchasing or renting housing, and the state and local governments are urgently developing policy solutions.
We see this problem even as housing units have increased over the past two decades. As reported by the U.S. Census, the number of year-round housing units significantly increased from 2000 to 2020. Overall, Massachusetts experienced an increase in housing of approximately 14.4 percent. Ignoring the tiny Dukes and Nantucket counties, the most significant changes are in the most populous counties:
This expansion is consistent with population growth. So why the stress?
The phrase “housing market” is an abstraction, as there are, in fact, many housing markets. For example, people come into the market as they move away from family after completing their education, when they build a household with a partner, when children come, or when couples want to downsize at retirement, etc. Consumers also factor in geography when looking for housing that meets their needs as they want to be near employment, family, friends and cultural amenities. These factors make for many markets which consumers then look toward to meet their changing needs.
A significant explanation for stress in the market results from the private sector building types of units inconsistent with needs across these ranges of consumers. While overall supply is increasing, it needs to catch up with the demand in the categories of affordable housing, starter homes, duplexes/two-decker/three-decker units. In recent years, the multi-family units built across the Boston metro area have been for higher-income consumers. This mismatch increases homelessness and drives prices up for lower-income communities, increasing housing insecurity.
The other likely issue is the investment funds’ purchase of homes and multifamily dwellings. This has been documented recently by the Metropolitan Area Planning Commission (MAPC) in a recent report, “Homes for Profit,” which makes the stunning observation that 21 percent of residential property transactions between 2004 and 2018 were made by investors—entities looking to purchase property for profit rather than shelter.
Massachusetts Governor Healey has proposed a housing bond bill of $4 billion. The most significant portion of funds will go to rehabilitating and maintaining existing state-run and municipally-run public housing. This investment is deemed as long past due by the Administration. Other money goes to tax credits, energy efficiency mechanisms and subsidies to encourage affordable production. The goal is 22,000 new affordable units and 12,000 middle-income units. As a ten-year bond, the substantial investment is not enough to address the scope of the problem.
The National Low Income Housing Coalition estimates that Massachusetts lacks 175,000 affordable housing units for very low-income families. The Boston Globe has run a series on the housing crisis in Massachusetts, featuring an article about construction costs that is very relevant to this discussion. The article clarifies that the dual nature of the markets for housing—as shelter for a basic human need and as an investment asset for those with capital—creates a market failure. The financialization of housing causes distortions in the market, making it more expensive for those looking for shelter to meet their needs.
The question arises regarding whether it is good public policy to continue transferring housing funds to the same private sector, profiting from housing speculation and making various housing types unaffordable for working families. For example, Massachusetts offers rental vouchers through a program underfunded by hundreds of millions of dollars annually. Small amounts of funding each year flow through low-income housing tax credits. Other programs are rather complex to navigate and community action agencies, such as in Somerville, helps applicants navigate the system.
Maryland’s Montgomery County has created a housing construction vehicle, allowing the government to act as the housing developer and owner. The financing is self-sustaining for the agency, which can borrow using public rates. Aggressive government action can reduce the cost of housing by reducing land acquisition, approvals, financing and elimination of profit.
The government is responsible for stepping in and providing services when the private sector is unable or unwilling to deliver such services at a rate that meets societal needs. Housing is as critical to an acceptable standard of existence as health care, food and safety.
Author: Dr. Ben Tafoya is an adjunct faculty member teaching economics at Northeastern University in Boston. Ben is the author of a chapter on social equity and public Administration in the recently published volume from Birkdale, Public Affairs Practicum. He can be reached at [email protected] or on Threads at bentafoya . All opinions and mistakes are his alone.
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