Housing led us in to this recession. It will have to lead us out.

In back-to-back weeks, I found myself sitting alongside industry peers at The Boston Foundation. This time, we were there for the presentation of the 2011 Greater Boston Housing Report Card—an annual report put together by Northeastern University’s Dukakis Center.

Briefly, the report explains that at the core of our nation’s recession is the collapse of the housing market. The authors write that until the housing market recovers, there is little hope for increased economic growth.

As for Greater Boston, the region’s housing market has outperformed national averages. Production has not declined as much as in other areas (think: Las Vegas and cities that were in the midst of a construction boom when the housing bubble burst), and housing prices have not tumbled drastically. 

The report finds that despite this (relatively) good news, Greater Boston’s inner city areas continue to be plagued by foreclosures. These areas (including Lynn, Lowell, Lawrence, Revere and Dorchester) saw home prices skyrocket from 2000 to 2005, leading to an extraordinary bust period from 2005 to 2010.  In the city of Brockton, MA, for example, there were 299 foreclosure deeds in 2008, and home prices are down more than 31% since 2004 (nearly double the loss experienced by Greater Boston as a whole).

High concentrations of foreclosures adversely impact neighborhoods by decreasing overall property values and increasing the number of abandoned properties. The report notes that, “more importantly, [high concentrations of foreclosures have] sown the seeds of doubt in the minds of potential homebuyers, who have stayed away from these communities out of fears of further price declines.” A 2008 report from ICIC echoes those fears, stating that the foreclosure crisis could undermine decades of hard-won gains in inner city neighborhoods across the country.

Furthermore, potential homebuyers, skeptical of the current market conditions, increasingly remain in the rental market. A dual pressure on the rental market has thus developed: first, by those who continue to rent instead of buy; and second, by those who have lost their homes to foreclosure and now must rent. In Greater Boston, the rental market is further compounded by the high number of college students who rent while studying at local universities. As a result, the report finds that Boston has one of the tightest and most expensive rental markets in the country. Low-income families disproportionately suffer from this, as an increasingly high percentage of their incomes go towards housing costs. Nicolas Retsinas of Harvard University’s Joint Center for Housing Studies explained that this will lead to overcrowding and homelessness, particularly in our inner city areas.

Certainly, there was some gloom and doom presented in the research findings. But perhaps most interestingly, and newest to many of us in the audience, were the policy initiatives helping to alleviate the housing burden for our cities’ low-income residents. The report outlines several new housing policies as well as pending proposals, including:

• Successful defense of Chapter 40B: In 2010, there was a bruising campaign to abolish The Massachusetts Comprehensive Permit and Zoning Appeals Act—aka Chapter 40B. Under this legislation, there have been 22,000 affordable housing units built in the past 10 years, resulting in the creation of almost 50,000 jobs and $9.25 billion in economic activity. This law helps secure housing for low- and middle-income residents.
• Passage of HomeBASE: This program, passed by the Massachusetts legislature and enacted in July 2011, makes housing assistance—not shelter—the primary response to assisting the homeless. Families will pay no more than 35% of their income towards rent and utilities while enrolled in the program. Such programs are going to be critical if Retsinas’s prediction of increased homelessness comes to fruition.
• An Act to Stabilize Neighborhoods was passed in 2010 by Massachusetts Governor Deval Patrick. This delays foreclosure by an additional 60 days (to 150 days total) if the financial institution neglects to consider loan modification. The law also protects tenants of foreclosed properties from unnecessary displacement. This legislation will help to alleviate the blight that otherwise spreads as a result of foreclosure concentration.

Not to be forgotten are the programs or policies being rolled out at the national level—including HUD’s “Project Rebuild,” which seeks to rehabilitate commercial and residential properties in our nation’s hardest hit neighborhoods.  There are also local programs that vary from city to city. But in this time of fiscal jurisprudence, cities are increasingly reliant upon federal and state programs. By highlighting these programs, The Greater Boston Housing Report Card not only nicely presents the state of the Greater Boston’s housing market, but also the opportunities for the region to draw support and stimulate our inner city economies. As Barry Bluestone, the report’s author concluded in his presentation, “housing led us in to this recession; it will have to lead us out.”

BY Amanda Maher on October 31st, 2011

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