THE COMMONWEALTH OF MASSACHUSETTS EXECUTIVE OFFICE FOR ADMINISTRATION AND FINANCE Policy Report Bringing Down the Barriers: Changing Housing Supply Dynamics in Massachusetts Argeo Paul Cellucci Governor Jane Swift Lieutenant Governor Stephen P. Crosby Secretary of Administration and Finance Policy Report Series No. 4 – October 2000 The principal authors of this report were Ken Ardon, Carlo DeSantis, Pamela MacLeod, Rebecca Rissman, and John Simon of the Executive Office for Administration and Finance. Staff at the Department of Housing and Community Development and at the Executive Office of Environmental Affairs also contributed content and provided information. Staff at the Office of the Governor and at the Executive Office for Administration and Finance provided valuable guidance and editorial assistance. In addition, special thanks go to representatives of the wide variety of other government agencies and private organizations listed below, whose advice and expertise were invaluable in the development of the analysis and initiatives in this report. While all parties did not agree on the conclusions, their input was critical to the authors’ gaining a thorough understanding of the issues. Architectural Access Board Economic Assistance Coordinating Council Association of Independent Colleges Executive Office of Administration and Finance Attorney General's Office Executive Office of Environmental Affairs Board of Boiler Rules Executive Office of Health and Human Services Board of Building Regulations and Standards Executive Office of Transportation and Construction Board of Elevator Regulations Fiscal Affairs Division Board of State Examiners of Electricians Greater Boston Legal Services Board of State Examiners, Plumbers, and Gasfitters Housing Court Department Boston Department of Neighborhood Development Massachusetts Association of Realtors Caritas Communities Massachusetts Bankers Association Citizens' Housing and Planning Association, Inc. Massachusetts Bankers Association Community Economic Development Assistance Corp. Massachusetts University Community Partnership Department of Economic Development Massachusetts Development Finance Agency Department of Environmental Protection Massachusetts Health and Educational Facilities Authority Department of Fire Services Massachusetts Highway Department Department of Housing and Community Development Massachusetts Homebuilders Association Department of Mental Health Massachusetts Housing and Finance Agency Department of Public Health Massachusetts Housing Partnership Fund Department of Public Safety Massachusetts Law Reform Institute Department of Social Services Massachusetts State College Building Authority Department of Telecommunications and Energy Operational Services Division Department of Youth Services Small Property Owners Association Division of Capital Asset Management and Maintenance Trinity Financial Division of Local Services University of Massachusetts at Boston Division of Professional Licensure Additional copies of this report can be downloaded from http://www.magnet.state.ma.us/eoaf/ THE COMMONWEALTH OF MASSACHUSETTS EXECUTIVE OFFICE FOR ADMINISTRATION AND FINANCE RESEARCH AND DEVELOPMENT UNIT STATE HOUSE, ROOM 373 BOSTON, MASSACHUSETTS 02133 Bringing Down the Barriers: Changing Housing Supply Dynamics in Massachusetts Contents Executive Summary.......................................................................................................................iii Introduction..................................................................................................................................... 1 The Parameters of the Current Problem.......................................................................................... 3 Housing Prices ............................................................................................................................ 3 Rents ........................................................................................................................................... 5 Construction Activity.................................................................................................................. 7 Determinants of Demand .......................................................................................................... 11 Impact of High Housing Costs.................................................................................................. 13 The Economics of Housing........................................................................................................... 17 Local Concern About Increased Municipal Cost Burden......................................................... 18 Local Barriers to Housing Production in Massachusetts .......................................................... 20 Zoning and Subdivision Control Laws in Massachusetts..................................................... 21 Building and Related Specialty Codes.................................................................................. 25 Title 5.................................................................................................................................... 26 Federal and State Interventions in the Housing Market............................................................ 28 Housing as an Investment ......................................................................................................... 30 A Statistical Analysis of Housing Production in Massachusetts .................................................. 31 Municipal Costs of Residential Development .......................................................................... 31 Special Cases ................................................................................................................................ 37 Student Housing in Boston ....................................................................................................... 37 Recent History ...................................................................................................................... 39 Impediments to Student Housing Construction .................................................................... 40 Land and Neighborhood Opposition..................................................................................... 40 Institutional Resistance ......................................................................................................... 41 Financing Capacity ............................................................................................................... 42 Single Person Housing.............................................................................................................. 43 Background........................................................................................................................... 44 Department of Housing and Community Development ....................................................... 44 The Department of Mental Health ........................................................................................ 48 Community Economic Development Assistance Corporation (CEDAC)............................ 48 The Massachusetts Housing Partnership Fund ..................................................................... 48 Key Issues ............................................................................................................................. 49 Public Housing.......................................................................................................................... 52 Capital Needs........................................................................................................................ 53 Legislative Limitations ......................................................................................................... 54 Affordable Housing in Massachusetts .......................................................................................... 57 Federal Affordable Housing Programs ................................................................................. 57 State Affordable Housing Programs ..................................................................................... 58 Current Affordable Housing Programs in Massachusetts..................................................... 61 Action Agenda .............................................................................................................................. 65 Executive Order 418 ................................................................................................................. 67 Initiative: Continue to implement Executive Order 418 and expand outreach to encourage cities and towns to plan for and promote housing development........................................... 67 Special Commission on Barriers to Housing Development ..................................................... 71 Initiative: Appoint a special commission to recommend statutory, regulatory, and operational changes to reduce unneeded barriers to housing development......................... 71 Commonwealth of Massachusetts Housing Supply Incentive Program.......................................................................................... 72 Initiative: Revise the provision of local aid to reflect increased municipal costs resulting from housing development. .................................................................................................. 72 Providing Tax Benefits for Affordable Housing Development...............................................