Condominium prices and apartment rents in Boston are as high as ever, despite the recession, and they will inevitably increase even more as our economy improves. The cause of the problem is the same as it's always been: too much demand and too little supply. If we don’t come up with a solution, I fear our city will stop growing and we’ll be faced with a dire situation. The time to act is now.
Here are some ideas I have for how to deal with Boston's housing crisis.
Eliminate the city's affordable housing program
The mayor's affordable housing policy hasn't been been very successful. It’s time to analyze it on its merits and consider reconfiguring it or dropping it completely.
The policy had its genesis in the late 1990’s. Boston Mayor Thomas M. Menino (through the Boston Redevelopment Authority) instituted a policy that required developers of major condo and apartment projects to price 10% (now 15%) of new housing units at a fraction of what they would cost on the open market.
The mayor’s intentions were good, the general idea being, if you set aside a portion of the housing stock and price it artificially low, you can keep some people living in the city who would otherwise be “forced” to move away. To an extent, the policy works - people who would otherwise be unable to live in downtown Boston could afford to buy in buildings including the Court Square Press / Macallen in South Boston and the Modern in the South End, and will be able to afford to buy in the new Copley Place condo tower once it’s built in Back Bay.
But, the policy does little to benefit the people it purports to help. In some ways, it actually exacerbates the problem - It reduces the (already limited) supply of new housing and ends up putting heavier demand on the market, causing prices overall to be higher than they otherwise would be.
The policy hurts the city in another way - it lowers property tax revenue. A building with 100 market-rate units might bring in 10-15% more income on an annual basis than one with 15 affordable units, based on my analysis. (See sidebar.) That’s serious money. The city of Boston, more so than just about any other major municipality in America, relies on property tax revenue to balance its budget (60% vs. 27% for the next-highest city, Seattle). Therefore, it must focus on how best to increase its cash flow.
The set-aside program does nothing to bring down the cost of housing for the hundreds of thousands of us who don’t qualify. And, the program comes with strict guidelines. In order to qualify, you need to have a salary within a very tight income range. Below or above, and you’re out of luck. And, there's a laundry list of "preferences" given to certain applicants - don’t fit one of these and you’re also out of luck. The housing “lottery” (which it basically is - just a few people winning a huge jackpot) ends up being rigged in favor of the few and the well-connected.
Is this program good fiscal policy? Does it help enough people that it warrants punishing the rest of us? Or, is it nothing but a “feel good” initiative?
Subsidize home-buyers outside Boston Proper
How can we increase the housing supply in a city such as Boston, where much of its core is off-limits to new development, due to historic district designations and vehement community opposition, and in a city where many new residents seem unwilling to consider living in neighborhoods outside of its downtown?
There is actually a way to reduce demand for housing in the city core without forcing people out of the city - we can encourage home-buyers to move to Boston’s outer-neighborhoods (West Roxbury, Roslindale, Hyde Park, Dorchester, and East Boston) by offering financial incentives such as discounted property tax bills.
I’ve never been a fan of government subsidies, so suggesting this is outside my comfort zone, but it’s an idea at least worthy of consideration. The idea here is get people to consider living outside of our city center. New York City does this a lot, even in Manhattan, giving people a discount on their property taxes if they live in certain designated neighborhoods. (Near Wall Street, for example, which suffered after the 9/11 attacks and was lacking in full-time residents.)
In addition to these two novel and dramatic ideas, there is the standard list of solutions that everyone offers up.
Improve the city's infrastructure
In coordination with the state and federal governments, we need to expand our public transportation system into neighborhoods outside of Boston Proper. The Mayor’s bike lane program is a clever, low-cost way of improving accessibility to downtown Boston. We need more of this type of thinking. If people can get into downtown Boston to work, they may be more willing to live outside downtown Boston and commute.
Improve the city’s public schools
With good schools in every neighborhood, parents (home-buyers) would be willing to look beyond certain areas in which to live. We could end forced busing today if Boston parents believed their children could be educated as well in a school just down the block instead of across town. Nothing improves a neighborhood more than having a good school in it, and nothing is more appealing to a home-buyer with a family than a good school within walking distance.
Develop a pro-growth housing policy
What we’re talking about here is putting together a rational and responsible - and pro-growth - housing policy.
What is the city’s five, ten, and twenty year housing plan for each of the city’s 23 neighborhoods? We seem to have been caught by surprise by the spike in population during the past decade. Based on historic precedent, we’re bound to see more economic booms and busts in the future - how are we planning for this, now?
Boston is at risk of losing a golden opportunity here, the chance to grow our city by encouraging people to move here and to stay here. Without a policy of sound urban planning, we may irrevocably damage our city for years to come.
