I went to the presentation of two reports on housing today at the Federal Reserve Bank of Boston: one by Barry Bluestone of Northeastern’s Center for Urban and Regional Policy, the other by Harvard-KSG-Rappaport Institute’s Edward Glaeser. The Globe had a front-pager on the reports this morning. As I’ve strongly suspected, these reports blame the high cost of housing (bubble?) for the state’s slow job growth and loss of population. We can talk about other factors in our high cost of living: health care, taxes, etc; but this is really the elephant in the living room, so to speak.
Bluestone went through the graphs like a hot knife through butter, and it was a bit dizzying, and a bit scary. This is why population loss matters: we’re losing the 25-34 year-old demographic to other states, where they can afford more house in a nicer neighborhood for less money. The “entry-level”, smaller single-family homes are exactly the homes that we are not building in the state, because of communities’ reluctance to take on the burden of permitting development and then educating their kids. Now, these are also the folks that are critical for economic growth. They are a short-term drain on local resources, but a long-term boon to the economy. Bluestone said, “If you lose them, economically, you’re in trouble.” And brain drain is a huge concern: It’s not necessarily bad to be a high-cost state, if we’re a high value state. If we don’t have the brains, we don’t have the value.
Edward Glaeser of Harvard’s Rappaport Institute made the choice even starker: No homes = no jobs = no people. Glaeser convincingly argued that we’ve got a supply problem. Our zoning system restricts supply, which not only makes housing more expensive (naturally) but also more volatile. Areas that have grown (like Atlanta) have a steadier, slower increase in home values. Ever-provocative, Glaeser warned that without more supply of housing, we run the risk of turning Greater Boston into “a boutique city for educational elites.” Ouch. Glaeser advocates tying local aid restoration to loosening of building rules, and strengthening 40R and 40S (pdf), which provide incentives for new housing supply.
The political quandary is pretty clear: some 60% of Massachusetts residents are homeowners. And, as KSG Dean David Ellwood wryly pointed out in closing, “If prices are too high, then I think we’re saying that we want them to be lower.” And that won’t go over well with property owners who find themselves wealthy from the run-up of the last decade. But it’s pretty clear that our economic future depends on our ability to attract and keep the younger folks who sustain the economy. It would be good to hear our candidates start to talk about this issue boldly.
Later, I’ll have more on the potential solutions that were discussed.