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December 16, 2004
A housing dilemma
Greater Boston has been suffering from a housing
crisis for some years. Home ownership is out of the reach of those
with a modest income. The increase in rents threatens to force
low-income families to become homeless.
Recently the Boston Tenant Coalition decided to attack the problem
by re-imposing rent control in the city. However, the Boston City
Council defeated the “Community Stabilization Act”
last week by a vote of 8-to-5. Even if the measure had passed,
it is unlikely that it would prevail in the state Legislature.
Such an act is a home rule petition which would require approval
through the same process as any bill filed in the Legislature.
While some residents may feel deserted by city councilors, it
is important to understand the economic conditions which would
influence a negative vote. First of all, the cost of rent is influenced
to a great extent by the available supply of housing. When there
are a large number of vacancies, landlords will customarily lower
rents to fill apartments. Conversely, when there are too few apartments,
landlords will raise rents.
Some analysts have asserted that rents were already dropping because
of natural market forces. According to the Boston Municipal Research
Bureau, advertised rents in Boston for two-bedroom apartments
had dropped by 9.7 percent, while the volume of advertising for
such units had increased by 17.6 percent.
The ultimate solution is to induce real estate developers to create
more housing. The imposition of rent controls impedes that process.
This is an especially sensitive issue since the word from City
Hall is that real estate taxes will soon increase, so landlords
would have more expenses.
Another factor causing rents to be high is the difficulty of buying
a home in Greater Boston. Home ownership is the American ideal.
Home prices in Massachusetts have jumped 53 percent or more since
1995. That is the largest increase in the nation during that time.
As a result, the cost has outpaced families’ incomes. According
to a report in Commonwealth Magazine, “in only nine of the
127 cities and towns in Greater Boston could a family earning
the median income in that community afford a home at the median
price of homes sold there.”
Rental housing is less available in the suburbs, so many households
have to come to Boston. It is disturbing to find that the state
has such a housing problem since Massachusetts has the seventh
highest median household income in America. With such a substantial
household income, one would not expect that housing would be such
a problem.
According to the Commonwealth Magazine report, the scarcity of
housing has resulted from the real estate development restrictions
of towns in Massachusetts. Even though the number of households
grew by 4.4 percent between 1990 and 1998, the state ranked 47th
in the U.S. in the per capita issuance on new housing permits.
Towns have created a number of impediments to the construction
of housing that working families can afford because they have
learned that property taxes from such housing do not pay the cost
of municipal services. The cost of schools causes an imbalance
in the equation. As a result, some towns restrict permits to luxury
homes assessed at $500,000 or more and senior citizen housing.
More than 35 percent of Boston’s budget goes to pay for
public education. The same is true for most cities and towns.
The state pays less than half of public education costs, placing
Massachusetts in the bottom third of all states. Excessive reliance
on real estate taxes to finance public education clearly impinges
on the market for housing for working families. The supply side
will not change adequately until that problem is solved.
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