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Report: Costly housing hurts economy
by Dan MacLean
Free Press Staff Writer

An updated report by the New England Public Policy Center at the Federal Reserve Bank of Boston bolstered the notion that affordable housing is crucial to the economy.

"The region's high cost of housing may undermine its ability to attract and retain workers," according to the 173-page report, titled "The Lack of Affordable Housing in New England." The report was released Monday.

Higher housing costs could also encourage companies to relocate to other parts of the country, the report says.

Housing prices increased 85 percent in New England from 1995 to 2005, compared with a 56 percent national increase. Easier access to mortgages and expectations of rising property values helped drive demand, forcing prices up, the report said.

The lack of affordable housing is particularly noticeable to extremely low-income Vermonters.

Roughly 58 percent of Vermont's lowest income families — some 43,000 families that make no more than $20,000 a year — suffer a "severe burden" in paying for housing, more than any state in New England and more than the U.S. average, the report says. The New England level is 51.8 percent and the national average is 55.5 percent.

Severe burden refers to those who pay more than 50 percent of income for housing and utilities. Housing is considered "affordable" when no more than 30 percent is spent.

The study also found smaller New England cities — including Burlington — have median household incomes sufficient to afford the median home. However, median means half are above and half are below. The other such cities are Hartford, Conn., Springfield, Mass., Worcester, Mass., Manchester, N.H., and Nashua, N.H.

To help create more affordable housing, the report encourages coordinating government policy and loosening building restrictions. Strict land-use regulations, particularly subdivision regulations, can increase the cost of housing up to 50 percent, the report says.

Reducing the power of local municipalities might help, the report said, noting that some southern New England states have "constrained the ability of local governments to restrict land use in ways that curtail the production of affordable units."

To alleviate concerns of possible tax increases, Massachusetts passed a law providing money for "any net education costs associated with affordable units developed within a smart growth district."

Since 2005, New England's housing-price growth has slowed. The region's home prices increased 7.5 percent, compared with 9.2 percent across the United States. Sluggish growth in housing supplies has helped make housing more expensive.

From 2000 to 2005, New England housing units grew at 3.2 percent — less than half the national rate, the report said. New Hampshire was the only New England state not ranked in the bottom 10 in housing stock growth.

"The lack of affordable housing has the potential to affect not only individual households in the region, but also the region's economy itself," the report concluded, adding a call for "coordination across cities and towns, metropolitan areas, and even states, to create policies that will have a measurable effect on prices throughout the region."

Contact Dan McLean at (802) 651-4877 or dmclean@bfp.burlingtonfreepress.com