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This is our national challenge for the next 25 years, according to Jeffrey C. Fuhrer, Executive Vice President/Chief Strategy Officer for MassDevelopment, the Commonwealth’s economic development and finance authority.
Fuhrer prepared this slide presentation for a meeting with regional affordable housing experts and developers in November, 2020. Part 1 looks at projections for the financial markets and issues in tax exempt financing and how such financing can help provide more affordable housing for poor people.
Part 2, starting on slide 13, looks more explicitly at the sources of racially based economic inequality in the US. The study’s author spent decades working with the Federal Reserve and determines that research shows the scourge of Black poverty compared to other races is not due to education but rather to land use, zoning and housing finance decisions set in place by governmental agencies that have intentionally limited access to equity building opportunities for Black Americans.
Slide 18 shows the U.S. Black population in Boston region has a household median net worth of about $0. While the white population in the region has an estimated net worth of $247,000 per household.
Changing landuse and zoning policies as well as using tax exempt financing are some of the ways to remedy this long standing problem. Additional causes are listed on slide 20:
Key examples:
• Post Civil War “reconstruction” an embarrassing string of broken promises and abuse
• Social Security and unemployment insurance in the 1930s excluded domestic and agricultural workers
(65% of black workforce excluded, versus 25% of white
• Debate about whether it was intentionally discriminatory
• Housing assistance in the 1940s (e.g. Levittown written clause excludes black homeowners)
• The GI bill post WWII a tiny fraction went to black soldiers
• Housing policy post 1950s
• Welfare reforms of the 1990s
• Current: Education spending disparities; criminal justice disparities (the “War on Drugs”); policing disparities; voter registration restrictions
See the full slide presentation here.
Why Is This Our Issue & What Should We Do About It?
(presented by Adam Chapdelaine, Town Manager, to Select Board on July 22, 2019)
Overview
Since 1980 the price of housing in Massachusetts has surged well ahead of other fast growing states including California and New York. While the national “House Price Index” is just below 400, four times what an average house might have cost in 1980, a typical house in Massachusetts is now about 720% what it was in 1980. Median household income in the state has only increased about 15% during the same period. No wonder people in Arlington are feeling the stresses of housing costs if they want to live here and are feeling protective of the equity value time has provided them if they bought years ago.
In response to concerns about zoning, affordable housing and housing density, the Town joined the “Mayors’ (and Managers’) Coalition on Housing” to address these growing pressures. This 12 page slide deck presentation outlines the key data points, the number of low and very low income households in Arlington, the rate of condo conversion that is absorbing rental units, etc.
Solutions are offered including:
• Amendments to Inclusionary Zoning Bylaw
• Housing Creation Along Commercial Corridor – Mixed Use & Zoning Along Corridor
• Accessory Dwelling Units – Potential Age & Family Restrictions
• Other Tools Can Be Considered That Are Outside of Zoning But Have An Impact on Housing
Chapdelaine’s suggested next steps are:
• Continued Public Engagement
• Town Manager & Director of DPCD Meet with ARB
• Select Board & ARB Hold Joint Meeting in Early Fall
• ARB Recommends Strategies to Pursue in Late Fall/Early Winter
The Select Board approved the suggested next steps and a joint ARB/ Select Board meeting should be scheduled in the near future.
Note from Reporter: As a community, Arlington has long prided itself on its economic diversity. With condo conversions, tear downs leading to “McMansions”, higher paid workers arriving in response to new jobs, etc., Arlington is at great risk of losing this diversity that has long enriched the community. Retirees looking to downsize and young people who have grown up in Arlington looking for their first apartment are finding it impossible to stay in town. Shop keepers and town employees are challenged to afford the rising housing costs. With a reconsideration of zoning along Arlington’s transit corridors, Arlington NOW has an opportunity to create new village centers, like those recommended in the recent STATE OF HOUSING report. These village centers along our transit corridors could be higher, denser but also offer the compelling visual design and amenities desired by people who want to walk to cafes, shops and public transit.
from Alexandra P. Levering , Thesis, Urban & Environmental Policy and Planning, Tufts University, August 2017
By 2017 65 out of 101 municipalities in the greater Boston (MAPC) region allowed Accessory Dwelling Units by right or by special permit. The average number of ADU’s added per year was about 3. But by 2017, Lexington had 75 ADUs, Newton had 73 and Ipswich had 66. It is a slow process for a variety of reasons, but the number of units grows over time.
AARP recommends ADU’s. The help homeonwers cover rising housing costs by providing income trhough rent. They also create a space for a caretaker or a family member to live close by, as the homeowner ages.
Autism Housing Pathways and Advocates for Autism of MA (AFAM) came together to advocate for an ADU bylaw to benefit parents of adult children with disabilities. For more information see her complete thesis (with a very useful set of tables and bibliography) HERE.
Accessory Dwelling Units (ADUs) provide multigenerational housing options for aging parents and for adult children. They help families manage changing lifestyle, fiscal and/or caretaking situations.
This type of housing is seen by many as a clear opportunity to offer more affordable residential opportunities. One reason why they are slow to develop is the cost of renovation and construction for homeowners. Some communities offer low or no interest loans to encourage more ADU development.
by Amy Dain, for Pioneer Institute of Public Policy Research and Smart Growth Alliance, July 2018 (This study updates a 2004-06 study on ADUs by the Pioneer Institute.)
Even in the midst of a housing crisis, zoning laws prohibit most homeowners in cities and towns around Boston from adding accessory dwelling units (ADUs) to their single family houses. An ADU is an apartment within or behind an own- er-occupied single family house that appears from the street to be a single-family as opposed to a two-family house.
Homeowner-voters can be reassured that new rental hous- ing that could be added as ADUs would be highly dispersed and barely visible. The houses are owner-occupied; the land- lord lives next to the ADU renters, so the risk of property-ne- glect or loud parties is minimal. The houses also have to look like single family houses. Since household sizes are shrinking, new residents in ADUs might maintain current neighborhood population densities, but are unlikely to increase them.
Moreover, ADUs are permitted at such low levels now — only 2.5 permits annually per municipality where they are allowed — that permitting levels could increase substantially without being at all noticeable in neighborhoods. If the region were to average five permits per municipality per year across 100 municipalities, over a decade, ADUs could provide 5,000 apartments, dispersed among 538,000 single family houses. Less than one in 100 houses would have an ADU, yet the new rentals would house thousands of people.
Click HERE for the full report.
Report by Vicki Been, Ingrid Gould Ellen, and Katherine O’Regan, Supply Skepticism: Housing Supply and Affordability, NYU Furman Center 8/20/18
Some affordable housing advocates question the premise that increasing the supply of market-rate housing will result in more affordable housing. This paper addresses the key arguments these “supply skeptics” make. Considering both theory and empirical evidence, the authors conclude that adding new market-rate homes moderates price increases does make housing more affordable to low- and moderate-income families.
At the outset, the authors review the relevant studies and conclude that “the preponderance of the evidence shows that restricting supply increases housing prices and that adding supply would help to make housing more affordable.” They then turn to several arguments the supply skeptics make. One key issue is whether adding housing in a part of the housing market will affect prices in another. The housing market is not uniform but composed of various submarkets. These submarkets relate to each other in complex ways. Critically, however, if demand forces up prices in a higher-end submarket, some buyers will turn to the next segment down and bid up prices there, generating a cascade. Adding supply at higher levels reduces this cascade and relieves price pressure all the way down. Empirical research indicates that this “filtering” process happens surprisingly quickly.
Supply skeptics may also fear that construction of new housing will exacerbate affordability problems by raising neighborhood rents or prices, fueling gentrification, and potentially displacing existing residents. New construction can have both positive and negative effects on prices or rents of nearby homes. New housing may an amenity that makes a neighborhood more attractive – and expensive. But it also absorbs demand and may reduce the incentive to upgrade existing housing to please high-end buyers. The evidence on the net effect of these effects is unclear. An important California study indicates that the production of market rate housing was associated with a lower probability that low-income residents in the neighborhood would experience displacement. But more research is needed.
The authors point to additional disadvantages of limiting supply, including pushing lower-wage workers to live in distant suburbs, where long commutes add to regional traffic woes and greenhouse gas emissions. They stress, however, that increased supply, while essential, is not sufficient to address the affordability challenge. Government intervention through subsidies and other measures is critical to ensure that housing supply is added at prices affordable to a range of incomes, and especially the lowest ones.
I live on Sunnyside Avenue in Arlington, Massachusetts. The neighborhood was built as two subdivisions in 1948, with 42 duplexes (84 homes total). These were starter homes with 792 square feet of finished space plus a basement with a garage. I affectionately refer to them as excellent specimens of mid-century slap-up. They were constructed in the mid 20th century, and the builder just kind of slapped them up.
Here’s one of the original newspaper ads for these homes.
It’s fun to read the ad copy. The homes are “within walking distance of schools, transportation (MTA) and shopping centers” (a selling point that endures to this day); the lots are “large to provide for individual landscaping” (they’re 3,000 square feet give or take, which is unbuildably small by today’s zoning laws); and the homes have “full-sized dining rooms”, “spacious streamlined kitchens”, and “two large sunny bedrooms” (so much largeness for 792 square feet). I guess this was a time when good salesmanship took precedence over truth in advertising. It was a different time.
I have to admit, they were a pretty good deal. $8750 in 1948 is equivalent to around $95,000 in 2020 dollars; these homes, with the original floor plan, currently sell for around half a million dollars.
However, the part of the ad that most caught my attention was “All Mortgages FHA 25 years”. FHA refers to the Federal Housing Administration, who were the primary mortgage underwriters during the middle of the 20th century. They’re also an example of how the United States used housing policy as a tool for segregation; the FHA was in the business of insuring mortgages for white families in white neighborhoods. The Fair Housing Center of Greater Boston has a short summary of FHA practices. There’s also discussion of the FHA in Segregated by Design.
Which is to say, my nice little neighborhood in East Arlington was likely designed, built, and sold as a segregated development for whites.
Arlington’s biggest period of residential construction was in the 1920’s when we were building an average of 500 homes/year. But there was still a good deal of single- and two-family construction that took place from the 1930’s to the 1960’s — a bit over 5,000 homes. Since the FHA was the primary mortgage underwriter during that period, I think it’s safe to say that my neighborhood was probably not the only for-whites-only neighborhood in town.
I will end with two questions. How do we feel about this bit of history, and what (if anything) should we do about it?
This infographic demonstrates in data and graphs why Arlington needs more housing.
According to Richard Rothstein in his 2017 book, Color of Law: A Forgotten History of How Our Government Segregated America, “we have created a caste system in this country, with African-Americans kept exploited and geographically separate by racially explicit government policies,” he writes. “Although most of these policies are now off the books, they have never been remedied and their effects endure.” Zoning was one of the policies that contributed significantly to this outcome.
Here are some highlights, selected for Arlington readers, from this book:
P. VII
“… until the last quarter of the twentieth century, racially explicit policies of federal, state and local governments defined where white and African Americans should live. Today’s racial segregation in the North, South, Midwest, and West is not the the unintended consequence of individual choices and of otherwise well-meaning law and regulation but of unhidden public policy that explicitly segregated every metropolitan area in the United States. The policy was so systematic and forceful that is effects endure to the present time. Without our government’s purposeful imposition of racial segregation, the other causes – private prejudice, white flight, real estate starring, bank redlining, income differences, and self-segregation – still would have existed but with far less opportunity for expression. Segregation by intentional government action is not de facto. Rather, it is what courts call de jure: segregation by law and public policy. “
1917 – Buchanan v. Warley – Supreme Court case that overturned racial zoning ordinance in Louisville, Kentucky. Municipalities ignore and fought against this. Kansas City and Norfolk through 1987.
- Post WWII GI Bill – African Americans largely excluded from education and mortgage benefits
- Federal Housing Administration won’t insure mortgages to African Americans or mortgages in integrated neighborhoods. African Americans limited to non-amortizing loans, which means they build no equity in their homes while making payments
- Federal, stage and local governments are used to enforce race-restrictive covenants in deeds.
1948 – Shelley v. Kraemer – Although racially restrictive real estate covenants are not per se illegal, since they do not involve state action, a court cannot enforce them under the Fourteenth Amendment. FHA continues to not insure mortgages for African Americans.
1968 – Fair Housing Act endorsed the rights of African Americans to to reside wherever they chose and could afford. Finally ending the Federal Housing Administration’s’ role in mortgage insurance discrimination.
1969 – Mass 40B law passed
1972 – Head of Arlington ARB editorial talking about preserving the suburban way of life
1973 – Town Meeting passes moratorium on apartment construction
1975 – Arlington zoning re-do that all but stops development
1977 – Supreme Court upholds Arlington Heights, IL zoning that prohibited multi-unit development anywhere by adjacent to an outlying commercial area. In meetings leading to the adoption of these rules, the public urged support for racially discriminatory reasons.
p. 179″Residential segregation is hard to undo for several reasons:
- Parents’ economic status is commonly replicated in the net generation, so once government prevented African Americans from fully participating in the mid-twentieth-century free labor market, depressed incomes became, for many, a multi-generational trait
- The value of white working and middle-class families’ suburban housing appreciated substantially over the years, resulting in a vast wealth difference between whites and blacks that helped to define permanently our racial living arrangements. Because parents can bequeath assets to their children, the racial wealth gap is even more persistent down through the generations than income differences.
- Once segregation was established, seemingly race-neutral policies reinforced it to make remedies even more difficult. Perhaps most pernicious has been the federal tax code’s mortgage interest rate deduction, which increased the subsidies to higher-income suburban homeowners while providing no corresponding tax benefit for renters. Because de jure policies of segregation ensured that whites would be more likely to be owners and African Americans would more likely be renters, the tax code contributes to making African Americans and whites less equal, despite the code’s purportedly nonracial provisions.