Could the Cost of the Housing Status Quo be Worse Than Change?

By Scott Pollack
for ULI Boston/New England

Lots of people are talking and writing about how hard it is to build housing in Massachusetts. But I wonder – if I wasn’t in the land use community, would I really pay attention to the MBTA Communities law, restrictive zoning, the difficulties of permitting and building additional dwelling units (ADUs), or even how high construction costs and interest rates have gotten?

At certain points in their lives, everyone is impacted by high housing costs and low supply.   But for most of us, the crisis only comes into focus when either we move, or we get the inevitable tax/rent increase.  Once a year I complain when my mortgage escrow goes up due to real estate taxes, and then I go back to worrying about more pressing issues.

Unless you’re a public official, a housing advocate or a developer, you probably aren’t paying too much attention to the details or root causes until someone proposes a new building in your neighborhood, or you must move.  And since most people in most years stay put, the housing crisis is an intellectual concern.  It’s far less immediate than the cost of food and fuel, taxes, jobs, and the quality of public services.

But if you’re trying to recruit talent for your business, or are part of the small minority of people who want or have to move right now, or who are trying to relocate to Massachusetts, it’s crisis time.

Public choice theory talks about concentrated costs and diffuse benefits, where the costs and/or impacts of a particular issue fall disproportionately on a small group, while the solution only peripherally benefits everyone else.  Of course, it’s the larger group, who end up being asked to pay, who are unhappy about being made to pay for something from which they won’t get immediate gratification.

It’s entirely reasonable that if it’s not impacting me, right now, then I’d rather worry about it later.

This plays into many areas of public policy, but I think it is particularly applicable to current housing discussions.  If I have a place to live and I like it, then it’s easy to say that the impacts of more housing on what I care about will be greater than the benefits, since the advantages will mostly go to others.  Community character, traffic, the number of school children and local taxes might get ‘worse,’ and the people benefiting aren’t my current neighbors – so why should I support change?

Reading through the recent Massachusetts Talent and Competitiveness Survey 2024 got me thinking – maybe, just maybe, the housing crisis’s costs are hitting a lot closer to home than we realize.  The cost of living, of which housing is such a big part, is really high, impacting what else we can afford.  And businesses continue to struggle to get people to move here, keeping jobs here in the Commonwealth.  The survey shows that Massachusetts’s ability to compete for talent, while a little better this year than last, is still hurting.

• The rising cost of living, led by the cost of housing and doing business, are the dominant factors impacting hiring and influencing organizations’ decisions to keep jobs in Massachusetts.
• An overwhelming majority of respondents flagged housing as the biggest risk to MA’s competitiveness, followed by transportation.
• More than 50% indicated the largest hurdle to recruiting is candidates’ unwillingness to move to MA, because of the cost of living and lack of good housing.

We have many things going for us.  We’re highly regarded for our quality of education and are on many young professional lists as a great place to live.  We’re known worldwide as a hub for tech and innovation, healthcare, and we’re consistently rated high for public services like police, fire, and public education.

But those ever-more expensive public services are directly dependent on the taxes that come from the good paying jobs that employers are trying to recruit for.  And there, we’re not keeping up. Massachusetts has trailed the broader economy in real GDP growth since 2021 by 13%.  Our inability to deal with housing has left business leaders, both large and small, with little choice but to consider whether adding or even leaving jobs here makes sense as the talent they depend on, many of whom went to school here, can’t find available, affordable housing.

Smaller household size, far more people living alone or with one other person, and older residents staying in their home later in life have created a fundamental misalignment between who needs housing and the housing we have. When supply and demand are out of whack, prices go up.  This is our reality, as discussed in earlier articles (see Part 1: The Problem(s) with Housing,  Part 2: We Are Not Who We Used To Be,  and What does Community Character Mean Anyway?).

It is new families of all types, whether they are coming here to work or to start a new household in the town they grew up in, that are hurt the most.  All of this leads us to a difficult question that we need to ask:  could the cost of letting things stay the same be far worse than the cost of change?

The data discussed in earlier articles, and the history of many communities around the state, should give us a pretty good sense. Many of the 351 towns and cities are smaller in population than they were 50 years ago.  This is true in both urban and rural communities, the Boston area and its suburbs, and especially in the western part of the state.

When new housing isn’t built, the population gets older and shrinks, due to the 70-year-old national trend toward smaller household size.  Less people mean fewer jobs and less taxes.  Decreased population leads to less state aid, reducing local revenue and, inevitably, cuts to public services that are so important for safety and quality of life.

Until recently, I didn’t think much about this doom loop.  But then I started looking at Detroit, a city that was once above a million people and is now down to 620,000. I read reports about how hard it’s been for businesses on the Cape and Islands to find the summer workers their economies depend upon, let alone year-round teachers and police and health care workers.  The people fighting housing, especially multifamily housing that the young and workers need the most, are the same ones who moved there to enjoy the services those people provide.

There is a cost to maintaining the status quo that needs to be talked about.  Not about whether current conditions are fair or equitable – though that is important – but what the future will look like at the end of this path.  We may not be able to predict the future, but we can make some pretty good guesses.

• Continuing to allow issues of community character to dominate local discussions about housing will continue to make housing, and the cost of living, rise.
• Employers will continue to struggle with attracting and retaining talent other than for those at the very top of the pay scale.
• Employers may, or may not, choose to keep high-value jobs here, because of our great quality of life, but they also might have to consider reducing investments in the middle class that most of us inhabit.
• The people who provide the public services we depend on, like police and fire and teachers, will find it harder and harder to afford to live where they work.
• In the end, we’ll either get less services or have to pay much more for them, for which there isn’t tax revenue without tax increases.

It is reasonable for any one of us, at any point in time, to think that housing isn’t our biggest personal problem. We think we can’t do anything about it because it’s not in our job jar.  But even if you’re not a housing advocate, or a developer, or a government official, it does matter to you today, and you have to do something about it.  If you own a business, big or small, while it may not be in your business plan to build or invest directly in housing, you can support it.  Going to public meetings, staying informed where you work and vote, will have a direct impact on your difficulties recruiting talent.

There is ample data, like the MBR’s survey, that competitiveness, housing, quality of life, and cost of living are directly correlated for all of us, whether we’re moving or not.  Life is full of tradeoffs, and the citizens of the Commonwealth have every right to protect the status quo.  But we also have a responsibility to consider tradeoffs and future costs.

We do not have to grow our housing supply.  Our constitution, and local control it grants our cities and towns, mean that we get to choose.  But if we choose the status quo without considering the current, and very real, costs of that path’s impacts, we are fooling ourselves.

Because just like new housing has costs, doing nothing does too.

Scott Pollack is founder of SRPlanning (SRPlan.net) and serves as Co-Chair of ULI Boston/New England’s Housing Roundtable. Please send any reactions, comments, or ideas to Scott at [email protected].