The Boston Globe, Wednesday, May 24, 2006, Editorial

WHERE’S THE HOUSING

THE TOPIC was the high cost of housing in New England; the location was the Federal Reserve Bank of Boston. Sponsorship of this symposium shows that the bank is putting the economic consequences of the housing shortage high on the agenda of business leaders.

Barry Bluestone, professor of political economy at Northeastern, began his presentation Monday by recalling a chat with a young woman he met on an airplane. She was a dental surgery resident at one of the major Boston hospitals, and preferred to stay in the area, but was thinking of moving to the Sun Belt because she and her husband wanted to live in a home they could afford.

One of her options was North Carolina, and Bluestone presented evidence at the symposium that high housing costs were among the reasons that it took $64,656 for a family of four to maintain an adequate standard of living in Boston, compared with $44,124 for a comparable family in Raleigh-Durham. Differences in child-care costs and taxes were also major factors. Child-care costs go down as children mature, however, and the high taxes are generally mitigated for Boston residents by higher incomes. The great continuing variable was housing. The rent was $1,266 for a two-bedroom apartment in Boston compared with $779 for a similar-size unit in Raleigh.

And Bluestone's study may have understated the problem. Alicia Sasser of the Federal Reserve's New England Public Policy Center said that incomes in Greater Boston are high enough so that rents are affordable for many people. It is owner-occupied housing that has soared beyond affordability. "On the supply side," a study she co-authored said, ". . .the single most important factor appears to be the region's strict land-use regulations." High housing costs are forcing families out of the area just as wage-earners are entering their most productive years.

Bluestone has been one of the leaders in a three-year campaign to get state government to offer incentives for communities to loosen restrictive zoning regulations. Towns have been slow to embrace the new laws, called 40R and 40S. Last week, however, Plymouth and North Reading approved zoning under the 40R rubric that would encourage the construction of more than 1,000 apartments. Cities and towns need to understand that the state will give them the money to defray additional costs of new housing, and that their decisions will benefit the economy of the entire region.

Edward Glaeser, professor of economics at Harvard, believes that many suburbs lack the concentration of business interests needed to make the case for new housing. He contrasts that with the situation in Boston, which is big and diverse enough so that the economic gains from new housing are obvious and compelling. The city has issued permits for 17,000 units over the past seven years, 523 in the Mattapan development described in the next editorial.

This production ought to be the norm throughout the area. It was in the 1980s, as shown in the accompanying chart. But unlike the '80s, the surge in prices wasn't accompanied by an increase in supply. Communities, with the exception of Boston and a few others, tightened up their zoning, and the shortage developed. This trend needs to be reversed.

If 40R and 40S aren't successful, Glaeser thinks the state needs to intervene more directly by denying any aid to communities that refuse to put up new housing for young families. That's a tough step, which would be more palatable if cities and towns were confident that the Legislature would stop slicing local aid during a recession. Communities need assurances that, if they do their part to generate housing, the state will provide the money to help pay for schools and other essential services.

Glaeser calls these communities that have the most restrictive zoning "boutique towns," and they are home to some of the most influential business leaders in Massachusetts. Town meetings there need to get the message that a lessening of zoning restrictions in the name of smart growth is good for the economy, and ultimately good for the towns.

The symposium was held because Bluestone's research institute, the Center for Urban and Regional Policy, Glaeser's Rappaport Institute for Greater Boston, and the Fed's Public Policy Center were coming up with reports on housing at the same time. Their unanimous assessment of the consequences of the housing shortage ought to spur the business community to more concerted action.

The Greater Boston Chamber of Commerce has been an advocate of increased housing production for years. It's gratifying that the Federal Reserve Bank of Boston, as a steward of the regional economy, also is concerned. Cathy Minehan, president of the Fed, said yesterday in a telephone interview that one of the bank's roles is to bring clarity to issues that affect economic development. Business leaders need to take this message back home to their bedroom communities: A wealthy enclave can only escape so long from the consequences of a regional economy in decline.