October 23, 2017
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 2
Median Monthly Housing Costs Massachusetts’ median 1600 monthly housing costs is the 6 th highest in the 1400 nation. Monthly Housing Costs ($) 1200 1000 The median monthly housing costs 800 represent 23.9% of the 600 median household income in 400 Massachusetts, the 8 th 200 highest percentage among states. 0 West Virginia Arkansas Mississippi Kentucky North Dakota South Dakota Alabama Oklahoma Louisiana Montana Iowa New Mexico Tennessee South Carolina Indiana Missouri Nebraska Kansas Ohio Idaho Wyoming Michigan North Carolina Maine Wisconsin Pennsylvania Texas Georgia Arizona Florida Minnesota Oregon Nevada Utah Illinois Vermont Delaware Rhode Island Colorado Washington Virginia New York Alaska New Hampshire Massachusetts Connecticut California Maryland New Jersey Hawaii 3 Source: U.S. Census Bureau, American Community Survey, 2011-2015 5-year estimates. Monthly housing costs include mortgages, insurance, property taxes, condo or homeowner association fees, and utilities. Statistics for all occupied units.
Median Monthly Housing Costs 25 Largest Metro Areas Among the 25 largest 2000 metro areas in the US, 1800 Median Monthly Housing Costs ($) Boston has the 4 th 1600 highest median 1400 monthly housing costs. 1200 1000 For the Boston Metro 800 Area median monthly housing costs 600 represent 24.3% of 400 median monthly 200 household income. 0 4 Source: U.S. Census Bureau, American Community Survey, 2011-2015 5-year estimates, Monthly housing costs include mortgages/rent, insurance, property taxes, condo or homeowner association fees, and utilities. 25 Largest Metropolitan Statistical Areas based on 2016 population projections.
Zillow Average Home Value Home values have $500,000 recovered from the $450,000 recession and are $400,000 steadily increasing $350,000 across $300,000 Massachusetts and $250,000 the Boston Metro $200,000 Area. $150,000 $100,000 $50,000 $0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Boston Metro Massachusetts 5 Source: Zillow Research, accessed on 10/5/17. Boston Metro Area as define by Zillow.com. Cities in region include Boston, Newton, Cambridge, Somerville, Quincy, Lynn, Lowell, Brockton & Lawrence
Homeownership Rates Annual Averages 100.0 Nationally 90.0 homeownership 80.0 rates have declined for 12 consecutive 70.0 Homeownership Rate (%) years. 60.0 50.0 The challenge in Massachusetts has 40.0 been a rapid decline 30.0 in homeownership 20.0 rates since 2012. 10.0 0.0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 US Massachusetts 6 Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey
US Home Ownership by Age 100.0 Nationally 90.0 homeownership 80.0 rates have 70.0 Homeownership Rate (%) 60.0 declined more 50.0 severely in those 40.0 under 45. 30.0 20.0 10.0 0.0 1982 1985 1988 1991 1993r1 1996 1999 2002 2004 2007 2010 2013 2016 Less than 35 years 35 to 44 years 45 to 54 years 55 to 64 years 65 years and over 7 Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it Already Doing? II. Case Studies 8
Housing for which the occupants are paying no more than 30% of their income for gross housing costs, including utilities. A household that is paying over 30% of its income for gross housing costs. A household that is paying over 50% of its income for gross housing costs. The median family income for an area. For Boston, AMI ranges from $72,400 for a 1-person household to $103,400 for a 4-person household. AMI is used by HUD in determining criteria for housing assistance programs. A family whose combined income does not exceeding 80% of the median income for the area. Households in these income brackets qualify for various housing assistance programs such as public housing and Section 8 vouchers. Housing that is affordable to the middle class families that make up much of Boston’s workforce. Workforce housing projects are typically aimed to be affordable at 80% to 120% of AMI. 9 Source: Department of Housing and Urban Development, Glossary, https://www.huduser.gov/portal/glossary/glossary.html
In a recent survey of Massachusetts businesses conducted by The UMass Donahue Institute on behalf of MassEcon, nearly all interviewees mentioned the cost and supply of housing as a challenge for their business and a barrier to retaining talent. Our survey of City Awake Delegates found that housing and economic mobility were the two most important issues for millennials. • 80% of respondents disagreed with the notion that Greater Boston is made up of affordable neighborhoods. “I’m not sure I want to buy a home in Greater Boston because it seems so impossible. It would be helpful to be able to save money for a down payment.” -City Awake Delegate 10
I. The Affordability Problem in Boston II. What is Affordable? III.Housing Costs IV.Housing Production V. What Can Public Policy Do? I. What is it already doing? II. Case Studies 11
Cost Burden by Age 2015 70.0% Younger and older 60.0% Bostonians are significantly more Percent Cost Burdened 50.0% cost burdened than 40.0% those ages 30 through 74. 30.0% 20.0% 10.0% 0.0% Under 25 25 to 29 30 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+ Total Boston Metro Area Source: 2015 American Housing Survey, burden for all occupied units. The AHS Boston Metro Area differs from the Boston 12 Metropolitan Statistical Area. Cost burdened defined as spending over 30% of gross monthly income on total monthly housing costs
Cost Burden in Boston Metro Area 2015 80.0% In the Boston 70.0% Metro Area, 60.0% nearly half of all Percent Cost Burdened renters are cost 50.0% burdened , 40.0% compared to only 30.0% 28% of owners. 20.0% 10.0% 0.0% Under 25 25 to 29 30 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75+ Total Owner Renter Source: 2015 American Housing Survey, burden for all occupied units. The AHS Boston Metro Area differs from the Boston 13 Metropolitan Statistical Area. Cost burdened defined as spending over 30% of gross monthly income on total monthly housing costs
Housing costs are more than Rent or or Mortgage Payments. Other factors include: • Property Tax • Homeowners or or Renters In Insu surance • Homeowner or or Con ondo Ass ssociation Fees • Utili tilitie ies • Priv rivate Mortgage In Insu surance 14
Mortgages with less than 20% down often require Private Mortgage Insurance (PMI), typically between 0.5% and 1% or the entire loan amount on an annual basis. $400,000 Home $400,000 Home 20% Down Payment 10% Down Payment 30-Year Fixed, 4% Interest Rate 30-Year Fixed, 4% Interest Rate Down Payment $40,000 Down Payment $80,000 Principal $360,000 Principal $320,000 Interest Paid $258,730 Interest Paid $229,982 Private Mortgage Insurance* $12,600 Total Cost $629 $629,982 Total Cost $67 $671,330 Average Monthly Payment $1,7 $1,754 Average Monthly Payment $1,5 1,528 * Assumes PMI rate of 0.5% and the elimination of PMI after 7 years. PMI is typically eliminated once the buyer accumulates 20-25% equity. 15 Monthly payments will be higher than average when paying PMI and lower once PMI is retired.
Boston median monthly housing cost for homeowners is made up of a number of factors: Mortgage Payment- Monthly costs of a mortgage, which Real Estate Taxes covers principal and interest $400 Real Estate Taxes: In Massachusetts, real estate taxes are Utilities charged by the municipality based on the assessed value of a $323 home Homeowner/Condo Association Fees: Fees charged by condo Homeowner/ Mortgage or homeownership associations usually for shared utilities, Condo Fee insurance or maintenance costs $1,365 $300 Insurance: Homeowners insurance is usually required for property that has a mortgage Insurance Utilities: Depending on the home utilities, costs include $100 electricity, gas, fuel oil, other fuel, trash collection, and water Source: 2015 American Housing Survey, burden for owner-occupied units. The AHS Boston Metro Area differs from the Boston Metropolitan Statistical Area. Mortgage costs only apply to homes with at least one mortgage. This analysis excludes lot/land rent costs, which apply to only 2.7% of homeownership in the Boston region. Size of bubble represent 16 median monthly cost for individual cost factor, do not add up to median monthly housing costs.
Median Monthly Costs Factors Owners 2000 1800 While Boston has 1600 lower mortgage 1400 payments than Median Monthly Cost ($) 1200 some peer cities, 1000 it leads the way 800 with high taxes, 600 utilities, insurance 400 rates and fees 200 0 Mortgage Amount Real Estate Taxes Homeowner or Renter Homeowner/ Condo Utilities Insurance Association Fee Boston San Francisco Philadelphia DC Seattle Raleigh Source: 2015 American Housing Survey, burden for owner occupied units. Mortgage costs only apply to homes with at least one mortgage. This analysis excludes lot/land rent costs, which apply to only 2.7% of homeownership in the Boston 17 region.
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