ULI Terwilliger Center for Workforce Housing Report Analyzes Affordability Problem for Moderate-Income Workers

For more information, contact Trisha Riggs at 202-624-7086; email: [email protected]

BOSTON (October 1, 2010) — Housing that is close to major employment centers remains unaffordable to a large portion of workers in the Boston metropolitan area, despite the decline in home prices that occurred in many parts of the region during the recession, according to new research published by the Urban Land Institute (ULI) Terwilliger Center for Workforce Housing.

Priced Out: Persistence of the Workforce Housing Gap in the Boston Metro Area examines the availability of for-sale and rental housing near six major employment hubs in the Boston area, specifically in terms of housing that is affordable to workforce households, or those with incomes ranging from 60 percent to 100 percent of the area median income (AMI). Approximately 23 percent – or more than 600,000 households fall in this income range (according to 2008 data from the U.S. Census Bureau). The analysis was based on proximity of workforce housing within a 30- to 45-minute in-traffic commute of the employment centers of downtown Boston, Route 128 North, Route 128 West, Framingham, Route 128 South, and Route 3 North.

According to Priced Out, while the household median income for the Boston metro area ranks relatively high compared to other U.S. metro areas ($81,180 for a family of three, $90,200 for a family of four), there is currently a shortage of about 25,000 housing units affordable to workforce households near each of the six employment centers. This number is expected to rise over the next ten years by an additional 11,000 units, as growth in workforce households continues to outstrip the region’s ability to build housing that is affordable to those households.

The problem is most severe among family households, or those with at least three people living together. About 40 percent of the area’s workforce consists of households with at least three people; and while these have traditionally been defined as a couple with one or more children, larger households are increasingly made up of one parent with children or multigenerational members. This group, notes the report, has the most difficulty finding appropriate housing within reasonable distance of the area’s key employment cores.

The report was released today in conjunction with a ULI Boston program that examined the potential ramifications of repealing the Commonwealth’s 40B law, which was enacted 41 years ago to encourage the development of affordable housing in areas that are unaffordable to those making 100 percent or less of AMI. Priced Out builds on a report released earlier this year by the ULI Terwilliger Center, the Boston Regional Challenge, which found that the combined costs of housing and transportation for the Boston metro area totals approximately 54 percent of the typical household’s income.

Within the Boston metro area’s resale market, the median price for single-family homes fell from 395,600 to 332,600 between 2007 and 2009 (according to the National Association of Realtors) — a level that, despite the decline, remained out of reach for the majority of workforce households. During the second quarter of 2010, the median price reached $360,200. While the increase is an encouraging sign that the housing market may be improving, it suggests an upward trend that would place for-sale homes further outside the affordable price range for most households with incomes of 60 to 100 percent of AMI.

For-sale housing that is affordable to the workforce tends to be geographically concentrated on the periphery of the metro area, and located farthest away from both job centers and transit, the report found.

Priced Out also looked at the availability of rental housing, which currently is more accessible to workforce households proximate to these employment centers. Unfortunately, the rents that workforce households can pay are not high enough to support new high-rise or mid-rise construction – the product types that current land prices require to be economically feasible. As a result, the availability of high-quality rental housing for workforce households will continue to decline, predicts the report.

Priced Out, prepared for the ULI Terwilliger Center by RCLCO/Robert Charles Lesser & Company in Bethesda, Md., was published by the center as part of its efforts to measurably increase the supply of workforce housing in high-cost markets throughout the nation. The center was established in 2007 by former ULI Chairman J. Ronald Terwilliger, chairman emeritus of Trammell Crow Residential, headquartered in Dallas. The research underscores the persistent need for moderate-cost housing that is closer to jobs, Terwilliger said. “In high-cost markets, workers are being pushed far away from employment centers in search of housing they can afford, and which adequately meets the needs of their families. This is adding to traffic congestion and sprawl, cutting into family time, straining family budgets, and placing enormous pressure on the economic and environmental well-being of our urban areas,” he said.

By documenting the shortage of workforce housing through research such as the Priced Out study, the ULI Terwilliger Center aims to encourage public policies that provide incentives for private-sector construction of moderately priced housing that is close to jobs and transportation. Without pubic incentives, the gap cannot be closed — either through for-sale or rental construction — as both land and construction costs are prohibitively high to justify building workforce units that are owner-occupied or leased.

The ULI Terwilliger Center’s work in the area of workforce housing supports the Institute’s ongoing pursuit of sustainable, thriving communities, said ULI CEO Patrick L. Phillips. “Workforce housing is a key component of communities that are the most livable, economically successful, and ultimately, the most competitive globally.”

The six inner employment cores analyzed in the report account for 57 percent of the metro area’s total employment.

The analysis found a sufficient supply of workforce housing in only one category, in one employment center – for three- to five-person households in the Route 3 North area. A significant undersupply exists for all other categories, in all employment centers, with the most profound shortages occurring for three- to five-person households in the 128 West and downtown employment cores.

The report notes that nearly every profession includes employees who fall into the workforce housing income range, including those who work in the fields of health care, retail, manufacturing, educational services, construction, lodging and food services, science and technology and finance and insurance. “The ability to house workers in key workforce housing employment sectors – teachers, health care workers, police officers, and firefighters, among others – is vital to the economic sustainability of the Boston metropolitan area,” says Priced Out.

However, without an incentive to help offset the high cost of land, entitlement and construction, the production of new housing will be positioned with prices “well beyond the financial wherewithal of the vast majority of workforce households…The ability of the market to build its way out this housing affordability crisis is extremely limited.”

About the Urban Land Institute
The Urban Land Institute (uli.org) is a nonprofit education and research institute supported by its members. Its mission is to provide leadership in the responsible use of land and in creating and sustaining thriving communities worldwide. Established in 1936, the Institute has nearly 30,000 members worldwide representing all aspects of land use and development disciplines.

About the ULI Terwilliger Center for Workforce Housing
The ULI Terwilliger Center for Workforce Housing was established by J. Ronald Terwilliger, chairman and chief executive officer of Trammell Crow Residential, to expand housing opportunities for working families. The mission of the Center is to serve as a catalyst in increasing the availability of workforce housing in high-cost communities by harnessing the power of the private sector.