Climate refugees with money choose Vermont

A January 2022 piece in the online news site Seven Days VT featured stories of people called "climate change refugees" - those who had lived in other US communities but who left due to changing weather and living conditions and chose Vermont. The story is part of a series about the housing crisis in the state called Locked Out. Since 2020, the housing market in Vermont has changed drastically. Everyone seems to know someone who was offered a job and couldn't take it because they couldn't find a place to live. Everyone seems to know someone whose rent just keeps going up and up and they don't know what to do. Everyone seems to know of "zombie  houses" that are second (or third) homes that wealthy out-of-staters only use for a few weekends each year. And everyone seems to have met people who moved to the state because they loved the climate here and were getting burned out or heated out of their home state.Prior to COVID, there was plenty of real estate available in Vermont to buy, though the rental market was tight across the state. Residential properties with 20-100 acres would stay on the market for several months and often sell below asking price. The housing stock in the state is old and in need of repair. People have smaller families and don't need or want a big old farmhouse. Zoning and environmental restrictions (the notorious Act 250 which basically blocks all commercial development in the state) make it hard to change a big farmhouse into a bunch of apartments.Enter people who were either rich-rich or house-rich from other parts of the country with better housing markets than Vermont had pre-COVID. They swooped in, often buying with cash, and local people were priced out.Many of the relocaters are retired, though some have young children - the younger families are either able to live without working (trust fundees) or work remotely, if they managed to find a Vermont home with internet.In 2020, there were 1,000 more homes bought by out-of-state buyers compared to 2019 and the median price of a home rose 32% to $325,000, putting homeownership out of grasp for most local people. The median household income in the state is $67,674 and only $37,903 per capita.Vermont is a small state - the population is under 650,000 - so relatively small changes can make a big impact. You can read the whole Seven Days article, including more specifics about the people interviewed, here.

Mayor Wu's Rent Control Plan Modeled on Portland, OR

Rent Control is a government program that limits annual increases on rents, with an aim on keeping costs reasonable for tenants. Almost all rent control programs are municipality-based and exist in cities and towns in New York, New Jersey, California, Maryland and Washington, DC. In 2019, Oregon instituted a statewide rent control law, limiting annual rent increases to 7% + the consumer price index. Now that the CPI is high, that means rents can be raised by 14%, which is unaffordable to many tenants, particularly in the urban areas of the state, where rents are already higher than in suburban and rural areas. Portland, OR in particular has a significant homeless population and the increased rents are driving people to live in tents and their cars when they can’t afford the increases.The Boston Globe recently ran an article about the Oregon situation and interviewed a 70 year old woman who works and receives Social Security. Her rent for a basic, rent-stabilized, two-bedroom apartment in Portland is about to be raised to $1,400 and she can’t afford it. She is contemplating moving into her car.When the Oregon law was passed in 2019, the CPI was nowhere near the 7% it is today, and housing advocates didn’t foresee the increases getting so high. Landlords did, however, and warned that initial bill was a foot in the door for even stricter rent caps. This year, the Oregon Legislature is considering a lower cap: 3% plus CPI or no more than 8% annual increase, whichever is lower.Opponents to rent control say that what’s needed is simply more housing and that if there was more supply, demand would be sated and there would be price points for people all along the market. Landlords and developers say that limiting rents limits their profits, which limits what they have to invest in new housing.Median home prices in Portland Or have tripled since 2000 and there are now at least 5,200 people who are homeless, many sleeping rough in tents. It’s a scale of housing crisis that has not been seen in the Greater Boston area, perhaps because the median rents are so much higher in metro Boston. Many of those who can afford to live in Boston can afford the rental increases and those who can’t are still earning more than low and middle-income renters in Oregon. Perhaps some of the 100,000 people who left Boston moved West, where apartments are relatively affordable. The chart below shows the rent increases in the two cities over time, including when the rent control measure came into effect in Oregon. The Oregon housing bill that contained the rent restrictions also loosened zoning laws, allowing multi-families to be built on what were single-family lots and also allowing ADUs, which permit the owners of single-families to create rentable units in their backyards. Developers can also fit more units on one lot, even if they feel the rents they get can’t be raised as much as they’d like.Boston’s Mayor Wu is attempting to institute rent control in the city. Her plan would limit annual rent increases to 6% plus the CPI, but with a maximum hike of 10%. The first 15 years after construction would be exempt from the rent controls, just like in Oregon and small, owner-occupied apartments would be exempt. There are no zoning changes built in to the law she proposes. Boston housing advocates mostly support Wu’s proposal (some say it doesn’t go far enough), but the business community unsurprisingly does not, for all the same reasons given in Oregon: it will stifle growth, landlords and developers won’t be able to build, and the free market should set the rent. Developers and housing advocates agree that building more will naturally stabilize rents down-market. Some apartments are subject to bidding wars and there are certainly tenants out there who can and will pay top dollar for those pricey Boston apartments. But nearly every day there are news stories about working people leaving Boston because they can’t find a place to live that they can afford. The median per capita income in Metro Boston was $92,900 in 2022, according to the US Bureau of Economic Analysis, whereas in Metro Portland it was $68,374.The graph below shows what an annual increase on a $2,000 apartment would look like under various models of rent control:        Rents in Boston and Cambridge are the highest in the state, with a median asking price in the Back Bay/South End hitting $3,940 in the last quarter of 2021 (the most recent data available). Prices have undoubtedly risen since then, meaning many median rents are topping $4,000. But with a median per capita income of over $90,000, those rents are easily affordable for some.Pro-affordable housing critics of rent control say that because there are no income restrictions on rent controls, more affluent people will “scoop up” lower-cost units in order to benefit from limited rent increases. Economists warn, however, that rent controls can fuel gentrification “by driving up rents in uncontrolled units or pushing landlords to convert apartments into condos” Rent control in and of itself doesn’t seem to have an impact on production, according to experts. The lag in new development in Greater Boston is due to high interest rates, and rent controls probably won’t further depress production. But it also doesn’t create production. As quoted in the Globe,  rent control “doesn’t create an incentive to build, or make it easier to build,” said Jenny Schuetz, a senior fellow in urban economics at Brookings Metro. Building more housing is “the only solution” to the housing crisis, she said.

Boston Housing Crisis Q&A

Andrew Brinker, business correspondent for the Boston Globe held a Q&A on Reddit about the Boston housing crisis.You can read the whole article here, including more lengthy answers, but below are some of his answers to short questions posed by Reddit users:

• Q: How do we ban tenant-paid broker fees?
• A: State legislation

• Q: How much housing in Boston is owned by foreign investors?
• A: There's no data that tracks that, but cash buyers may indicate foreign investment.

• Q: What online tool can help find housing?
• A: Housing Navigator 

• Q: What percentage of housing is corporate owned?
• A: No one has done that research

Daly Appraisal Newsletter - Vol 5

Appraisal Insights

Welcome to the fifth issue of Appraisal Insights! We've launched this newsletter to share customer stories and illustrate the power of real estate appraisals to provide valuable property and market insights.Recent appraisals that we’ve written or are working on include:

• A racquetball club in Worcester County converted to an office building.
• A refurbished Brimfield farmhouse on 77 acres used as a single family dwelling and working animal farm with horses, pigs, chickens, and goats.
• A six house subdivision in Worcester.
• A dilapidated retail strip in Dorchester that will be redeveloped for retail and apartments, or just apartments.
• An industrial complex in Boston's Hyde Park neighborhood.
• The old Jordan Marsh building in downtown Lowell.

The picture above is of the old Jordan Marsh department store in downtown Lowell. The property is known as the Bon Marche' (translated as “bargain price”) building because that was the name of the department store that occupied the property from 1887 until the Jordan Marsh company took it over in the 1970s. Jordan Marsh went out of business in the mid 1990s. The property was refashioned into office and retail space and now houses, among other tenants, the Lowell Public School administrative offices.

Featured Article

Greater Boston's Housing Crisis:A 21st Century Village ApproachPart IIBy Jim Daly

Two recent stories in the news show how the housing crisis affects the old and young. The first is about how cruel the effects of gentrification can be, the second about how landlord mismanagement continues to plague students seeking livable dormitories and off-campus housing.Story 1: A Princeton University study estimates that 43 tenants per day are evicted in Massachusetts. It's almost double what the rate was in 2005. Boston Globe Magazine profiled one tenant facing eviction. Jerome Stanley, 64, a Boston school bus driver, was evicted from his Roxbury apartment after living there for 27 years. New landlords were seeking to raise his rent by 70%. He couldn't afford it and became one of an estimated 20,000 people in the state who are homeless. "Close your eyes and imagine the joy you have with your work, look at your home and imagine the time you have with your children," he wrote the Globe, ". . . then tomorrow suddenly after 30 years it's gone." A link to the story detailing how he represented himself in housing court is below.The second story is about the calamities that befell students occupying the first-ever dorms at UMass Boston. The two new dorms, which opened in Fall 2018, have 1,077 beds. In the first weeks of school, elevators with students inside abruptly fell several floors. According to the Boston Globe, "water shot out of one toilet when you flushed another . . . the rooms are often stifling hot, but the showers are frigid . . . and the hamburgers in the dining hall are sometimes raw." A link to the story, in which the development company tries to explain what happened, is below.These two stories are linked because they illustrate the need for a coordinated approach to dramatically increase not just housing, but housing that fits the needs of the region's changing population.Suffolk County's population has increased by 9% since 2010. Boston's population of 675,000 is expected to increase to 725,000 by 2030. Mayor Marty Walsh has pledged to increase housing by 53,000 units during the interim. His initiatives have gained momentum, according to the Greater Boston Housing Report Card 2017 from Northeastern University.One sign of progress is that there were 12,900 permits issued for new structures in Greater Boston in 2017. Two-thirds of those were for multi-families. Also in Boston, the wait time for new building permits has decreased from 425 to 120 days.There are few other signs of progress. Home prices continue to soar. Rents, the fourth highest in the country, show some signs of the leveling off and decreased slightly (<3%) in 2017 after increasing 6.9% per year from 2009-2016. Inventory of both single family houses and apartments are at record lows.Barry Bluestone and James Huessy, the authors of the Greater Boston Housing Report Card 2017 study, are calling for a more coordinated approach. Their 21st Century Village concept calls for housing that fits the needs of Boston, which increasingly is becoming younger ~ students and Millennials ~ and an aging population ~ people like Jerome Stanley, many of whom live by themselves.Bluestone and Huessy think the units need to be built quickly but worry that cities and towns will fail to take a coordinated approach. I have seen little in the news that suggests that leaders, with the exception of Mayor Walsh, are endorsing the plan. The study's main points are that:

1. A consortium approach is needed from political and business leaders such as the governor, regional mayors, hospital CEOs, and local university presidents.
2. The authors propose villages comprised of multi-story buildings that range in height from five to 35 stories.
3. Each "village" could contain a range of units from "micro" apartments to studios and multi-bedroom units.
4. Each village would have a community space with lounges, laundry facilities, seminar rooms, study areas, gyms, and roof gardens.
5. Construction would incorporate modular design and panelized construction using new materials and high productivity building techniques.
6. Leaders should investigate the feasibility of opening a state-of-the-art manufacturing facility in Greater Boston, where modular units and panels could be fabricated.

Further reading suggestions:1) Greater Boston Housing Report Card 2017.2) “As rents soar in Boston, low income tenants try to stave off eviction," by Jenifer McKim and Alejandro Serrano. Globe Magazine, February 19, 2019. 3) “Falling elevators, raw hamburger, lax security at UMass Boston dorms," by Laura Krantz. Boston Globe, November 11, 2018.