Short-term rentals on the Cape may have maxed out the market

A recent article in the Boston Globe details the falling demand for short-term rentals (AirBnBs, VRBOs) on the Cape. Possible causes? Oversaturation of supply, prices too darn high, a strong dollar making a trip to Italy more appealing, $45 lobster rolls and long waits for everything (due to the lack of service workforce).The upside is many hosts are slashing prices, so last minute travelers can get a deal.Read the whole article here: On Cape Cod

Worcester Tries to Keep and Grow Affordable Housing

Eric Batista, the City Manager for Worcester, wants the city to create a Housing Production Plan (HPP) and Affordable Housing Preservation Program (AHPP), according to a story on MassLive.While not a requirement, a Housing Projection Plan is something most Mass cities have. The HPP sets forth the community’s goals for housing in general and affordable housing in particular. If the state’s Housing and Community Development Department (DHCD) approves a municipality’s HPP, then any decision by that municipality’s Zoning Board of Appeals to deny a comprehensive permit application will be upheld under chapter 40B. Without this, developers can override zoning regs to put in 40B housing.Worcester is well above the requirement of 10% housing stock affordability, but a HPP is still a useful tool to create a plan for development and it helps city officials make development decisions. In 2022, Worcester passed an inclusionary zoning policy that requires all developments with 12 or more units to reserve 10-15% of their housing as “affordable.” Affordable housing means a variety of things, and most broadly means that people earning up to 80% of the AMI can live in those units. As median incomes grow, those “affordable” rents also increase.Some in Worcester are pushing for 60% of the AMI to be the cutoff for housing deemed affordable, rather than 80%.Batista’s Affordable Housing Preservation Program would use $1 million to help preserve currently affordable units that don’t have deed restrictions requiring them to be affordable. The program would give landlords a one-time payment of $15,000 per unit in exchange for a 15 year deed restriction to maintain affordability. 

Granny Flats (ADUs) in California Becoming More Popular

The WashingtonPost recently ran a piece on how accessory dwelling units (ADUs), sometimes known as in-law apartments or "granny flats," are easier to build in California, thanks to zoning changes that have been put into place in the past few years.The article states that about 23,000 ADU permits were issued in California in 2023, up from 5,000 in 2017. However, as recent stories in the Los Angeles Times and San Francisco Chronicle show, although a lot of permits have been granted, far less building has actually happened and the construction that has been completed has happened in the wealthiest communities, with the average cost coming in at about $200,000 ($150/SF plus) and prices rising every day as materials costs continue to increase.Only 622 ADUs have been built in San Francisco since 2017 (0.2% of the city's total housing supply). In LA, more ADUs are being built, but again, they tend to be in the wealthiest areas, although there were $40,000 grants available for moderate-low income households to build an ADU; the funding was exhausted in a few months.Crosstown Conversions shows the number of ADUs by neighborhood below:And then the median income in those neighborhoods (below):The distribution of ADUs closely tracks the median income in the neighborhood. 

Home sales declined across the country in April 2023, including Boston

Yahoo Finance reports that "homeowners are quiet quitting" the sales market, as they hold on to their lower interest rate mortgages and listings are down more than 20% compared to April of 2022. Inventory is low, mortgage rates are high, and only those with the ability to handle a 7% mortgage rate (or wealthy enough to pay cash) are buying homes right now.This is the case in Boston, too. The Boston Globe reports that "prices, sales volume, and new listings have all declined during what is typically one of the busiest months of the year."While the market in Boston is segmented on an almost street-by-street basis, overall, the median price for a single-family home in Greater Boston fell by 3% compared to the previous year and condos fell by about 1%.The Globe article notes that most homeowners have a mortgage rate between 2-3%, which is less than half the current rate and can result in about $1,000 more per monthly payment."Buyers still outnumber sellers" in many Mass towns, "but bidding wars are much more rare."

16 apartments coming to Chicopee

The Chicopee City Council approved preliminary plans for a 16 unit apartment building on the site of a former Masonic Temple (more recently a thrift store) that burned down in 2017.The vote was 12-0 and while one resident spoke against adding apartments to the city, the council acknowledged that Chicopee, like the rest of Massachusetts, has a housing shortage.Read the full article on MassLive

Haitian and Latin American Migrants Coming to Mass in Record Numbers

Economic and political turmoil in Haiti and Latin and Central America are resulting in a surge of migrants coming to Massachusetts and this influx of new people, many of whom do not speak English and are in need of shelter and medical and social services, is overwhelming shelters and service providers. 900 homeless families have been placed in hotels as emergency shelter and Governor Healey’s proposed FY24 budget includes $324 million for shelters, but that might not be enough, according to a Boston Globe article.

Massachusetts’ Q1 Residential Data Points to a Slowdown in Sales

The Massachusetts first quarter residential real estate data is out from MLS and it shows that homes continue to hold on to their value (good news for sellers), but are only rising very slightly in price and sales are taking longer to happen (good news for buyers).The first quarter of the year (January – March) is usually a slow time for selling or buying a home in snowy Massachusetts. And yet, prices have continued to rise, albeit more slowly than during the peak pandemic years. In Q1 of 2023, the median sale price came down to the list price, after having exceeded it for two and a half years. Pre-pandemic, median sales price was below list price. The median sale price for a SFH in Massachusetts this quarter was $535,000 a 39% increase over 2019’s median price for the same quarter, but only a 1.9% increase over Q1 in 2022. Q1 of 2022 turned out to be the fastest of the past five years for sales to happen, and in 2023, the average time for a home to sell is now well over a month statewide.The news is about the same on the condo front. Median sales price for the first quarter of the year were $1,000 above asking price, which is negligible. The median sales price of condos in Mass is now $500,000 which is an increase of 36% since 2019 and an increase of 6% from the same time last quarter.The days on the market for condos is also longer than the rush in early 2022, with condos also taking more than a month to sell now.With mortgage rates still very high (and more than double what they were until September 2022), sales are slowing. The sales volume has decreased markedly in Q1 compared to the pandemic year and is only slightly higher than Q1 of 2019. The residential real estate market in Massachusetts seems to be stabilizing in terms of time on market, offer prices and volume of sales. The prices, however, are remaining at the heights they reached during the pandemic, which makes it hard for first-time buyers to enter the real estate market. Lending rates are a further impediment to new buyers.

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

Renting in Boston Just Got Harder

As if the rental crush that started as the pandemic eased in late 2021 wasn't bad enough, rental apartments are even harder to find in Boston today and the rents on the few units that do become vacant are just going higher and higher.According to the Boston Globe, rents in Greater Boston are up 6% since March 2022, which is a steeper increase than the nation as a whole. The median rent for a 1BR in Boston is now $2,011, on par with NYC and San Francisco. That's $24,132 a year, and it means that the income needed to rent that median unit is about $100,000 per year.The vacancy rate is 0.49% - which essentially means any unit that becomes vacant will be rented in a day. A healthy vacancy rate is 5%The Globe interviewed a young woman who couldn't find a place to live on her own after a break-up and wound up spending months living in her car before finding a room to rent with strangers in Jamaica Plain. Another interviewee is a Harvard instructor who lives in a room in a shared collective. She would like her own place, but can't find anything she can afford.White collar professional workers are living like students just to be able to afford to live near their jobs.

Can't Afford Boston? Try Japan.

Japan's shrinking population and a cultural distaste for second-hand homes has led to a growing number of vacant homes (akiya) for sale at seriously low prices, some for as little as $25,000.The country's 2018 housing survey identified about 8.5 million akiya and the number has likely risen since then. Heirs can refuse to take possession of a house that has been left to them in an estate, and in those cases the municipality auctions the house off - for tens of thousands of dollars.The New York Times ran a piece about the akiya and some of the non-Japanese buyers who have relocated to them, when they've been priced out of their home markets. Two Americans have started a business promoting the inexpensive akiya housing to international relocatees.Some in Japan are worried about what it will mean for Japanese culture if so many foreigners move to the country, but few native buyers are stepping forward.Read the whole article here.

How the Property Tax System is Impacting Housing Shortage

The Wall Street Journal recently shared how the low property tax rates for undeveloped land may be keeping some landowners from developing those parcels.They illustrate the low rate paid for vacant land by a parcel in Austin, TX that has been used as a parking lot for many years. The owners earn revenue from the parking and because the land is unimproved, their tax rate is substantially lower than nearby properties that contain buildings. Austin used to be an affordable town with plenty of housing, but it has become a boom town in recent years, resulting in a housing shortage. There are plenty of vacant lots, but owners of those lots are reluctant to build.A proposal from tax reform experts is to increase the tax rate on vacant land and decrease the rate on improved parcels, resulting in the same revenues for municipalities, but shifting the burden.Pittsburgh has adopted this taxation plan and it resulted in more construction activity, but it's not politically popular and developers tend to think it wouldn't make that much of a difference. Detroit is currently considering adopting it, stay tuned.You can watch this episode from WSJ on YouTube here.

1,000 New Apartments Planned for Downtown Worcester

A MassLive article from April 18, 2023 (full article here) details several upcoming residential and mixed-use development projects that, if completed, will add 1,000 residential units to the city.The projects are:35 Portland St (currently a parking lot behind the Hanover Theater) to create 108 studio and 1BR units. Planning permission granted April 2023.274 Franklin St (several blighted parcels totalling 3.75 acres) 364 units from studios to 2BRs, 21 of which will be ADA accessible. Construction to begin Spring 2023.5 Salem Square (former site of Notre Dame des Canadiens church, demolished in 2018). 163 units, 14 of which ADA accessible. A 20,000 SF grocery store and ground floor parking garage. Preliminary planning permission granted March 2023.3 Eaton Place (currently vacant land) 145 units, 12 accessible. Preliminary planning permission granted in 2023.484 Main St (former Denholm Department Store, owned by the city). The Worcester Redevelopment Authority issued an RFP in 2022 and is reviewing submissions for redevelopment to include housing.

Boston Globe Editorial Suggests State Needs to Take Control of Housing Regs

The Boston Globe published an editorial on April 10, 2023 that detailed the long-reaching consequences of an important early twentieth-century law. In 1920, the state gave zoning and planning authority to cities and towns, which, the Globe says, resulted in many municipalities suppressing housing growth in an attempt to keep out renters and the lower classes, particularly in the Greater Boston area.As a result, the cost of housing in Massachusetts increased at a greater rate than the national growth. In Q4 of 2022, the median single family home in Boston cost $707,250, compared to $378,700 in the United States as a whole.In Boston proper, 46% of renters are considered rent-burdened (meaning they pay more than 50% of their monthly income on housing costs) and 110,000 people have left MA since the start of the pandemic. The Globe attributes this loss of population to the high cost of housing.What can be done? The Globe endorses more government intervention at the state level to encourage municipalities to dramatically loosen zoning restrictions - even when local officials argue against it. The Globe suggests that the Governor and AG should levy legal consequences on towns that don't comply.Read the article here: Boston Globe editorial 4.11.2023

Single-Family Homes in California - The End of an Era?

In the NY Times “The Daily” podcast of October 11, 2022, “The Rise of the Single-Family Home”, host Sabrina Tavernise documents the story of a single plot of land in California over time. The same house and the changes to it and its neighborhood are also featured in a NY Times print/online article by Conor Dougherty from a year earlier (October 8, 2021).The show talks about how California is “the most extreme example of the affordable housing crisis” that the US is currently facing. Median home purchase costs are higher than the country’s, homelessness is soaring, and many people are doubling or tripling up in small apartments, just to have a place to live. And yet, “people still want a single-family home”. The single-family home (picket fence, yard in back, dog, barbecues, kids playing basketball in the driveway) is a core component of the American Dream and is both a physical reality and a symbol of community and economic achievement.Many communities across the country have zoning laws that only allow for single-family homes by right (i.e. no special permit needed, no hearing required – you buy a plot of vacant land of a certain size, you can build a single-family home on it). If a homeowner or developer wishes to build something else – a duplex, a triple-decker, or other multi-family housing – they have to go through a hearing process (and will expect to face opposition by neighbors who want to preserve the character of the neighborhood and preserve their property values and who feel that anything other than a single-family home will negatively impact both).So where did the popularity of the single-family home come from? The United States was a primarily agricultural society until the Industrial Revolution and the arrival of the railroad. Cities arose around mills and factories and the population shifted from 95% rural in the first US Census of 1790 to 51% urban in the 1920 census. The chart below from Statista.com shows the steep change from rural to urban as industrialization took hold (and it predicts the urban march to continue into 2050).In the 1940s, cities started running out of space, and the soldiers who’d lived on farms prior to serving in WWII didn’t really want to go back home to the farm due to the lack of economic opportunity on small family farms. Assembly-line production was being perfected for the auto industry at that time, and the resulting availability of large swaths of land, cheap-to-produce assembly-line housing components, and the widespread availability of affordable automobiles led to the opportunity for the development of the American suburb. The GI Bill gave affordable mortgages to returning veterans to buy these new homes.The Daily episode shares archival audio (with the gee-whiz attitude of mid-century advertising) that tell us “five years ago, this was a vast checkerboarded of potato farms on New York’s Long Island, but today this a community of 60,000 persons living in 15,000 homes all built by one firm.” The audio concludes “that old potato patch has come to a good end.”In 1944, 114,000 new homes were built in the US and six years later in 1950 1.7 million new homes were built. And thus, the single-family home was born.The Daily show then interviews Margie Coats, whose father – a returning veteran – bought a newly built ranch home in a new subdivision in San Diego, California : 5120 Baxter Street in Claremont Villas California. He paid for it $13,250 in 1955. There were four styles to choose from, and the Tote family chose the ranch house, covered patio, two-car garage. Buyers got to choose some interior finishes, but they all looked just like the flyer below.In 1976, the house was sold to the Reeses, another family with a veteran dad looking for a nice place to raise their kids. They paid $51,000, $37,750 more than the Coates’ paid; an appreciation of 284% over 20 years. The median sales price of a single-family home in California kept increasing and by 1980 it was $100,000.One of the Reese’s daughters loved the neighborhood and wanted to stay in it to raise her own family, but couldn’t afford the only house that was available for $117,000 in 1990. So they moved out of California to try to save money with the goal of moving back to their old neighborhood. In the two years they were off saving money, the house they had their eyes on went from $117,000 to $162,000. They kept moving and saving, but what they saved was never enough. The Reese patriarch kept living in the family home all this time, then died in 2019. The daughter then inherited the house, which at this point, needed quite a lot of work, which she thought she couldn’t afford, despite now owning the home free and clear. So after spending decades trying to move back to her old neighborhood, once she had the property, she decided to sell it. She sold it for $700,000 and moved to Texas, where it was more affordable to live.The photo to the right shows Margie Coats, daughter of the home’s first owner, in front of her childhood home, 5120 Baxter Street in Clairemont Villas, San Diego. Margie purchased a house across the street from her old home and has lived there since the 1970s, living for all but 5 years of her life on the same block. In the 1960s and 1970s, environmentalists became concerned about the impact on the natural world and open space, and new environmental laws significantly slowed development. Middle-income homeowners also wanted to protect the value of their home, which was usually their one and only asset. The pressure from existing homeowners and environmentalists resulted in stringent zoning regulations in many municipalities that forbade anything other than single-family development in most suburban areas and also took quite a lot of land out of possibility of development. Housing values skyrocketed in reaction – the age old supply and demand issue.California remained a sought-after place to live and the population continued to grow throughout the 20th century and in 2000 one in eight people in the United States lived in California. But the scarcity of developable land and the restrictions on building multi-families has led to the acute housing shortage the state now faces and has led to a decline in population since 2020.Two solutions have been floated for several years – allowing the construction of “accessory dwelling units” or ADUs on existing lots and allowing multi-families by right on what had been single-family-only lots. There was a great deal of opposition to the multi-family zoning proposition by the two constituents – existing homeowners and environmental groups – who had successfully shaped the zoning laws that protected open space and single-family lots. Opponents said that there was no guarantee that more housing would mean more affordable housing and that the only beneficiaries would be the much-maligned real estate developers. Proponents disagreed and said developers could create more housing for less money by being allowed to create 2-4 units on a lot that hitherto had been restricted to one unit.However, the ADU concept faced fewer objections. Marketed as “granny flats” ADUs are billed as a way to convert a garage or shed, or even build a new tiny house in the backyard to house a family member or college student, but in reality they are often a way for a cash-strapped homeowner to make a decent income from renting out an apartment that is separate from the homeowner’s living space. And not to granny, but to a family that can’t afford to buy a home.Back to 5120 Baxter Street. The Reese heirs that sold the property for $700,000 sold it to a developer who had experience adding ADUs. And now, what was once a single-family home with a garage and a backyard became three residential units: the original home, the garage, and the small two-story house built in what had been the back yard. See listing photo below:This now three-unit property on a lot zoned for single-family homes sold for $2 million in 2022.From 2018 to 2020, 23,000 ADUs were added to the housing stock in California, according to The Daily. There are currently about 100,000 new units (of all types) being built in the state, less than 10% of those are ADUs.The ADU legislation allowed for relaxed square footage and parking requirements. Some cities and were unhappy with those allowances and tried to create local ordinances that countervened the state’s regulations or that levied large permit fees and a lengthy permitting process in an attempt to dissuade people from building them.The Pacific Legal Foundation in an article titled “Still No Place to Live: The Local Barriers to the ADU Revolution” documented the hurdles faced by Malibu, San Marino, Coronado, Oakland and San Diego County homeowners who wanted to built an ADU on their property. The state law requires a ruling on an ADU application within 60 days. In San Diego county, the average time for an ADU permit ruling was 112 days prior to the 60-day requirement taking effect and 187 days after the 60-day rule came into effect statewide.Perhaps softened by the lack of massive impact from the ADU bill, in 2021 the state again considered getting rid of single-family zoning by right and allowed existing single-family lots to be severed into two and also allowed multi-families on all previously restricted single-family lots by right. There was hueing and crying on both sides – proponents expecting it to create 2 million units in five years, opponents predicting climate destruction.Read our next article to learn about what the impact has been so far.