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.
What Does "Affordable Housing" Actually Mean?
According to the Office on Housing and Urban Development (HUD), housing is considered affordable if it costs 30% or less of what the renter/homeowner earns, utilities included. Many people pay 50% or more of their income to housing costs, which makes them fall into the "housing burdened" category, and means they have little discretionary income to use on savings, retirement, or entertainment, which helps support the economy.Affordable housing may bring up images of public housing "projects", but more often "affordable housing" refers to rental units that are part of a privately-owned apartment building or multi-family. There are also some homeownership models that have deed restrictions to preserve permanent affordability. In this model, the income restriction applies at time of purchase, but the owner may later exceed the income limits with no penalty.Because the most common model of affordable housing is one or more rental units restricted to affordable levels, that is what we’ll look at here.There are tax credits and lower interest loans available to developers who create affordable units within a housing development and some towns may require that some percentage of units (often 10% - 20%) be made "affordable." The rules and regulations about zoning and tax credits are extremely complex and not what we are covering here, but anyone interested in Massachusetts' rules can find information about the Low Income Tax Credit (for developers creating units reserved for those earning up to 40% of the AMI) here and about affordable housing development here. So nestled into a large apartment building may be several apartments that go for a far lower rent than the others.The rent considered affordable is based on the Area Median Income (AMI), which is defined annually by HUD (in mid-April). Generally, “affordable housing” is available to people/households that earn up to 80% of the AMI. Some affordable housing is restricted to those earning up to 60% of the AMI. The median income varies a lot by region in Massachusetts. Some cities have their own AMI and others are regional (by county or by Census area)For example, the FY22 Boston/Cambridge/Quincy area was $140,200 per household.
So for the many, many towns in the greater Boston area, a family of four earning $111,850 is eligible for affordable housing. And the “affordable” rent for that family of four earning 80% of the AMI would be $2,908 per month for a fully privately owned/developed unit. Development that used 40B funding is slightly different and the cap on the rent for a 40B-funded three bedroom unit would be $2,552 per month.
Wellesley, one of the towns in the Boston/Cambridge/Quincy market has a median rental cost of $4,500 for a three-bedroom, so the $2,908 “affordable” rent is certainly less than market rate, but still not what many would think of as “affordable”. For Boston itself, the median rent for a 3 bedroom is $3,222, and in Quincy, it is $2,600 – less than the rent set for those earning 80% of the AMI.So "affordable housing" really means housing costs that are 30% or less of a household's income. Many in Massachusetts wish that there was more of it, so that MA residents could spend their income in other areas besides just shelter.Several current projects include a percentage of affordable units (due to either a shortage of such units in a municipality or the advantageous financing of projects that contain affordable units, even if the municipality has "enough" affordable units). One such project is the new mixed-use development underway at the former Court Square Hotel in Springfield. The once grand hotel and opera house has been vacant for decades. It is being redeveloped to contain 59 market-rate apartments and 12 "workforce apartments" that will be restricted to those earning up to 80% of the AMI, or $73,300 for a family of four, as of the FY22 HUD AMI limits: The favorable financing that comes with the affordable units helps the developers' bottom line. The full cost of the project is budgeted at $49 million and includes financing from the city and state.The architectural rendering shows what the completed facade with apartments on upper levels and storefront retail, including a restaurant that will be run by the prominent Lee family of restauranteurs.
Industrial Sites Converted to Housing in Worcester
Housing is still the best bet for development in Worcester as former industrial sites become residential sites. A March 27,2022 article by Trea Lavery on MassLive (subscription required to access) detailed the latest large housing development projects in Worcester's Canal District, totaling 800 new residential units, only 10% of which will be deemed "affordable".The former Table Talk Pie factory in Kelly Square is being turned into a total of 474 apartments, 83 set aside for people earning up to 60% of the area median income, the rest at market rate.SOMA (South of Madison) will contain 228 apartments and is slated to also include a hotel and biotech lab and office space. With office and lab space across the state seeing high vacancy rates, that may change.The former Cove music hall will now house 171 market-rate apartments and some ground floor retail, including a candlepin bowling alley.And the former home of Fairway Beef on Temple Street will house 105 apartments.Table Talk, Fairway Beef and the Cove all employed people who could afford to live in the Worcester of old. While the new developments do include some affordable units, most are market-rate, meaning $1500 and up per month for rent.
Daly Appraisal Post - North Shore - Beverly thinks about limiting growth
NORTH SHORE HOUSING. A regional approach to housing needs to be advocated to quell NIMBYism. Beverly has added 1,400 housing units since 2014, when new Mayor Michael Cahill made housing a priority. But the growth has led to complaints from residents about poorly maintained streets and an aging & shut down bridge connecting the west side to the downtown. City Councilor Matt St. Hilaire says downtown story heights of apartment buildings should be reduced from five to three. Saugus and Peabody have already adopted similar anti-housing measures.Read full article here:
Daly Appraisal Post - Online Boston Atlas
The Boston Public Library has a new mapping program to discover the presentation of a property in an old city atlas. For instance, you can type in a Marine Road address in South Boston and discover it used to be called Ninth Street. Or type in the address for the Boston Garden (a/k/a TD Garden) at 135 Causeway Street and find out that North Station was once called Union Station. Or find proof that 4 Yawkey Way (Fenway Park) used to be called and unfortunately is now again called 4 Jersey Street. Here's link to mapping program: https://www.atlascope.org/Read full article here:
Daly Appraisal Post - Cape Cod bridges
Bourne Bridge and Sagamore Bridge will not be replaced anytime soon, likely a negative impact for Cape Cod.Read full article here:
Daly Appraisal Newsletter - Demand for Medium-Size Housing Swings Back
Appraisal Insights
Illustrating the power of real estate appraisals to provide valuable property and market insightsSometimes we discover a surprise gem when appraising commercial property, such as this organ now located in a Waltham retail store. It bears the inscription, "New England's Premier Organist John Kiley played this organ for the Boston Red Sox at Fenway Park for over twenty years." Mr. Kiley was organist from 1953-1989. He passed away in 1993.
Here's a sampling of some of our recent appraisals:
Retail and office building in Waltham Center
An industrial and automotive building in Waltham
A 1,200-SF parcel in South Boston approved for a 3-unit condo complex
An undeveloped vacant lot in Dorchester
A condominium complex being developed in Westfield
A used car lot in Springfield
A 20,000 SF Class A office building in West Springfield
An ice cream parlor & diner in Hampden
A hair salon & upstairs apartment in Medford
Featured Article
Demand for Medium-Size Housing Swings Back
By Linda Sakelaris
Staff Writer
Housing developers have spent the past decade building ever-larger homes just as the average U.S. household unit was shrinking.
This demographic upset has negatively affected existing home sales in the Northeast, where sales of existing homes fell 2.9% in July although existing home sales were up 2.5% nationwide.
Problems in New England have been blamed on an inadequate inventory of medium-size homes. The shortage has driven up prices, resulting in higher mortgages and greater obstacles for middle-income buyers.
Builders, however, appear to be shifting focus. Last year, the average size of new homes fell to 2,320 median square feet (SF) from 2,500 SF in 2015. This indicates that developers may address the “missing middle housing,” a term coined by California architect Daniel Parolek. Middle housing is affordable to middle-income buyers and includes duplexes, courtyard apartments, bungalow units and multiplexes as well as starter homes.
Since the 2008 economic downturn, the percentage of newly constructed homes larger than 3,000 SF has increased from 19% to 30% of new homes, according to Disruption Demographics, a recent report by real estate advisory company RCLCO.
Since mega-size homes go against the trend of shrinking household size, new home production appears to be moving in the opposite direction of U.S. demographics, according to the RCLCO report.
Increase in Non-Traditional Households
Demand for medium-priced homes is currently coming from two major classes: baby boomers and millennials. Married households without children and single households are expected to account for 69% of household growth in the next 10 years.
Baby boomers, with assets and established purchasing power, are beginning to downsize, and now seek smaller solutions that are flexible and modern. This group is an important customer for the home market since they will likely use their current home value to purchase another home.
Millennials, while still building their earning power, are capable of entering the home market but developers will need to properly align home products with prices to meet this demand, the RCLCO report states. Compared with prior generations, millennials are having fewer children, driving average household size down.
If the needs of these two buyers are not addressed, the size of the new housing market could decline, experts say
What Do These Buyers Want?
Consumer preferences have changed in the past decade. While the detached, single-family home remains the most desirable product, at least 15% of buyers would now consider an attached townhouse or plex product.
Both boomers and millennials want to be close to activity and mixed-use development, such as shopping, services, jobs, shared open space and a walkable neighborhood.
Older buyers in particular are attracted to master-planned communities for the sense of community, safety and maintenance services.
Also, in demand are open floor plans that meld multiple rooms. While entertaining, guests in the kitchen can see guests in the living room, a system that requires design continuity that interconnects the spaces.
The dining room, which has been less pronounced in recent construction, is coming back but without the formality. Today’s dining rooms are comfortable and friendly, with perhaps a comfortable, well-lit adjoining living space.
Wall-free interiors first became popular in the 1970s, representing freedom from the succession of small rooms often found in older New England homes.
While it remains a popular concept, there is some indication that buyers wouldn’t mind a few privacy walls here and there. “Buyers are moving away from uninterrupted views,” Boston real estate agent Loren Larsen told the Boston Globe in March. Some spaces, some items, deserve a little privacy.
Daly Appraisal Newsletter - Vol 6
Appraisal Insights
Boston's Changing Face: The picture above, taken circa 1968, is the marquee for South Boston's Broadway Theater. The long vacant building is being developed into 42 condominiums or apartments. Plans include a shared roof deck and 42 underground parking spaces. The back portion of the building along Athens Street has been demolished and is being replaced with a six-story, 44,000-square-foot addition. The old theater's lobby will reportedly become a lobby for the complex.
Featured Article
Micro-Housing:
Changing the Way Cities are Organized
The Village Concept
Micro Units
Developer & Investor Point of View
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:
- A consortium approach is needed from political and business leaders such as the governor, regional mayors, hospital CEOs, and local university presidents.
- The authors propose villages comprised of multi-story buildings that range in height from five to 35 stories.
- Each "village" could contain a range of units from "micro" apartments to studios and multi-bedroom units.
- Each village would have a community space with lounges, laundry facilities, seminar rooms, study areas, gyms, and roof gardens.
- Construction would incorporate modular design and panelized construction using new materials and high productivity building techniques.
- 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.
Daly Appraisal Newsletter - Vol 4
Appraisal Insights
Welcome to the fourth 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 office building in Hopkinton on a parcel that could be converted to a parking lot
A commercial building in Dorchester's Adams Village that once housed multiple retail and office tenants
Vacant land in Burlington that belongs to a church and is slated to be redeveloped for single family use
A former farm property in Uxbridge converted to retail, restaurant, and industrial use
The picture above is of William Callahan, the man responsible for the construction of the 123 mile Massachusetts Turnpike. Before the elevated roadway opened in May 1957, Boston was suffering from economic malaise due to deteriorating railroads and a decaying seaport in a state where it was difficult to transport goods and services. Many credit the toll road for reviving the region's economy so that Boston could become a world class city. Here Commissioner Callahan points to Worcester, the city that was bypassed by the turnpike to much consternation. Because he hired 33 contracting companies to work simultaneously, it took only two years for the roadway from Exit 1 in the Berkshires to Exit 14 at Route 128 to be built. It wasn't until February 1965 that the 12 mile Boston extension from Exit 14 to the downtown was completed.
Featured Article
The Housing Crisis:A 21st Century Village ApproachBy Jim Daly
In our dramatically appreciating housing market, we often fixate on the increases. It fascinates us that the median sale price of a 4BR home in Canton is $675,000 and the average monthly rent of an apartment in Greater Boston is $2,874. The numbers alone seem like signs of progress. After all, why shouldn’t someone who took care of a home for 25 years benefit handsomely and enrich their retirement? But as a whole, such numbers are signs of an unrelenting housing crisis.Those are the conclusions of the Greater Boston Housing Report Card 2017, a Northeastern University undertaking that Barry Bluestone, the founding dean of the School of Public Policy and Urban Affairs there, arrived at after careful study. (The other author of the study is James Huessy). The good news is that Greater Boston has reached nearly full employment, with 284,000 jobs added since 2009. About 350,000 jobs were added during that time period to the state as whole. But with housing costs increasing by 5% per year and family income going up by only 1%, the percentage of income spent on housing has become astronomically high. The report estimates that the average annual rent in Greater Boston is now $35,000 and the average household income is $62,000.The report explains that the housing being obtained for such high rent wasn’t built to fit the needs of its tenants. Bluestone focuses on the triple decker, the miracle structure that saved Boston from the housing crisis of 1870 to 1920. With immigration, the population had tripled from 250,000 to 750,000. The three families were cheap to build and had the attraction of additional income. They allowed the working class to establish a foothold here.In Boston, Somerville, and Cambridge, 40% of the combined housing stock are triple deckers. What Bluestone calls Boston’s Inner Core (those three cities) has almost 74,000 students who live off campus, more than half of them graduate students. “Millennials are doubling, tripling, and quadrupling up triple deckers, outbidding working families for what was traditionally working family housing,” the report states. But for how long do people in the 25-34 age range want to live with multiple roommates? Prices have been driven up so high that there’s nowhere for them to go. Housing inventory is so low that the market sometimes seems to be standing still.Across the country, home ownership has decreased. According to the U.S. Census Bureau, in 2000, 40.7% of those in the 25-34 age range owned homes. In 2015, that number decreased to 30%. In the 35-44 age category, home ownership in 2000 was 67.2%. In 2015, it decreased to 58%. Some of that decline is due to student loan debt and the fact that many couples are getting married later. But a lot is due to the housing crisis.Only new construction can help moderate housing costs and provide a better fit for the 725,000 who are expected to inhabit Boston in 2030. The city has about 675,000 inhabitants now. Bluestone and Huessey suggest a long-term collaboration between leaders in the political, banking, construction, medical, and academic fields. Their idea - 21st Century Villages that include micro apartments, common shared spaces, and ground floor retail – are detailed in a YouTube clip entitled Greater Boston Housing Report Card 2017. Stay tuned for Part II of this article in an upcoming issue, in which I'll focus on Mayor Walsh's ambitious housing plans for the city and how Bluestone and Huessey hope leaders in surrounding communities will emulate him.Further reading suggestions:1) Greater Boston Housing Report Card 2017.2) “How Did Renting in Boston Become Such a Nightmare?” by Thomas Stackpole. Boston Magazine, May 30, 2018. 3) “Anwar Faisal: Lord of the Sties." by David Bates. Boston Magazine, December 31, 2013. The Keystone Mill in Easthampton in Hampshire County houses INSA, one of the first stores in the state to sell recreational marijuana legally. This brick building was repurposed from an old factory and now has multiple tenants. Next door, a similar building, The Brickyard, houses a brewery tenant that recently expanded its bar and function room space. The upper stories of both buildings may one day include apartments.
Daly Appraisal Newsletter - Vol 3
Appraisal Insights
Welcome to the third 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:
The effects of a temporary construction easement on the value of a single family home in Weymouth
An industrial building in Agawam that was once a tennis club
A 165 acre former dairy farm in Monson
An industrial property in Wrentham
An office building in Worcester
A mixed use retail and office property in East Longmeadow
Pictured is Kendall Square in Cambridge, where life science companies and biomanufacturing buildings near MIT and Harvard continue to proliferate. In the early 1960s, the neighborhood, much of it empty, was slated to be home to NASA. Then JFK was assassinated and LBJ shifted the space exploration center to Houston. In the late 1970s, science companies seeking lab space began coming to the cleared out neighborhood. Life science and biomanufacturing is now the predominant use, but there are also apartment towers, restaurants, retail shopping, a movie theater, and in the winter, an 8,400 square foot outdoor skating rink.
Featured Article
Bad Foundations:Tainted With PyrrhotiteBy Jim Daly
Russell and Tatiana Dupere came back from a soccer tournament to find a leaking water heater had flooded their basement. They went to repair the damaged rec room and found cracks in the foundation. Their house was built in 1990. But the cement foundation was deteriorating.Another couple in nearby East Longmeadow was all set to sell their home, which was built in 1992. The buyer’s inspector found the foundation’s concrete had spider-webbed and was crumbling. They sold for $200,000 less than what they had agreed to.The culprit in both cases: pyrrhotite, a mineral that reacts with water and oxygen and expands. The slow motion process destabilizes foundations and makes replacing them a necessity. Insurance typically fails to cover the loss.Officials estimate more than 35,000 homes in Northern Connecticut and Hampden and Worcester counties in Massachusetts have tainted concrete in their foundations. Everything has been traced back to one source: Becker Quarry in Willington, CT, which sold pyrrhotite-contaminated stone through sister company Joseph J. Mottes Concrete from 1983 until 2017. The companies agreed to stop selling the product at the request of Connecticut authorities. Both went out of business.Officials estimate the average cost to replace a foundation tainted with pyrrhotite is $185,000. Connecticut lawmakers created a $100 million insurance fund to begin tackling the problem house by house. US Representative Richard Neal, the Chairman of the House Ways and Means Committee, helped secure the funds.Distribution of the funds is slated to begin later this month.In Massachusetts, homeowners from Wales, Holland, Brimfield, Monson, East Longmeadow, and Longmeadow recently shared stories of crumbling foundations with local news outlets. Massachusetts lawmakers have begun to address the issue by having foundations tested. State Sen. Anne Gobi, D-Spencer, and State Sen. Eric Lesser, D-Longmeadow, are putting together a commission to come up with a long-term solution.So far the calamity is more prevalent in Connecticut, where state law mandates that sellers must disclose the possibility of tainted concrete. Because there is no such law in Massachusetts, mortgage lenders and realtors are justifiably concerned. Some banks are telling appraisers to scrutinize foundations poured between 1983 and 2017 and report signs of deterioration. Realtors who are selling newer homes are attempting to find documentation to prove that JJ Mottes did not pour the foundation. Usually such records are hard to come by.In May 2018, Russell Dupere, the homeowner with the flooded basement, told Longmeadow’s Board of Selectman the story of his home's crumbing foundation. On a video available on YouTube, he said tests proved his large brick Colonial’s cement foundation was made up of 25% pyrrhotite. It is expected to cost $325,000 to replace. Work has already begun.Longmeadow Selectman Richard Foster said the issue is being called “a slow motion disaster.” Estimates for repair for all affected Connecticut homes is $1 billion. Dupere said it was important to bring the issue public. “One by one, people are foreclosing quietly,” he said. “That’s not a good situation.”
Daly Appraisal Newsletter - Vol 2
Appraisal Insights
Welcome to the second 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 include:
A repurposed old mill building in Easthampton that now houses a brewery and other tenants
A vacant Friendly's in East Windsor, CT
A half acre of land in Worcester that was once part of a condo complex
An industrial parcel in Agawam improved with a single family
A mixed use building in Holyoke
A manufacturing building in Chicopee
This is the site of what could become the new Polar Park in Worcester's Kelley Square, where the PawSox plan to relocate and become the WooSox. The underdeveloped neighborhood is industrial in nature and part of the Canal District, even though there is no canal. The six acre ballpark would open for the 2021 season. It would serve as the centerpiece of what is planned to be an 18-acre, 650,000 square foot mixed use development. While nearby bar and restaurant owners are celebrating, a few surrounding property owners haven't come to terms with the developer yet. They anticipate if they don't come to terms, their properties will be taken by eminent domain. Downtown Worcester is across train tracks in the background.
Featured Article
Taking on the Taxman:The Perils of Filing for an AbatementBy Jim Daly
Experienced property owners tend to have an idea of what their property is worth. So when they receive an assessment that overinflates the assessed value of their property ~ thus substantially increasing property taxes ~ they know their only option is to file for an abatement. One commercial client of mine who recently filed for an abatement said she was “suing the town.” The phrase struck me as odd at first but was completely accurate. Filing for an abatement is a contentious act.A tax assessment is the job of determining a property’s value to calculate property tax. In Massachusetts, an annual tax on a property is equal to the assessment divided by $1,000, which is then multiplied by a set tax rate. A townhouse I once owned in Boston is currently assessed at $685,000. The 2018 residential tax rate for the city is $10.48. The annual taxes are calculated by dividing $685,000 by $1,000 ($685), then multiplying by $10.48, which equals $7,178.80. In some communities ~ Boston is one ~ homeowners can file for a residential exemption, granted if the owner lives at the property. This can result in a substantial tax reduction.An abatement is a reduction of or exemption from taxes granted by a government for a specified period. If an assessor grants an abatement, the department decreases the assessed amount by a certain number, which then lowers the property tax. Abatements typically are only good for a 12 month period.The due date for filing for an abatement in Massachusetts is February 1, the day that 3rd quarter taxes are due. Cities and towns are strict about the due date requirement. Also, quarterly taxes must have been paid regularly for an abatement filing to proceed.The wisest property owners file for an abatement only if the assessment is glaringly inaccurate. It takes time and money to file. Magistrates who hold court proceedings will only consider an appraisal report, or sometimes just an appraiser’s live testimony, as evidence to dispute the assessment. So a property owner must first decide if appraisal fees paid out are less than the amount that the taxes would be reduced if an abatement is granted.Sometimes the appraisal fees are less. I recently appraised a commercial property in which the assessment was $1.5 to $2 million more than what the property was worth. The situation will likely result in an abatement.An abatement, once granted, is good for only a year. Sometimes the best thing a property owner can do is establish a working relationship with the head assessor. That way, the assessed value can be negotiated instead of being decided by a magistrate. One homeowner I know lacks such a relationship. He fights with the assessor every year over the value of his property. He thinks he’s being overtaxed. But is it worth the fight?
Over the summer, I appraised the Myrtle Baptist Church in West Newton. Martin Luther King, Jr. used to preach there. When King was assassinated in April 1968, church elders held a series of services to honor his memory and help the community heal.
Daly Appraisal Newsletter - Vol 1
Appraisal InsightsWelcome to the first 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 include:
- A 30 unit apartment building in Somerville, MA
- A shopping plaza in East Windsor, CT
- A large church in Newton, MA
- An old wharf building overlooking Boston Harbor with street level commercial and apartments above
- A 42 acre potential subdivision parcel in Hanover, MA
Many Massachusetts residents are wondering how a new casino will affect property values. On August 24th, MGM Springfield Casino opened its doors with a parade down Main Street. The $960 million casino has already changed the face of the downtown. Its buildings include a hotel, restaurants, sports bar, and movie theater. Here is a photo of one building. The building to the left is Red Rose Pizzeria, the iconic restaurant that has long served downtown Springfield.Featured ArticleThe Vacant Colonialby Jim DalyFeatured ArticleThe Vacant ColonialThe inspection of the bank-owned house was going well until I almost took a swim in the basement. I had already measured the rectangular Colonial style home and made a sketch. I took all my pictures. Now to the basement. I bounded down and stopped at the last step. A foot of water stretched across the finished basement. It was completely flooded.As most appraisers and realtors know, it doesn’t take long for a recently vacated home to go downhill. Cabinet doors come off their hinges. Utility companies disconnect their services. Boilers shut down. Sideways rain finds its way through old roofs. The weather fluctuates from autumnal warmth to extreme cold. Pipes freeze. Disintegration begins.Appraising an REO, or Real Estate Owned, property is challenging because you’re looking at a neglected property. You have to gauge how far the neglect has gone. Is there mold? Does the heating system work? Has copper piping been stolen? Have critters invaded the attic? In one home, I was warned by a fleeing tenant not to turn on the whole house fan so mouse droppings wouldn’t be scattered through the vents into the bedrooms.REO means a property is owned or controlled by the bank that holds the mortgage on it. Banks usually hire a realtor or management company to secure the home, empty its contents, and get it ready to sell. The most likely buyers are investors who plan to fix up the home and flip it for a profit. The appraiser’s job is to estimate the market value so that the bank doesn’t give away any equity or value a property might have acquired.According to World Property Journal, an online publication, there were 676,535 U.S. foreclosure filings in 2017, which represents 0.51 percent of all housing units. This represents less than a quarter of the foreclosures that occurred in 2010, when the country was in the throes of the economic downtown known as the Great Recession.In most Massachusetts markets, there is an overall scarcity in housing inventory, which means that once a home is foreclosed upon and restored, it can be sold as a functioning property within months. The problem is that wheels of foreclosure turn slowly. Right now in the U.S., it takes a bank an average of 1,027 days to foreclose on a property from start to finish. This is a 28 percent increase from a year ago. The worst offenders in Q4 2017: Indiana (2,370 days); Nevada (1,933 days); Florida (1,493 days); New Jersey (1,298 days); and Georgia (1,263 days). Few improvements are made to properties about to be foreclosed upon. Three to seven years is a long time for a property to sit idle.
The Colonial with the flooded basement is less than 20 years old. It's in subdivision in a town next to Springfield. It has four bedrooms, 2½ baths, and 3,000 square feet of gross living area. There wasn’t much wrong that a good cleaning, new carpeting, and a fresh coat of paint wouldn’t fix. The problem was trying to figure out the impact of the flood on value. So, in a Sales Comparison analysis, I used three recent sales – homes similar in age but requiring significant repair – to approximate a local investor’s mindset. Based on the opinion of value in my report, the bank now has the property listed for sale at auction. The minimum bid is for $231,000 – $185,000 less than the property foreclosed for back in April. Stay tuned for a follow up to this property in a future issue.