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September 2006 — Vol. 84, No. 7

Lack of affordable housing jeopardizing New England economy

 

“A growing chorus of policymakers and employers are warning that expensive housing may be undermining the region’s ability to attract and retain workers, especially those with skills in high demand. More and more households, spanning a wide swath of the income distribution, find that they can get more ‘bang for their buck’ outside New England ... As a result, the cost of housing may be driving away households and repelling potential migrants, slowing growth in the region’s workforce.”

Those are among the findings in a working paper* prepared for the Federal Reserve Bank of Boston’s New England Public Policy Center.

The paper says the problem is particularly acute in southern New England and affects both middle- and lower-income households.

Other notable findings include:

  • From 1995 to 2004, real house prices in New England rose 73%, versus 44% nationwide.
  • Two of the region’s metro areas (Bridgeport-Stamford-Norwalk, Conn., and Boston-Cambridge-Quincy, Mass.) ranked among the 10 most expensive metro areas in the country in 2004.
  • The median gross monthly rent in New England ($800) is 15% higher than the national median ($694).
  • Every New England state except New Hampshire ranked in the bottom 10 states for the rate of growth in housing starts between 2000 and 2004.
  • Easier access to mortgage credit and strict building regulations are likely the main reasons for the worsening affordability of homes in the region. Land-use regulations alone can raise prices 17% to 50%.
  • Increasing the supply of affordable homes will be critical in addressing the issue.

* “The Lack of Affordable Housing in New England: How Big a Problem? Why Is It Growing? What Are We Doing About It?” May 2006

 

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