Massachusetts has been a pioneer in the fields of medical research, education, industry – you name it.
Boston was home to the first public school. The industrial revolution first took root on our country’s shores in mill cities like Lawrence and Lowell. And the COVID-19 vaccine took shape in the labs of Cambridge-based Moderna.
But the Bay State has also been a pioneer in another, not particularly happy area as well: the housing crisis, demonstrating to the country what happens when you systemically throttle the construction of homes, condominiums and apartments for years.
We’ve been working at this for a while. The problem first became apparent nearly a quarter century ago, when a big drop in apartment and home construction over the 1990s led to a corresponding increase in rents and prices.
As the 20th century drew to a merciful close, the then-fledgling Greater Boston Interfaith Organization took on the state’s housing crisis as its first major cause.
At that point, Massachusetts, and Greater Boston in particular, was just one of handful of older metro areas like New York and San Francisco experiencing an economic rebirth thanks to the growth in the tech and later biotech sectors as well.
Boston and its fellow New Economy boomtowns also did a terrible job accommodating all the new growth, with tightknit urban neighborhoods and insular suburbs not interested in giving a green light to more housing to meet the rise in demand.
Fast forward a quarter century and the housing crisis is no longer a Boston, New York or San Franciso thing.
Rather, the housing crisis has gone national now, with potentially momentous implications as we enter one of the most high-stakes presidential election years in our nation’s history.
We’ve Dug a Big Hole
Yes, a big part of the current drop-off in new home, apartment and condo construction across the country can be tied to the big increase in interest rates since 2022 and the heights to which construction costs have risen since 2020.
But nationally, the problem of underbuilding really began with the Great Recession, which saw housing starts of all types plunge after having increased steadily since the early 1990s.
Both new home and apartment construction has lagged ever since across the U.S., with residential construction still far below its last peak in the mid-2000s.
And restrictive zoning rules, which have become heavily tilted over the decades toward single-family homes on larger lots, are now increasingly viewed as a major culprit behind the drop in construction.
Elected officials across the country have taken steps to rein in or eliminate altogether single-family zoning laws. It is a diverse group of cities and states, from Charlotte and Gainesville to Minneapolis, and from Maine and Montana to Oregon and California.
The Biden administration has also tried to step in and steer federal money to cities and towns that revamp their zoning to allow more apartments and condos to be built.
But the reforms to zoning, which are just starting to spread, will take time to kick and have an impact.
Meanwhile, home prices and rents continue to relentlessly rise, feeding off a housing shortage that has been building now for years, with little attention from the media and elected officials until relatively recently.
The American Dream, Denied
The combination of short-term factors like the surge in interest rates, combined with years of underbuilding, have resulted in a truly dire situation, with 75 percent of the homes on the market nationally unaffordable to first-time homebuyers, according to the National Association of Realtors.
As we prepare to enter a pivotal presidential election year, voters are in a glum mood right now, despite seemingly robust economic metrics like extremely low unemployment, falling inflation and rising wages.
While this disconnect has stumped some otherwise seemingly smart pollsters and economists, the rotten real estate market is clearly taking a toll and helping sour the nation’s political climate.
At a conference earlier this fall Brian Gordon, principal of Applied Analysis, warned the unbearably high cost of housing could definitely weigh on voters as they got to the polls in 2024.
“Mortgage rates are above 7 percent, the cost of housing is rising, rental rates remain elevated. And this is hitting consumers in the pocketbook,” Gordon noted at the Commercial Alliance Las Vegas Education Symposium, according to the Las Vegas Review-Journal.
“And when consumers face economic challenges in their daily lives, that certainly has the potential to bleed into the political realm,” Gordon said.
He’s not making it up. Poll after poll in the last few years has found that housing costs have been voters’ top concern.
A Cato Institute survey in 2022 found that 55 percent of Americans couldn’t afford their home if they tried to buy it today, and 69 percent worried their children and grandchildren won’t be able to afford a home. A Data for Progress poll last year found voters were polarizing by political party on radical ideas to fix the situation, like presidential executive action.
And voters moving from high-cost areas to lower-cost areas is considered an aspect of why America has been increasingly polarized by geography.
Buying and owning a home has for generations been a core part of the American Dream.
And when middle-class families can’t afford to buy three quarters of the already shrunken number of homes on the market, then no wonder voters are not just down in the dumps, but flat-out depressed.
Scott Van Voorhis is Banker & Tradesman’s columnist; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.