Jane Swift – Backs 40B
Homebuyers hunting for a bargain during this economic downturn may not have much luck.
According to economist Karl E. Case, home prices are not drastically falling like they did during other recessions, particularly in the late 1980s when there was rapid depreciation of condominium prices. That’s mostly because this time around interest rates are low and there isn’t inflation, Case said.
Don’t anticipate a big break in this downturn, said Case, who spoke at the second annual Governor’s Conference on Housing last Thursday.
Case was one of several speakers – including Gov. Jane Swift – at the conference, which drew roughly 700 housing advocates, developers, homebuilders and policymakers. The conference, held at the Best Western Royal Plaza Hotel in Marlborough, was organized by several state housing agencies and featured sessions on various issues, including zoning and homelessness.
Case, an economics professor at Wellesley College and a founding partner of a real estate research firm called Case Shiller Weiss, said that in most markets when demand falls, prices fall. The housing market, however, is different.
In the housing market, you have stickiness, he said referring to prices standing still.
Case also noted that the housing market is just starting to feel the pinch – a decline in sales volume and demand and homes staying on the selling block longer. Even in Weston, where Case lives, he has seen homes auctioned off by builders who haven’t been able to sell.
Prices will hold steady, however, mainly because demand is much higher than expected, said Case. Case attributes the higher demand to good interest rates, which are the lowest they’ve been in 41 years.
Don’t expect much relief from this downturn on housing prices, he said.
Still, Case acknowledged that the country is in for some rocky times and unlike other economists who predict that this recession will be short, Case is forecasting a longer and harsher economic downturn.
I don’t believe that we are going to have a mild recession, he said.
Budget Cuts
The economist’s comments came after Gov. Swift spoke about the budget constraints the state is facing and the job and funding cuts that are likely to occur.
The state is facing a $1.4 billion cut, and last Thursday state leaders presented a budget outline that would cut $650 million from spending plans approved earlier this year. State leaders hope to vote on the budget by the end of the legislative session this Wednesday.
Swift, who has 10 days to decide which items to veto, has said she plans to file her own budget recommendations, with possibly even deeper cuts.
To the delight of many conference attendees, Swift said last week that her budget would not cut any funding that goes directly to homeless shelters and housing programs currently serving people. She also said legislators should approve the $500 million housing bond bill, which would help maintain public housing units and spur the creation of other affordable housing units.
Swift touched on another hot topic, the state’s Chapter 40B laws, also known as the anti-snob zoning laws. The Department of Housing and Community Development adopted changes to the law several months ago.
The state’s Chapter 40B laws allow real estate developers to bypass local board approval in communities where less than 10 percent of the housing stock is affordable to low- and moderate-income people if the developers build some affordable units.
According to Swift, the Chapter 40B changes adopted by DHCD allow communities to reject housing proposals that would drastically alter their character, a complaint that has been lodged by many of the smaller towns facing large development proposals.
But Swift vowed to veto any efforts to weaken this important law, including efforts to reduce the affordable housing threshold from 10 percent to 5 percent, and a proposal to count prison cells as affordable housing.
To those who make such proposals, I offer a resounding no, said Swift.
Chapter 40B and inclusionary zoning were examined in two sessions at the conference.
David Rusk, a leading urban researcher and author, talked about the success of mandatory inclusionary zoning, or zoning that requires developers to include housing units for low- and moderate-income individuals in developments of market-rate housing.
Rusk talked about an inclusionary zoning measure in Montgomery County, Md., which requires developers to set aside 85 percent of units as market-rate and 10 percent for moderate-income people. The remaining units are sold to the local housing authority, which rents to people with low incomes.
If Massachusetts had a statewide inclusionary law similar to Montgomery County’s, some 48,000 affordable housing units would have been created from 1970 to 1996, he said.
Cambridge adopted a mandatory inclusionary zoning law a little more than three years ago, and other communities have flirted with the idea. Senate leaders also included a provision in their version of the housing package passed in September that would allow communities to pass laws requiring developers seeking to build 10 or more housing units to set aside 10 percent as affordable.
In addition to inclusionary zoning, Rusk talked about urban sprawl, racial segregation and the concentration of poverty facing many communities, including the metropolitan areas of Massachusetts.
