Housing crisis

Is the long approval process fueling the affordable housing crisis?

It’s like watching paint dry or waiting for water to boil.

Choose any euphemism for things that take a long time to cross the finish line. You might as well include getting approval for a subdivision in Greater Boston to the list.

But does this arduous planning and approval process – touted as a way to give the community input and ensure better projects – unwittingly lead to a wave of housing development heavily geared towards the luxury market?

That’s not the only reason prices in the area are so high, but there are signs that the longer a project takes to get approved, the chances are it won’t meet demand. of affordable housing in one of the most expensive locations. live in the country.

“We still have a relative aversion to multifamily development, said Aaron Jodka, director of US capital markets research at brokerage Colliers. “A lot of communities, whether it’s because they’re afraid of overloading schools or traffic or whatever, we just don’t build them.”

But that doesn’t mean there isn’t a thirst for housing overall, regardless of price.

“The product that was built was very successful,” Jodka said. “We look at vacancy rates over time in Greater Boston, and they’re fantastic.”

So who is to blame?

Before the pandemic, there was a bit of a chicken-or-egg conundrum as to what was driving up costs nationally.

Developers have been singled out for gentrifying affordable neighborhoods with high-end projects that have sent rents and prices into the stratosphere.

The rising prices of building materials and the shortage of labor in the trades were pointed out.

But fingers have also pointed to an elongated approval process. Numerous rounds of environmental, design and historical reviews make time run, critics say, so by the time a project is finally approved, building units that command higher prices is the only thing that makes sense. financial.

“The process of building new homes is full of uncertainties and unexpected hurdles,” said Jenny Schuetz, senior researcher at Brookings Metro and an expert in urban economics and housing policy, in an early 2020 report on Who is to blame for the high housing costs. “Regulatory hurdles make it riskier, longer and more expensive, which has implications for housing affordability. »

Schuetz, who was unavailable for an interview for this story, doesn’t overlook the process in his report. Every step has a purpose, and coastal markets like Boston obviously have a reason for adopting an arduous environmental process. But she also noted that fees add up with every extended stage: from lawyers and architects, as well as surveyors, land speculators and consultants.

“Who ultimately pays for the costs associated with land development – whether it comes from developers’ profits or is passed on to consumers of new housing – may not be immediately obvious,” he said. writes Schuetz. “What is clear is that a longer and more uncertain process increases development costs.”

East Coast same as West Coast?

It may be on the other side of the country, but California’s housing crisis could be a wake-up call for Massachusetts about regulatory hurdles hampering production. California, like Massachusetts, consistently ranks in the top 10 for high home prices, and both states have leaders encouraging the construction of dense, transit-oriented residential developments around transportation hubs. (and opponents opposed to such plans).

But it’s not as simple as saying, “If there’s a train station, your dense housing proposal is approved.

“Our work suggests that the primary regulatory contributor to California’s housing crisis is local governments impeding dense housing through zoning and development approval processes,” reads a Social Equity in Housing report from the California Air Resources Board and the State Environmental Protection Agency released last spring.

“But even where cities have zoned more land for dense development, local regulations are creating long housing development approval times that impact the development of individual projects,” the authors concluded.

The study focused on housing production in 16 cities and four counties. The disparity of markets and approval times (it can take an average of 26.6 months to get the green light for a residential project of five or more units in San Francisco, compared to only 5.4 months in the Bay Area). ‘Oakland) creates uncertainty in the development world. Keep in mind that a project would still need more approvals after this eligibility phase to get a full green light.

Why even bother with such a long and uncertain timeline in one market when you can build much faster in a nearby town?

“It’s a little less ‘Oh, Oakland is a dummy’ than ‘Well, the problem that Oakland is highlighting is maybe you don’t need to take 27 months [to approve housing]” said Moira O’Neill, co-author of the report and associate professor of urban and environmental planning and law at the University of Virginia School of Architecture.

The state of construction here

Like California, Greater Boston is also grappling with a severe supply-demand imbalance that keeps home prices high even when other factors like rising interest rates might normally cool. demand and soften the market.

Restrictive zoning, changing demographics, older populations still living in sprawling single-family homes, and even the influx of high-paying jobs into the state in the tech and life sciences sectors also play a part. major issue in housing affordability and the supply crisis, said Susan Connelly, chief operating officer of nonprofit affordable housing advocacy group Housing Opportunities Unlimited.

“All of these things combined create a foundation where the ability for developers to have a clear and predictable path to creating housing that better matches changing demographics becomes next to impossible, and that’s where we are,” said Connelly. “Do these man-made rules, regulations and processes affect the production and therefore the cost of housing? Absolutely, but it’s more like the icing on the cake.

When prices for just about everything are so high, it can also mean that developers aren’t motivated to build lower-cost units, unless a municipality does more to encourage this type of project.

“Ultimately, developers aim to make a return on their investment, and often higher rents generate a higher return,” Jodka said. “So if I could open up a 30-acre piece of land in front of my house and build 300 apartments, unless you have an incentive from the town or the city, or some other program, you’re going to build the homes that are going to generate the greatest return on that investment.Unfortunately, low-cost units are often not the priority there.

Streamlining the process can help usher in more housing development, as increased production could ease the crisis.

According to the Metropolitan Area Planning Council, more than 400,000 new homes are needed in Massachusetts by 2040 for the state to continue to grow its economic base. But the state will have to put its foot on the accelerator: The 1,482 new housing permits issued in the state in May (according to the US Census Bureau) were the most in New England but well below the number granted to Sun Belt states like Florida and Arizona and even mid-Atlantic states like New York, New Jersey, and Pennsylvania.

“We need more, there’s no doubt about that,” Jodka said. “Different municipalities have rules about what percentage of affordability any development needs, but we’re not building enough housing in Massachusetts, plain and simple.”

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