SOME FACTS ABOUT BOSTON’s HOUSING MARKET

This looks like Charlestown, where long-time home owners, who never had all that much by way of income, now find that they own lottery ticket priced houses.


Almost every observer facing the rising prices of Boston real estate, and of housing rents, decries the two unhappy consequences : that more and more who live in the City cannot afford to do so and that development of new housing is displacing residents out to the suburbs and beyond, to long commutes and loss of old neighborhood ties. These consequences loom large, and it affects me as well ; I would like to move back into my ancestral neighborhood, East Boston, where I work and socialize, but cannot yet afford to do so. Yet the situation is not all blame and no responsibility, so hear me out as I discuss a few Boston housing matters that no observer these days has yet put into print.

No one wants now to admit that for a very long time — certainly from about 1965 to 1985 — Boston housing was substantially underpriced. The price of a typical house in the outer wards was about two times annual family income; in closer to Downtown, less than that. Homes in Charlestown, the North End, and East Boston, in and before 1970, seldom reached beyond the $ 5,000 level, if you could even find a buyer at all. Rents followed suit. I rented in Roxbury in 1968 : $ 35 a month; in Mission Hill in 1970 : $ 40 a month. From 1982 to 1985 I lived on Wellsmere Road in Rozzie : $ 250 a month. My next Rozzie rental, which I kept until 1995, cost me $ 450.00. In 1970 I worked for a time as a real estate broker in the South End. I sold three houses on Fort Hill in Roxbury. The prices ? $ 1500, $ 3000, and all of $ 20,000 — this for a large, period home with two acres of land. It was an all cash sale because almost no lender gave mortgages in that neighborhood in those days. All three sales were for cash. I also sold a five story town house on Beacon Street in the block between Arlington and Berkeley. The buy price ? $ 105,000. In 1975, during the busing flap, homes in West Roxbury were on sale for $ 25,000 — if you could find a buyer. As recently as 1997, three-deckers in Dorchester and East Boston were subjects for chapter 7 bankruptcies because they couldn’t be rented to anyone who could pay even $ 500, and many were extremely run down because there was no money for such dwellings. Empty lots, where homes once stood until condemnation after abandonment, abounded. In 1972, I think, the City enacted rent control (of rents beginning to rise from $ 35 a month to $ 150 !); the result ? Land lords stopped repairing or renovating, and tenants rented rooms to boarders for more than they themselves were paying in rent. Insurance proceeds fires became common, even in the area near Northeatern University where condos now go for $ 800,000 and up.

These were unsupportably low prices, and desperate financials, yet did anyone — myself included — take note of the fact and act accordingly ? We did not. We accepted bargain basement rents and house prices as the way things were even though in most areas of the nation they weren’t like Boston at all. Had we had the slightest awareness of the real deal, we might have accounted our $ 35 a month rents at $ 150, or our $ 250 a month rents ten years later at $ 500, which would have been the norm in most places, and set the extra money in a fund against future return to price normality. That is how people make money by investing: seeing undervalued assets and setting aside the difference between value and price. But of course none of us did that. Had we done so, had we saved the difference between price and value, we would, by 2000, have accumulated enough of a “rainy day fund” to pay the new going rates. We’d even be well prepared for what now is the extended boom, because we would understand — as the slightest engagement with securities markets makes clear — that the more undervalued an asset, the more over-valued it will become when the market turns. And the market in Boston sure has turned, hasn’t it ? In 1970-80 people wanted to move out of the city and did so in bunches. Since about 2000, people have wanted to move into the heart of the City and are doing so in… bunches and more bunches. (Those who moved out were mostly families in search of better schools. those moving in are often single, or couples without kids, to whom schools mean nothing but a tax assessment. This is why developers can get away with building tiny box-sized units instead of residences with breathing room.)

Because none of us took steps to address a market turn from bearish to very bullish — because we assume that housing costs drop upon us out of nowhere and aren’t the consequences of anything except evil profiteers and building trades unionists — most of us now face very painful choices : pay bull-market inflated rents that impact all of our other monthly payments, or move far out , maybe 60 miles out, to where rents are one-half of Boston numbers and sometimes less. Neither option works. If forced to choose, most opt to take on a second job, which means less family time and less sleep. The pain is widespread, which has led to the City Council working its butt off to come up with alleviations, most of which won’t work even if implemented, which most will not be. I’ll return to this matter later in this column.

Meanwhile, one group of us has benefited enormously by the huge bull market in houses : those who bought back in the days when no one wanted to buy. It’s a given, in investments, that you buy what other people don’t want any part of. As my Dad, a shrewd investor, used to tell me, “Son, be a good Christian. When people are begging to sell you something, do them a good deed and buy. And when someone is begging to buy from you, be a god Christian and sell it to them.” It’s a nice story, and in markets it is usually good advice. Yet few Bostonians who bought houses in the 1970s did so because they were shrewd investors. They bought because Boston was their home, and they didn’t want to leave it, or because as City employees they felt the nee to stay in the City. (this was before the residency rule , a fine return to 12th Century serfdom, was enacted by Mayor Menino precisely because so many people were ,leaving the city, including City workers.) Thus those buyers lucked out. Few earned more than the median income and fewer still saved very much cash, but if they still own that home they now possess a winning lottery ticket. I don’t begrudge them one bit. Their good fortune never comes up in discussions these days of Boston house prices, which is not surprising — long-term Boston residents are now the political minority in a City where the new majority often congratulates itself in the most flaunted way, like taunters on a football field. It simply isn’t politically popular in Boston in 2019 to consider the situation of long-term home owners who have never had very much and who, late in life, find themselves anointed by good luck.

So now back to the problem I reserved for later : what do we do about the City’s raging bull market in housing ? First, in my opinion, we have to conclude why it it is as it is. It exists because Boston is now the commercial hub of the entire region, businesses want to move into the core city, and those who work in them, or who serve those who do, want to live, shop, and socialize in Downtown as well, and because the move into Downtown continues with no end in sight. And why should it end ? Do we really want to return to the Boston of 1977, where no one wanted to work, or shop, or live ? Do we want even to curb the new prosperity, which has brought vast money into the City and into its real estate tax revenue ? To take just one example ; the City’s Schools Budget for FY 2020 :
Our commitment to public education is reflected in our budget. Including state and federal grants, we plan to spend almost $1.3B dollars next school year, and more than $22,000 per pupil for our more than 55,000 students. As recently as FY 2018, the budget amounted ,merely to $ 1.03 billion. $ 267,000,000 has been added in just two years, and this for an enrollment of 55,000 students in a system with capacity for 92,000 ! Even assuming this added $ 267,000,000 is needed — which I vigorously dispute — where would the money come from — all of it either taxpayer funds or Federal and State grants — if Boston real estate values had not boomed ? It seems to me that we cannot deny that the bull market benefits our City budget’;s biggest item (one third of the City budget total). Taper off the value growth and you’ll have to taper off the BPS budget growth.

Second, we must accept that value cannot be legislated out of existence. Attempts to control it merely shift it from one segment to another, a device which often leads to disinvestment and fraud, as did rent control. For very good reason, the legislature outlawed rent control; it isn’t returning. Likewise, attempts to force tax exempt institutions to pay more “in lieu of taxes” service payments to the City, as some Councillors are pushing, requires those institutions’ consent, because such payments cannot be Constitutionally required; and higher-education finances are already under enormous pressure (some colleges are closing down) due to decreasing Federal aid, higher costs of staffing and of additional courses offered, and fewer students, as the “baby bust” years hit college age. “Progressives” say they ant college education to be free, yet the same “progressives’ want colleges to pay the City more service contributions ? This isn’t policy, it’s absurdity.

I do agree with the “progressives” who say that Boston can’t build its way out of upward price pressure. The more housing that is built,m the more people and business that will want to move in. It’s like highways. We discovered, 50 years ago, that the more highways we build, the more cars that will use them. So we stopped building highways and started to expand the MBTA and CommuterRail. Unfortunately, you can’t do that with housing. A dwelling is a dwelling. Conclusion : we will build a lot more of them. It’s good for the Building Trades, who are Mayor Walsh’s core support, and building trades people spend their big paychecks, so it’;s good for our economy as well. And that observation brings me to the two moves I think we can make that will work : raising the City’s minimum wage. That and encouraging the formation of worker unions and the future success of unions already in the field. Of the two, I prefer expansion of unions, because unions can win, in bargain and contract, wage and benefit increases that are much harder to achieve by minimum wage legislation. Wage legislation has to conform to Equal Protection requirements;. union contracts can differ, be industry-specific, which seems much more practical and appropriate,. That said, the City should establish a $ 21/hour minimum wage, and the goal of union contracts should be higher than that by a lot. Frankly, $ 30 an hour isn’t too much if you want to afford the current Boston and still have money to spend on discretionary purchases, which are the driving force of economic growth.

Surprisingly, I do not hear “progressives” talking about either of these, not the $ 21/hour wage nor expanded unions. 50 years ago, unions were the backbone of Democratic politics. Today, most unions practice an entirely different style and objective of politics than the “progressives.” Myself, I prefer the union approach to resolving the City’;s bull market. I can think of no better way to make Bull market Boston work for as many people as a unionized city workforce.

—- Mike Freedberg / Here and Sphere

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s