Cambridge's Housing Shortage DRAFT

Cambridge's Housing Shortage 

THIS IS A DRAFT   

After reading comment that appeared on Cambridge Day, I realized that there may be a misunderstanding about the causes (and potential solutions) to our housing shortage. The following isn’t meant to take sides in any debate, but to simply provide a bit more background.

Most importantly, housing shortages aren’t confined to the Boston area. This is a global problem that’s being dealt with in a number of ways. For example, China has been constructing entire cities not just for their current population, but for their projected population. Some cities have created areas of high density such as Rosslyn in Arlington VA and Manhattan’s Hudson Yards. Other cities are simply densifying and driving out lower income residents.

Historically, most cities began as small settlements and expanded and densified due to migration and population growth. Some cities have found that uncontrolled and/or unplanned growth has had serious repercussions. For example, Mexico City, with a current population of 22 million, has run out of water. There are other cities facing severe water shortages. While the Boston area doesn’t face the problem of severe water shortages, the issue of outgrowing resources and infrastructure must still be discussed.

City planners are now asking critical questions, such as how much – and how fast - should a city grow? What are the short-term and long-term consequences of increasing urban density? Is there an ideal density?

Some years ago, at a political event, a local relator was asked “how many people want to live in Cambridge?” He replied, “about a million.” While his answer was unscientific and not meant to be taken seriously, it’s still a fair question. The takeaway is that there are FAR MORE people who wish to live here than we can (or possibly should) be capable of housing.

Housing shortages have become a critical issue here and in cities around the world. These shortages result from a complex interplay of factors such as migration patterns, the desirability of certain regions, increases in the money supply, restrictive zoning laws, rising construction costs, attractive investment opportunities, on-campus housing shortages, and other market dynamics. This essay explores these factors and how they contribute to housing shortages, with a specific focus on the Boston metropolitan area.

Migration significantly impacts housing availability and affordability. Boston has long been a magnet for both domestic and international migrants, attracted by its prestigious universities, robust job market, and cultural amenities. Between 2010 and 2020, the Boston area’s population grew by 12%, intensifying the demand for housing. The influx of new residents has strained the existing housing supply, pushing up prices and reducing availability. At the same time, Harvard, MIT, Lesley, Boston University, Emerson, Northeastern, and many other colleges have attracted students but not provided housing. Some small 2 bedroom apartments have been converted to 6-7 bedroom mini-rooming houses, as a 2-bedroom apartment may rent for $2500-$4000/month, but a 7 bedroom can rent for $7500+/month.

The desirability of the Boston area as a place to live further exacerbates housing shortages. Renowned for its educational institutions, healthcare facilities, and historical significance, Boston consistently ranks high in quality-of-life surveys. This desirability draws individuals and families who are willing to pay a premium for housing, thereby increasing demand and prices. Our concentration of technology companies attracts many young professionals. Our cultural offerings attract retirees.

Economic policies that increase the money supply can inadvertently drive up housing prices. Lower interest rates, a consequence of such policies, make borrowing cheaper, encouraging more people to take out mortgages. This increased purchasing power leads to higher housing demand and prices. Moreover, low-interest rates attract investors seeking real estate as a hedge against inflation, further constraining the supply available for primary residents.

Overly restrictive zoning laws can also limit housing development. While most of the region’s communities have regulations that restrict building height, density, and setbacks, some are overly restrictive impeding the construction of lower-cost multi-family housing units. These laws maintain the character of neighborhoods but reduce the overall housing supply, exacerbating shortages and driving up prices. Zoning is important to separate manufacturing and entertainment areas from residential areas, zoning. It can also stabilize a community, making it less likely that existing homes will be torn down to make way for ‘urban renewal’ towers, as occurred in many parts of the Boston area.

The rising costs of construction materials and labor also contribute to housing shortages. In recent years, tariffs on imported materials, supply chain disruptions, and a shortage of skilled labor have driven up construction costs. In the Boston rea, the cost of construction has increased by over 30% in the past decade, making it more expensive to build new housing. These higher costs deter developers from undertaking new projects, slowing the addition of new housing units to the market.

The trend of purchasing second homes has further strained Boston's housing market. Wealthy individuals often buy properties in desirable urban areas as vacation homes or investment properties. These second homes are frequently left vacant for much of the year, reducing the available housing stock for full-time residents. This practice has contributed to rising home prices and rental rates.

Short-term rentals, facilitated by platforms like Airbnb, have become increasingly popular in Cambridge. Property owners often find it more profitable to rent out units on a short-term basis to tourists rather than long-term to residents. This practice reduces the number of units available for permanent housing, contributing to shortages and higher rental prices. Although Cambridge restricts short-term rentals to those who live on the property, this has reportedly been widely ignored.

Even when new housing is created, this is typically done as market rate units. These units which sell for $2+ million, have no effect on the availability of hosing for the vast majority of those seeking housing here. The law of supply-and-demand, which has been touted as a solution for skyrocketing housing costs, has not worked in any city worldwide. In light of the earlier comment from the realtor (how many people want to live in Cambridge? One million.)

It's unlikely that Cambridge could possibly build enough to decrease the pressure on regional home prices. The MBTA Communities Act is one potential method to add housing somewhat equitably throughout the region. Unfortunately, some communities are against enacting it, others have figured out how to enact it but render it inapplicable. Some communities have taken it to heart: Boston, Cambridge, Somerville and others have added more housing than required under the Act. If followed, the MBTA Communities Act would go a long way to finding some regional solutions.

Another solution we’ve seen is the construction of a high speed rail line to Worcester, taking advantage of the low housing costs there. But, as it has been pointed out, people already live in those houses – and an influx of new residents would force them out – but to where? This would therefore have the net effect of moving the problem without solving it.

And lastly, another critical issue is climate change. Much of Cambridge, Boston, and Somerville are less than 15 feet above sea level.  Within 100 years, large portions of our metropolitan area will become uninhabitable. Boston’s Seaport District has only a few decades left – at the most. Anything we build now, at less than 25 feet above sea level, will need to be replaced. Sea walls can delay some of the smaller storm surges, but we cannot hold back the entire Atlantic Ocean.

Regional housing shortages are a multifaceted issue influenced by a myriad of problems.  Addressing these challenges requires a deeper understanding and comprehensive approach. Enriching developers of new $2+ million will not solve this, nor can Cambridge solve it alone.  There are more obstacles than I’ve noted here, and I would appreciate your feedback. 

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