boston.com
As prices rise, homebuilding surges
By Charles Stein, Globe Staff | November 18, 2004
NORTH ATTLEBOROUGH -- By its own modest standards, Massachusetts is experiencing a homebuilding boom.
Through the first nine months of 2004, the state issued permits for more than 15,000 units of new housing, up about 10 percent from the same period a year ago. If the current pace continues, Massachusetts would build more housing this year than it has in any year since 1989.
The building is a response to an improving economy, low interest rates, and a huge run-up in home prices, a signal that demand for housing outstrips supply. Over the past five years, single-family home prices have climbed 73 percent statewide and 90 percent in the Boston area.
Around the country, the same conditions have triggered a surge in home construction to the highest level in 25 years. Activity is especially intense in the fast-growing South and West. In metropolitan Phoenix, for example, 47,000 units of housing were built last year; metropolitan Las Vegas built 40,000 units. If the current pace continues, Massachusetts will put up slightly more than 20,000 units in 2004.
Massachusetts is a much more difficult market for developers.
"We have 350 fiercely independent cities and towns that don't want growth," said Karl Case, a Wellesley College economics professor who specializes in real estate. Family housing often meets with the most resistance, as communities are reluctant to put additional pressure on their school systems.
The result: Developers here build what they can get approval to build , which isn't always exactly what the market needs. According to those who follow the industry, much of this year's new home construction in Massachusetts falls into a few broad categories: expensive single-family homes in distant suburbs where open space is available; single-family homes and town houses in communities for people 55 and older; and apartment complexes that feature a blend of market-rate and affordable housing.
"We are still not providing enough family housing for our workforce," said Mark Leff, a banker who is also a vice president of the Home Builders Association of Massachusetts, a trade group. Leff said the shortfall is particularly acute for families with children.
The lack of reasonably priced housing, say economists, discourages employers from expanding in Massachusetts and acts as a brake on the state's growth. The administration of Governor Mitt Romney has made the production of affordable housing one of its top economic priorities.
"The governor has used his bully pulpit to make it clear he wants to see more housing starts," said Jane Gumble, director of the state's Department of Housing and Community Development. At a ribbon-cutting ceremony for a new development in Boston last summer, the governor said building affordable and moderate-income dwellings, "not McMansions," was critical for Massachusetts.
Affordable housing isn't a phrase that comes to mind in Westwood Estates, a subdivision currently under construction in North Attleborough.
"We build high-end houses," said Richard O'Brien, who is building very large homes in what used to be 100 acres of woods. A few years ago O'Brien started putting up 3,000-square-foot houses aimed at an executive audience. Over time, the houses have gotten bigger and more expensive. The latest models have more than 4,000 square feet and sell for at least $800,000. A few are priced well over $1 million.
For the money, a buyer gets a spacious home chock-full of amenities and the latest technology. The master bathroom has a Jacuzzi and a shower the size of a compact car. The kitchen has an enormous Sub-Zero refrigerator. An outdoor fireplace doubles as a pizza oven. There are flat-screen televisions built in everywhere, including one in the bathroom that can project a reverse image so the homeowner can watch it in the mirror while shaving. The home theater in the basement has a 120-inch screen.
"People see these things and it gets their blood bubbling a little," said O'Brien.
The builder had no trouble selling 15 of the homes this year and expects to sell as many next year. Westwood Estates may be a bit more pricey than the typical suburban development, but not by a large margin.
"What is being built are a lot of McMansions," said Greg Spier, president of the homebuilders trade group. Spier himself is building million-dollar homes in Foxborough.
According to statistics Spier has gathered, over the past two years the median price for new homes was $925,000 in Norfolk County, $699,000 in Middlesex County, and $689,000 in Essex County. Spier said the skyrocketing price of land was a key factor pushing builders into the upper reaches of the housing market. Another factor driving the demand for expensive homes is the uneven nature of the economic recovery. While wages have risen slowly, the value of assets such as homes and stocks has risen more rapidly, a plus for affluent households. Those same economics explain, in part, why so many luxury condominiums are being built in Boston.
Avalon at Crane Brook is targeted at a different market.
A blend of town houses and larger buildings, the 387-unit complex is nearing completion on a site just off Interstate 95 on the Danvers-Peabody line. More than 200 of the units already are occupied. A two-bedroom apartment rents for $1,400 to $1,700 a month. For that price a tenant gets an air-conditioned apartment with access to a gym and a basketball court.
Crane Brook is representative of another wave of Massachusetts home construction: multi-family projects. The state witnessed a spike in multi-family housing construction in 2003 and the numbers for this year are running just as strong. Mark Leff, the banker, says there are enough projects on the drawing board to keep builders busy for the next three years.
Like Crane Brook, many of the apartment complexes are being built under a state law known as 40B, a provision that allows builders to override most local zoning restrictions if less than 10 percent of a community's housing stock is determined to be "affordable." In return, the developers have to set aside a portion of the units -- usually 25 percent -- for low- and moderate-income families. Crane Brook also reflects another trend at work in Massachusetts. The project was built by a large national firm, Avalon Bay Communities Inc., a Virginia company that develops and manages apartment complexes around the country.
"Boston is a difficult place to build, but it has a great regional economy with high incomes and high housing prices," said Bill McLaughlin, a senior vice president with Avalon, explaining why national developers have begun to enter the Massachusetts market. Avalon has built a series of apartment complexes in the Boston area and has two projects about to begin construction -- one in Newton and another in Bedford
Another national player, Archstone-Smith, a Colorado company, just finished an apartment complex in Watertown, and is working on a 442-unit development on Washington Street in Boston.
Some of the new multi-family units, as mandated by law, are targeted at renters with relatively modest incomes. Others are not. At Archstone's Watertown complex many of the two-bedroom apartments rent for about $2,500.
"Much of this housing isn't going to help the family with an income of $40,000 a year," said Bonnie Heudorfer, a housing consultant.
Soon after taking office, Romney set an ambitious goal of doubling housing production over four years -- a target that corresponds to roughly 35,000 units. The administration hopes changing public attitudes, plus recent legislation that provides incentives to communities that allow new housing, will boost construction in the next few years.
Others are taking more of a wait-and-see approach. Said Heudorfer: "Things have picked up some, but we are a long way from declaring the housing problem solved."
Charles Stein can be reached at stein@globe.com.
© Copyright 2004 The New York Times Company
|
