Why has housing supply not kept up with housing demand? This is the question The Boston Foundation decided to tackle head-on in this edition of the Greater Boston Housing Report Card by undertaking an in-depth study of detailed housing cost data collected from housing agencies and developers. The answer to the question is an unsettling one. We have failed to meet housing production targets because there is no way to do so given the high cost of producing housing for working and middle-income households. In part, this is because of the extreme barriers to new construction, especially in the form of severely restrictive zoning at the local level across much of Massachusetts. The cost of developing new housing requires a price point or rent beyond the pocketbooks of such households and therefore developers only produce such housing, in quite limited numbers, when they are required to do so by so-called “inclusionary zoning” regulations or when they are able to secure limited public funding and subsidies to support affordability. The very high cost of land and site preparation, major contributors to prohibitive total development costs, will not come down until zoning restrictions are relaxed.
The lack of new housing then drives up the price and rent on all housing as the number of housing units demanded far exceeds the number of total units on the market.
Solving this problem of insufficient housing supply will require a battery of new approaches to zoning and construction techniques—something that has eluded developers and policymakers alike. Suggested in these pages are some new approaches to increase housing supply.