Mayor Martin J. Walsh, in his first major real estate development initiative, is seeking to dramatically increase production of middle-income housing in Boston as the region’s red-hot property market pushes prices beyond the reach of most average wage earners.
In a series of recent appearances, the mayor has said that generating housing for middle-income residents is crucial to Boston’s future economic growth. He warned that the city will lose key workers, industries, and tax revenue if it doesn’t create more affordable homes to rent and buy.
His administration is considering several steps to boost production, including the designation of more city-owned property for development. The mayor may also grant zoning and tax incentives to make certain projects financially feasible.
“Property values are skyrocketing and we need to create more opportunities for home ownership,” Walsh said in an interview last week. “Construction of high-end units have been outpacing those for moderate income, and we have to try to do a better job of balancing that.”
Boston is experiencing a historic surge of residential construction, but the vast majority of the new units are luxury rentals that cost $3,500 or more per month.
Of the 6,600 rental and ownership units under construction across the city, about 22 percent are considered affordable to households earning between $50,000 and $100,000 a year, according to city data. Most of the homes in that affordable category are rentals.
It has become exceedingly difficult for middle-income residents to find homes they can buy. In 2013 and early this year, middle-income earners were essentially priced out of many parts of the city, including Charlestown, the Back Bay, Beacon Hill, downtown, the South End, South Boston, and the Fenway.
In each of those neighborhoods, a household earning the citywide average of $80,000 a year could afford just a tiny percentage of the houses and condos sold, municipal data show.
In downtown Boston, for example, prospective buyers with household incomes of $80,000 could have afforded just 1.7 percent of the homes sold. In the South End, about 2.9 percent of transactions would have been within the reach of those house hunters. They could have afforded practically none of the homes that sold in the Back Bay and Beacon Hill.
The average sale price of condominiums in those neighborhoods surged to $950,000 in the first three months of the year, a 17 percent increase over the same period last year, according to LINK, a company that tracks sales in a dozen central city neighborhoods.
Because of those soaring property values, Walsh administration officials said they will seek to spur more middle-income housing production in outlying neighborhoods such as Allston, Brighton, Dorchester, Roxbury, East Boston, Hyde Park, and Roslindale.
“It’s not going to be a good use of anyone’s time” to try to build lower-priced housing downtown, said Sheila Dillon, the mayor’s housing chief. “We have to work in the neighborhoods where there’s opportunity for growth, places where there is great public transit and available building sites.”
Dillon is leading a group of developers, affordable housing advocates, and urban planners who are working on recommendations to submit in the coming weeks.
Among other measures, the group is exploring ways to lower construction costs with pre-fabricated modular homes and apartments, or using timber instead of more expensive materials such as concrete and steel.
It is also considering how to streamline the city’s lengthy approval process and allow developers greater flexibility to build taller buildings with smaller unit sizes.
The group’s work is being aided by the Metropolitan Area Planning Council. It is examining the region’s demand for middle-class housing and efforts to produce it in New York City, San Francisco, and other high-cost urban markets.
The goal of increasing Boston’s supply of middle-class housing has proved elusive in the past. During his long mayoral tenure, Thomas M. Menino repeatedly launched initiatives to build for that segment of the market. But most of the housing that was constructed served either extremely high- or very low-income residents.
Developers tend to build luxury projects because they are highly profitable. Lower-income housing can be developed with help from federal and state financial programs.
But fewer government resources exist for the middle of the market. A relatively small number of developers and lenders have the knowledge and experience to build it on a large scale.
“The financial markets are not organized around it, and the development industry is not organized around it,” said Bart Mitchell, chief executive of Community Builders Inc., a nonprofit that builds affordable and market-rate housing.
He said that most banks are wary of lending for middleincome projects because there are few examples of success. Mitchell is a member Walsh’s panel addressing the problem. He said the strength of Boston’s property market, and the recent influx of new residents and businesses, is helping to spur demand for housing and for innovative approaches to building it more affordably.
“It’s really a moment in the history of the city when we might be able to get this right,” Mitchell said. “To be able to have a significant supply of moderately priced housing added to what’s being built at the super luxury and deeply affordable levels is exciting and important.”
Walsh’s housing effort is also intended to address other issues, such as preserving units for elderly residents and generating more dormitory beds to serve the city’s growing student population.
A Globe Spotlight Team report recently showed that the off-campus student population is being crammed into multifamily houses in neighborhoods that were once filled with middle-income families.
That produces more income for landlords and cuts costs for students. But it also creates dangerous and sometimes deadly housing conditions and artificially inflates rents and sales prices in huge swaths of the city.
“We’re really going to have to have a frank conversation with the universities about that,” Dillon said. The city is particularly focused on spurring construction of housing for graduate students, who now have almost no choice but to live off-campus, she said.
The housing group is expected to generate recommendations over the next six weeks, and Walsh has pledged to act quickly on its findings.
“We have an opportunity to grow our population in Boston if we build these units correctly,” he said. “We’re going to look at everything we can do to get this done.”