Many people in Massachusetts are talking about the need to attract and retain young workers, but we are hardly sending out the welcome wagon. As the Globe reported recently, the Census Bureau estimates that the number of Massachusetts homeowners between ages 25 and 34 dropped by nearly 32,000 — or 19 percent — between 2005 and 2010. This massive decline reminds us that, despite our abundance of colleges, the Commonwealth remains inhospitable to young talent. I agree with those who would like less regulation of nightclubs and food trucks, but the larger problem is over-regulation of new housing, especially in suburbs near the urban core.
The Commonwealth’s economy is doing reasonably well, which should make it a magnet for the skilled and ambitious. In April, our unemployment rate was down to 6.3 percent. Our state’s gross domestic product increased in real terms by 6.5 percent between 2009 and 2011, leading the Northeast. According to the Case-Shiller Housing Price Index, the Boston area’s housing prices have only declined by 17 percent since their December 2005 peak, which represents remarkable resiliency during an historic housing collapse.
But the resilience of our housing prices points to the root of our youth problem: Massachusetts is still expensive. According the National Association of Realtors, our median home prices were $346,000 — more than double the national average, and higher than anywhere else in the country outside of the New York area, California, and Hawaii. Housing costs are a paramount barrier, because most of us keep paying our mortgages decades after we’ve stopped visiting downtown nightclubs.
Massachusetts is not alone in having fewer young homeowners. In the United States as a whole, the number of 25- to 34-year-olds owning homes dropped by about 12 percent between 2005 and 2010. The nationwide switch from owning to renting isn’t necessarily bad. Renting means more flexibility, which is valuable in a volatile economy, and less exposure to future housing market declines.
There is less to like about the dwindling number of younger homeowners in Massachusetts, and not only because the drop is more severe. Between 2005 and 2010, there were only 8,000 more 25- to 34-year-old renters in Massachusetts — not enough to make up for the drop of young homeowners. In other words, we’re losing young households, despite the state’s economic strength. Post-bubble, there isn’t much of an affordability problem nationwide; the median housing price in Atlanta last year was under $100,000. But in Massachusetts, high prices, not economic distress, are keeping young people from buying.
Our high prices ultimately reflect the Draconian limits on Boston-area construction. We don’t lack land, but our rules don’t let us build on that land. An overwhelming number of communities near Boston have enacted fearsome land use controls, including minimum lot sizes that are often over an acre, which make it all but impossible to produce significant numbers of starter homes.
Those rules close the state’s prosperous areas to outsiders and ensure slow population growth. In 2000, the population density of Harris County, Texas — where Houston is located — was 12 percent higher than in Middlesex County, Mass. Yet between 2000 and 2010, Harris County added 690,000 residents, while Middlesex County added only 36,000. The City of Boston itself deserves credit for permitting more construction during the last decade, which explains why Boston grew faster than the state for the first decade since the 1870s. But the outlying towns are stuck in hyper-regulation.
The over-regulation problem is so intractable because low density levels suit existing homeowners perfectly. Who wants the inconvenience of nearby construction projects? Why should homeowners hope for less housing price growth? Not every bit of behavior can be explained by economic self-interest, but self-interest often rules — at least at local land use meetings. Of course, we prefer to hide self-interest with fine language about preserving the traditional character of our towns.
The tragedy is that barriers to new construction are also walls that keep out the new talent that is the state’s future. Massachusetts expertly protects middle-aged insiders, like myself, but shuts its door to younger outsiders. If we maintain our fortress mentality instead of allowing more building, the recent decline in younger homeowners will be just another missed warning signal.