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Why more housing won’t make Boston much cheaper

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Greater Boston is experiencing a construction boom, like this new housing development in Quincy Center.David L. Ryan

Boston may not be as expensive as San Francisco (yet), but rents and housing costs are still among the highest in the country.

One oft-invoked culprit is the yawning mismatch between supply and demand — a lack of available houses to meet the growing needs of area families. And that points toward an obvious solution: Build, baby, build.

By lifting zoning restrictions, checking not-in-my-backyard opposition, and lowering bureaucratic hurdles, Greater Boston could let a thousand new housing units bloom, easing the competition for scarce spaces and dampening costs.

But this strategy has its limits. New construction doesn't just mean more options for people who are already here. It means more people moving in. So at the end of all its building, Boston could end up denser yet just as expensive.


Think that's impossible? Look at Manhattan, a city that has been building feverishly skyward since the dawn of steel construction, with little to show in the way of reasonably priced housing.

Is Boston a leader when it comes to housing construction?

Far from it. Boston has been one of the slowest-building cities in America. Since 1990, peer cities like Seattle, Portland, Ore., and Washington, D.C., have built new housing at twice the pace of Greater Boston. Sprawling cities like Dallas and Atlanta have grown even faster, sprouting new units four to five times faster than anything Boston can muster, according to data from Trulia.

One issue is the high cost of construction, which makes it hard for developers to build middle-class housing and still turn a profit. Partly, that's about the region's stiff labor costs, but there's also the fast-growing expense of integrating new units into aging street and sewer systems.

Another impediment is Massachusetts' long tradition of local control. Just about anywhere you want to build, there are people who want to stop you. Sometimes, it's because they like their communities the way they are. Other times it's because they already own homes, and therefore have a financial interest in making real estate more expensive, not less.


If Boston had a regional body empowered to streamline building requirements or fast-track projects, it might be able to work around these kinds of concerns — acting in the interests of the invisible people who would benefit from new construction but who have no voice because they're not yet on the ground.

For now, however, there is no such power. Zoning and land-use rules are set by individual communities, often in ways that tilt against new construction, giving local residents veto authority or presenting byzantine requirements for community or historic preservation.

This NIMBY opposition is a powerful political force and a big reason why construction in Greater Boston remains rare and challenging.

Can new building really drive down prices?

Perhaps nothing encapsulates the appeal of "build, baby, build" so neatly as the scatterplot below, which shows two things: 1) expensive cities don't do much building; and 2) construction-friendly cities are never expensive.

Notice that everything is crowded up against the axes of this chart. That tells you American cities either have high housing costs or high levels of construction — but never both. Which leads to the tempting conclusion that real estate is a simple trade-off. Build, or pay the price.

But this may not be the best way of looking at things. All this chart really shows is that fast-building cities tend to be cheap. But it doesn't actually tell us that building is what makes them cheap.


So consider another chart with just one crucial change. Instead of plotting building rates against today's house prices — as above — let's look at the change in housing costs. That should give a better sense for whether fast-building cities really hold down costs more effectively than slow-building cities.

The answer to this question is a lot less clear.

Some construction-friendly cities — like Dallas and Raleigh, N.C. — have seen fairly substantial price increases, comparable to Boston. Meanwhile, the cities with the most restrained cost growth are Chicago and Pittsburgh, which haven't been doing much building at all.

Bottom line, there may be a connection between construction rates and home prices, but it isn't as strong as you'd expect from Econ 101. It's possible to dramatically increase the supply of housing and still see prices go up substantially.

Here's one potential explanation. More building means more people packed densely together, which increases human connections, spreads serendipity, and creates a larger pool of talented workers — giving rise to new businesses and attracting ever more people toward the expanding innovation hub.

So should Boston build more or not?

Even if the benefits of "build, baby, build" are sometimes overblown, Boston needs an influx of people to keep our economy humming as baby boomers move into retirement. Possibly as many as half a million new residents along with several hundred thousand new housing units, according to the Metropolitan Area Planning Council.


Absent a rush of new building, we won't hit those numbers, which would mean stiffening competition for existing housing — and the potential for real estate prices to approach the Bay Area stratosphere.

There seems to be a kind of asymmetry at work when it comes to new construction. Not building would put tremendous strain on the city's housing supply. But even an unprecedented rush of building might not drive prices down too far.

That may sound like a paradox, but it's the nature of life in a thriving city. The big reason Greater Boston is an expensive place to live is that it's very desirable. If an eruption of new housing options actually started to drive down prices, new people would be drawn to town, bringing new ideas, new businesses, and lots of new bidders trying to hunt down affordable places to live.

This spiralling demand would obviously be good for the regional economy — and it may be reason enough to try and make Boston more construction-friendly. But it probably won't suffice as a solution to the ever-rising cost of area housing.