The Triumph of Hope Over Experience?

Robert M. Ruzzo

This August, when the Baker-Polito administration released long anticipated final guidelines for new Section 3A of the Commonwealth’s Zoning Act (Chapter 40A), optimistic assessments

of the new provision’s potential impact abounded. Section 3A requires 175 “MBTA Communities” to have at least one reasonably sized zoning district where multi-family housing is allowed “as of right.”

Such a reception should not have come as much of a surprise. Frustrated by the continuing failure of the legislative ball of purulence that is our current Zoning Act, housing advocates have chased moonbeams for decades in the hopes of boosting the state’s meager rate of housing production.

Like economists who have successfully predicted nine out of the last five recessions (maybe they are on track this time), housing advocates have consistently overestimated the change making ability of adopting new land use regulatory techniques. Two such examples for the would-be open space residential district (cluster) zoning and inclusionary zoning. These once bright shiny new tools were touted as the key to more sustainable and more affordable housing development in the Massachusetts. Please don’t misunderestimate the Housing Watch. It’s not that these tools aren’t valuable, they are; but they have not moved the dial one whit when it comes to the comparative affordability of our state’s housing when stacked up against other states competing to attract or grow the same companies.

Similarly, various legislative proposals such as Chapter 40R, Chapter 40S, and the starter homes zoning district initiative have been paraded through streets strewn with flower petals upon passage. One could even be forgiven for imaging a gaunt figure whispering “Memento Mori” as these enactments enjoyed their moment of triumph. Each was touted as a key to “bending the curve” and improving the affordability equation in Massachusetts.

The Housing Watch stands as guilty as the rest, particularly with respect to Chapter 40R. Despite uncertain funding sources, the tardiness in adding the Chapter 40S “school impact insurance” (to say nothing of the convoluted results of its formula), hopes for this zoning approach aimed at redevelopment and maximizing transit investments still burned brightly. Yet, as Bill Parcels (remember him?) used to say, “you are what your record says you are.” Candidly, the record says that Chapter 40R is not much. The latest statistics available (from 2019) on the DHCD website indicate that Chapter 40R has yielded only a total of 22,213 potential units, out of which a mere 3,759 have had a building permit issued.

Hopes were similarly high with respect to a common-sense starter homes district proposal in 2016. As things turned out, melding this initiative with the density driven minutiae of smart growth districts literally proved fruitless. No units have been produced as of today. A new proposal to move the starter homes district initiative into its own separate chapter (a proposed new Chapter 40Y) remains stalled (as of this writing) with the Economic Development bill that ran out of steam at the end of the formal legislative session in July. The Housing Watch wishes that effort all the best, but would caution against Dickensian expectations.

So, is the excitement over the issuance of final guidelines for “as of right” multifamily districts merely the triumph of hope over experience? Or are there legitimate reasons for believing this time will be different? Remember, Chapter 40R promised “as of right” approvals, yet the implementation of that statute became mired in an array of mind-numbing design standards and doubts about whether the money would be there for zoning incentive payments.

Still, there are at least two reasons for optimism.

First, unlike Chapter 40R, new Section 3A is mandatory, directing that municipalities shall create at least one reasonably sized multifamily as of right district. Section 3A, however, contains only modest explicit penalties for a failure to act (municipal ineligibility for the three grant programs, the most important of which is the MassWorks grant program). The new administration is likely going to have to do a lot better than that. If municipalities balk to any significant extent, assessing how “persuasive” the new administration is willing to be will be a litmus test for assessing its commitment to housing. Because it is at first blush difficult (though I'm sure not impossible) to imagine a scenario where a multifamily housing developer would have standing to challenge municipal obstinance in carrying out this mandate, providing the proper range of carrots and sticks for communities to act will likely be an almost exclusively administrative matter. So, the new administration has got that going for them….

Second, the animus of the times is different. The inter-relationship of transit investments and housing density is much more top of mind in Massachusetts than it was when Chapter 40R was enacted in 2004 (and the Housing Watch still has the bruises to prove it). Nationwide, notwithstanding the pandemic, automobiles seem on the road to becoming more of a service rather than an essential good. New generations are growing up with a distinct animus against what many Americans once viewed as their four wheeled birthright. That’s unlikely to change. The times and the technique may for once intersect. So, there is reason for some hope.

Otherwise, it could be back to the drawing board. Anyone up for another go at rewriting Chapter 40A? Or maybe, to paraphrase another Bill (one even more famous than Parcells), the fault may lie not in our statutes, but in ourselves.

Co-chair of the REBA affordable housing section, Bob Ruzzo is a former Massachusetts Deputy Secretary of Transportation. He also served as the Deputy Director/Chief Operating Officer at both MassHousing and MassDevelopment.  His column, “The Housing Watch…” is a regular feature in REBA News and on the REBA Blog. He can be reached at bob@bobruzzo.com

Free Advice, Well Worth the Price.

Robert M. Ruzzo

Despite the relative dearth of political headlines at the time of this writing (mid-spring), Massachusetts

is actually in the throes of a Governor’s race this year. The Housing Watch does not wish to back a particular candidate in this fight, but will always grab the opportunity to put housing in any headline. Given the fact that pandemic shortages and supply chain price pressures are now being coupled with interest rate increases aimed at curbing inflation, there are storm signals all along the housing horizon. Compelled by this confluence of events, your humble correspondent dares to share some thoughts about housing as a campaign issue and, more importantly, housing as a priority for any incoming administration, regardless of its political stripe.

We’re Number One?

Occasionally, it’s helpful to at least consider the experiences of those who have gone before you. And in all candor, this column does not recall the outgoing governor focusing much on housing during the halcyon days of the 2014 election cycle. Governor Baker campaigned as an experienced manager with financial and health care management credentials. To be candid, he came into office bringing with him the sympathies of a Swampscott selectman when it came to the demands being placed on the municipal level of government by the state. Not exactly the profile of your typical housing stalwart. All of this was swiftly overshadowed by the great "Snowmaggedon” and its aftermath, particularly its impact on the MBTA. While transit service is irrevocably intertwined with housing (hope you’ve been paying attention), the priority was, to borrow a health care term, simply to get the patient (the MBTA) ambulatory first. Then, during the second term, there was this little matter known as Covid 19. 

That's why it was particularly revealing to hear the governor, in his final speech before the Greater Boston Chamber of Commerce (somewhat akin to a commencement address) identify housing as the "principal headwind" facing the Commonwealth in the future. It's not quite the same as an outgoing President Eisenhower warning about the military-industrial complex, but it should make everyone think. Housing needs to be the priority for any incoming administration. That's not The Housing Watch talking, that’s the voice of hard-earned experience.

Build, Baby, Build!

No, The Housing Watch hasn’t “gone rogue,” but the harsh truth is current housing production levels are half of the already inadequate levels from thirty years ago. Rising construction costs and interest rates aren’t going to make things any easier. We need to focus both on the construction process itself, including exploring prudent means of greater reliance on modular construction in a way that does not irrevocably alienate union sensibilities and we need to focus intensively on the permitting/preconstruction side of the equation, seeking out what will really motivate municipalities to welcome more housing and what land use regulation techniques will deliver that production efficiently. Implementation is the most difficult stage of any policy, so that means, in particular, focusing on implementation of the new Section 3A of Chapter 40A, and its authorization of “as of right” MBTA multi-family zoning districts. Tweaking broader issues related to that goal, such as the consequences for failing to comply with new Section 3A, should be prioritized, notwithstanding The Housing Watch’s sympathy with the notion of adopting the “as of right” multi-family zoning concept state-wide.

It's About the Infrastructure, Stupid!

Speaking of zoning, there's more than one kind of infrastructure. Hard infrastructure, such as utilities (particularly water and sewer) are obviously vital to greater production and density. And that’s a great rationale for fostering ever more multi-family housing in the Commonwealth’s Gateway Cities where the infrastructure likely needs a solid upgrade rather than full scale installation.  

But there's a second kind of infrastructure and that's land use regulatory infrastructure. Here’s where Massachusetts falls down miserably, due largely to our notoriously outdated zoning enabling act, compounded by our snowflakish desire to proliferate local environmental regulations. If we are going to continue to go beyond state-wide environmental standards, better training at the local level is simply a must.  

The Housing Watch supports a dual track approach. And yes, that means tackling full scale zoning reform. But it also means first improving the carrot and stick tools we have such as Chapter 40R and Chapter 40B (more about that next time) and implementing the new Section 3A. If these tools can be tweaked enough to make continued opposition to housing production at the local level sufficiently burdensome, the eternal optimist can see an opening for the large-scale zoning reform that the Commonwealth really needs. 

Affordable Housing Doesn’t Need to Be this Complicated.

Every Affordable Houser has a horror story (or ten) about mixing multiple sources of subsidy from different entities in order to make an affordable development work. Long ago, Massachusetts’ subsidizing agencies wisely banded together to produce a “uniform” set of documents (known as “MassDocs”) to make legally tracking the requirements imposed by these various sources comprehensible. That’s been very helpful, as far as it goes, but since we have an Affordable Housing Trust in this state, one that can accept “donations” by the way, wouldn’t it be easier to “launder” (excuse me, “funnel”) the various sources through the Affordable Housing Trust and then have the subsidizing agencies provide simplified form and content for the restrictions? 

Ownership Equals Opportunity. 

Our time grows short. But this may be the most important point of all. More simply has to be done on the homeownership front in affordable housing (beyond the federal proposal for a homeownership tax credit). This may mean experimentation with the once heretical notion of “burning off” affordability restrictions on resale over time, even if that means fewer affordable units in theory. The Housing Watch is fascinated by the proposal made by the My City at Peace-HYM Investments team with respect to the P-3 parcel in Roxbury. It raises the possibility of affordable homeownership units with restrictions that fall away after fifteen years. The Housing Watch will keep a lookout for similar experiments. If we can change the municipal mindset on housing production, we can generate both new restricted units and a new generation of middle class, particularly among traditionally underrepresented communities. 

We also need to encourage new thinking about incentivizing the private sector to integrate housing assistance into the employee compensation equation.

One Last Thing. 

Can our new governor please get behind the notion of expediting (not eliminating, but really expediting) abutter (not municipal) appeals involving affordable housing developments? 

Please? 

Until next time.

Co-chair of the REBA affordable housing section, Bob Ruzzo is a former Massachusetts Deputy Secretary of Transportation. He also served as the Deputy Director/Chief Operating Officer at both MassHousing and MassDevelopment.  His column, “The Housing Watch…” will be a regular feature in REBA News and on the REBA Blog He can be reached at bob@bobruzzo.com. 

 

The Housing Report Card 2017: The Dickens, You Say

By Bob Ruzzo

“It was the best of times; it was the worst of times...”

Charles Dickens, A Tale of Two Cities

The Greater Boston Housing Report Card is an annual “must-see” housing event providing, as it does, an annual scheduled opportunity to step back from the project centric trees and observe the overall state of the larger housing forest.  The most recent Report Card marks the 15^th time that the Boston Foundation and Northeastern University have collaborated on this effort, with valuable sales and ownership information being provided by the Warren Group. Even if one on occasion quarrels with or has a quibble about some of the conclusions reached in the Report Card, this report is a true civic gem and these organizations are to be congratulated and thanked for their continuing diligence (and stamina) on this issue.

As the Dickensian reference suggests, we in the Massachusetts housing sector have much to be thankful for amidst the abundant challenges that confront us.  First, the Massachusetts economy continues to chug along.  As noted in the Report Card, “real inflation-adjusted gross domestic product has increased so fast in the Commonwealth that in 2016, Massachusetts ranked first in the nation in per capita output – up from sixth place in 2015.” Non-farm seasonally adjusted unemployment has reached an all-time high.

The benefits of this economic strength continued to be skewed in their distribution, and the extremely high cost of housing in the heart of the Greater Boston economic engine complicates the ability to house badly needed workers and becomes a factor in corporate decision-making about expansion and re-location; high-class problems, to be sure, but vexing hurdles nonetheless.

Obtaining and reading the Report Card itself is highly recommended, and here are some initial tidbits to add to your own reflections:

1. Higher Priced Housing Is On The Move and coming soon to a working-class community near you.  Continued price increases in the urban core (Boston, Cambridge and Somerville) are not surprising, but the uptick in housing costs in a number of locations further out from the core is in some cases, startling.  Over the last two years, the median home price in Lawrence is up 14.2%, higher, in percentage terms, than either Brookline or Newton.  Granted, we are dealing with significantly different starting points, but this trend carries with it long-term implications for our multi-modal transportation network.

2. Boston Continues To Lead The Way.  In terms of Housing Permits issued in the five-county Greater Boston Region, the city proper, which “makes up 0.62% of the total land mass of the region and… 9.4% of the region’s population”, was responsible for 29% of the building permits issued in the region in 2016.  Other communities in the region have not kept up, on a proportionate basis, with Boston’s increased housing production.

Thus, we come upon the annual quibble: while the Report Card was subtitled “Ideas from the Urban Core,” it reads somewhat more like a “Plan for the Urban Future,” recommending a 10 step plan to develop a substantial number of “21st Century Villages,” a laudable goal that does carry with it a number of statewide policy points.

One suggestion: a straightforward “idea from the urban core” may be expressed in two simple words: Boylston Street.

Fifteen years ago, the Fenway stretch of Boylston Street was an unloved asphalt mix of muffler shops, fast food options, and deteriorating commercial space.  A committed group of residents realized that with this as the base condition, and given the inherent advantages of the area-a number of large, fixed institutional resources (including, but by no means limited to Longwood Medical Area), it was possible to do much better.  While the high-rise (and high cost) approach of Fenway’s Boylston Street is not replicable (nor desirable) everywhere, it demonstrates the tremendous “recycling” opportunities that exist in “fully built out” communities throughout the Commonwealth.  Customizing the approach (and not necessarily the result) to individual communities is a path we should continue to follow.

3. The Power of Inclusionary Zoning.  Folks who were unable to attend the rollout session at the Boston Foundation missed this one, which was presented by Sheila Dillon, the Chief of Housing & Director of the Department of Neighborhood Development in the post-presentation discussion.  She provided statistics indicating that over the last year, the number of affordable units produced through inclusionary zoning actually outstripped the number of affordable housing units added through more traditional financing techniques such as tax credits, tax-exempt debt and “soft loans.”  That’s a true testament to the power of increased density in a highly desirable market and a topic well worth further discussion.  (And it wins the nomination for this year’s “most underplayed issue” to emerge from the Report Card process).

4. Speed Helps.  A discussion of increased production within the city of Boston would not be complete without noting the dramatic reduction in the time it takes to obtain a building permit.  Average wait times for a single family home permit were shaved from 472 days in 2014 to 74 days in 2016.  The average wait time from application to permit for a Multi-family (5 or more units) development permit was also trimmed from 425 days in 2014 to 119 days in 2016.

5. Homeownership Rates Continue to Fall.  Last year’s nominee for the most underplayed issue.  As indicated in this space last year (“Don’t Look Now, But the Homeownership Rate Keeps Falling”), the drop in homeownership among the upper reaches of “prime age households” (aged 25 to 44) is particularly noteworthy.  To its credit, MassHousing has taken the first steps in a pilot program to try to identify potential new homeowners from the ranks of renters in its affordable housing portfolio.

That’s all that time allows. Pick up a copy of the Greater Boston Housing Report Card and peruse it yourself. It is well worth the effort.

“The Housing Watch” is a regular column from Bob Ruzzo,  senior counsel in the Boston office of Holland & Knight LLP.  He possesses a wealth of public, quasi-public and private sector experience in affordable housing, transportation, real estate, transit-oriented development, public private partnerships, land use planning and environmental impact analysis. Bob is also a former general counsel of both the Massachusetts Turnpike Authority and the Massachusetts Housing Finance Agency; he also served as chief real estate officer for the turnpike and as deputy director of MassHousing.”  Bob can be contacted by email at robert.ruzzo@hklaw.com.

As the Transit Oriented Development World Turns…

By Robert Ruzzo

“The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.”

                                                                         William Arthur Ward

Sometimes, reality can get a little daunting if one is not sufficiently careful. Witness two recent presentations touching upon the present

state of rail transportation, particularly commuter rail, and Transit Oriented Development (“TOD”) development opportunities associated with our commuter rail system.

The first, as reported in Commonwealth magazine, was a gathering of eight experts from around the country and the world that had been convened by Congressman Seth Molson and assembled by the Urban Land Institute to spend an intensive week “gathering information on the North South Rail Link and the region’s transportation infrastructure.” Kudos to the Massachusetts Competitive Partnership for funding this study.

Part of the discussion focused on the state of TOD at commuter rail locations. As reported by Commonwealth, Robert Ravelli, a director at Contemporary Solutions in London, was quoted as saying the panel members saw the “commuter rail system as an untapped resource… a lost opportunity.” He urged close examination of TOD possibilities at all commuter rail stations, many of which, in the words of the Commonwealth article, “are just rudimentary stations with big parking lots next to them.”

On the other hand, one week later at a Regional Real Estate Development Leadership Council meeting of the Greater Boston Chamber of Commerce, a Mass DOT/MBTA presentation noted past successes, current projects and future potential for just the kind of development called for by the ULI Study group. In a candid assessment examining both successes and failures, development projects on publicly owned land were examined in some detail. A number of these developments included the transformation of either commuter rail or end of the line park and ride facilities, including Arbor Point at Woodland station in Newton, the Carruth at Ashmont Station, Forest Hills, Mattapan High Speed Rail, Beverly Depot, and Greenbush station. Those developments run the gamut from completed to proceeding apace to struggling, but still chugging along.

How can both the (relatively) optimistic picture offered by MassDOT and the critique of the ULI study both ring true?

Three factors are worth remembering. 

First, the universe is a pretty big place. The MBTA alone has more than 300 rapid transit, commuter rail, and bus rapid transit stations. Within a half-mile radius of these stations, you will find 25% of the region’s housing and 37% of the region’s jobs, all on about 5% of the region’s total land area. Regional transit authorities add further to the number of potential TOD locations. There is plenty of room within that universe for MassDOT to report its hard won successes and for others to clamor for more to be done.

While it is the belief here that within the soulless cracked asphalt of every “park-and-ride” lot, there beats the heart of a “live and ride” community yearning to breathe free, that is not going to happen overnight. But it does have to happen.

Second, every opportunity a developer envisions at a commuter rail stop brings an operational challenge with it. Operational issues, much like an offensive line in football, really only get the attention they truly deserve during periods of failure (real or perceived).

Construction, however, is by nature a disruptive event, and commuting habits are just that, habits. A disruption to the anticipated availability of parking due to construction brings with it the potential to raise the ire (and change the habits) of an (unquestionably) impacted ridership. And unlike, for example, escalator maintenance, construction period impacts have an extremely extended duration. It is therefore not surprising that many of the TOD successes to date have occurred at locations were there was in fact a surplus of parking.

Third, the MBTA is in fact frequently in competition with its neighbors. Typically, though not always, park-and-ride facilities are in a premier location with respect to the transit location; however, adjacent parcels in private hands nonetheless represent advantageous development opportunities, ones that come: (1) without the public procurement obligations and (2) blissfully removed from operational concerns. 

And, for good measure, you can add in the customary challenges any development encounters in the entitlement process in Massachusetts. For example, the “friendly Chapter 40B” process that resulted in Arbor Point at Woodland Station came at the end of a ten year development effort.

What would help?

Greater planning resources for both the MBTA and host communities alike would be useful in site prioritization and co-ordination of the interests of competing properties, particularly in exploring potential temporary or “swing space” parking solutions.

While the attributes of our Comprehensive Permit Law (including its robust potential as a redevelopment tool), are routinely applauded in this space, TOD locations would benefit most from a thoughtful planning process and planning-based zoning amendments thereafter, including but not limited to Chapter 40R Overlay Districts.

Despite all of its challenges, interest in TOD continues unabated. In many respects, TOD is riding a third great transit wave.  The first wave arrived upon the electrification of previously horse drawn streetcars and the resulting proliferation of streetcar suburbs; the second sizzled during the war years of the 1940s (representing the transportation equivalent of ‘the last days of disco” before the onset of suburban supremacy), and now the third wave continues to build as the combined result of animus against further development of green fields and exasperation with the congested state of the nation’s highways.

TOD’s future? As a Commonwealth, we are in it for the long haul. Let’s adjust the sails and continue forward.  

“The Housing Watch” is a regular column from Bob Ruzzo,  senior counsel in the Boston office of Holland & Knight LLP.  He possesses a wealth of public, quasi-public and private sector experience in affordable housing, transportation, real estate, transit-oriented development, public private partnerships, land use planning and environmental impact analysis. Bob is also a former general counsel of both the Massachusetts Turnpike Authority and the Massachusetts Housing Finance Agency; he also served as chief real estate officer for the turnpike and as deputy director of MassHousing.”  Bob can be contacted by email at robert.ruzzo@hklaw.com.

Don’t Look Now, But the Homeownership Rate Keeps Falling…

By Robert M. Ruzzo

 

From Capitol Hill to Beacon Hill, 2017 promises to be a very “interesting” (and perhaps difficult) year for housing aficionados. First of all, on the national front, the impact of tax reform (particularly its impact on the affordable housing tax credit world) is likely to be front and center. In addition, although the details are still evolving, it is difficult to imagine a (potentially)  $1 billion infrastructure proposal that would not have a major impact upon Transit Oriented Development efforts. Rumor also has it that long ago in a galaxy far away, reform of the government sponsored enterprises (the “GSEs,” a/k/a Fannie Mae and Freddie Mac) was once imminent. If GSE reform is going to happen within the lifetime of any life presently in being, the current session of Congress might seem as likely a time as any, but the betting window is still wide open on that one.

Meanwhile, the debate over zoning reform is sure to resurface on Beacon Hill, and it is once again time for a new Housing Bond bill.  Mix in some potential measures at the state level to counteract, offset or capitalize upon whatever comes out of Washington, and are things interesting enough for you yet?

If you can tear yourself away from this political back and forth long enough to ruminate upon any other housing issue, kindly consider the following as a way to add an eggbeater to already troubled waters: take a look at the homeownership rate in our otherwise economically vibrant Commonwealth, particularly the five counties comprising Greater Boston.

Like the MBTA in the fall of 2014, the plummeting homeownership rate in Greater Boston has all of the hallmarks of a crisis hiding in plain view.  While five counties do not a Commonwealth make, one would have a hard time arguing that homeownership is substantially more achievable to the average citizen in Barnstable, Dukes, or Nantucket Counties. When combined with Greater Boston (as defined in the Report Card), this would represent 8 of the state’s 14 counties and more than two thirds of the state’s total population.

The drop (plummet) in homeownership is the most underplayed issue to emerge (or not emerge) from the 2016 Greater Boston Housing Report Card. And while the swing of the pendulum in favor of “funky” downtown apartments explains some of this phenomenon, not everyone wants to spend their entire life in a micro unit, no matter how vibrant the surrounding neighborhood may be.

Massachusetts has always been somewhat of a laggard in terms of its homeownership rate due to our restrictive local zoning and high housing costs. Nationwide, the homeownership rate grazed the 69% level before crashing back to earth in the throes of the Great Recession. According to U. S. Census Bureau data, the nationwide homeownership rate was 63.7% in the fourth quarter of 2016. The homeownership rates for African Americans and people of Hispanic origin are far lower, averaging in the mid-40% range.

Of particular interest in Greater Boston is the homeownership rate among “Prime Age Households” (those between 25 and 44). The facts are there in all their shocking glory in Table 2.2 of the Housing Report Card.

In Greater Boston, in the year 2000, 67.2 % of all households between 35 and 44 (the choicest of the Prime Age Households) were homeowners. After the Great Recession, in 2010, that rate had fallen to 65%; however, even more troubling is the fact that since then, in the years 2011-2014, the decline in homeownership in Greater Boston has been more than twice as fast as it was between 2000 and 2010. Between 2011 and 2014, the homeownership rate in this age group plunged to 58.9%, despite historically low interest rates.

For those between the ages of 25 and 34, less than one third (30.2%) are homeowners according to the most recent data published in the Report Card, compared to 40.7% in the year 2000. With increasing student loan debt levels, rising home prices and now rising interest rates, it’s unlikely that trend will improve dramatically any time soon. The expiration, at the end of 2016, of the ability to deduct mortgage insurance premiums will not help matters.

Homeownership-the engine of middle class expansion in post-World War II America (and a fundamental means of wealth creation)-is becoming less viable for an increasing number of young citizens in Massachusetts, particularly in Greater Boston. 

A few points worth noting:

First, there is no immediate, sweeping solution, as the single family mortgage business is a retail business.

Second, there is an opportunity for some light to pierce this darkness, particularly in Gateway Cities (and perhaps, most particularly, for Gateway Cities with good rail links to the downtown Boston core).

Third, never forget that much of this is the result of our anemic housing production efforts.

Finally, even for a potential borrower with a healthy income and excellent credit, the so-called “wealth barrier” (accumulating a sufficient down payment) remains a nearly insurmountable hurdle on the path to homeownership. 

What can be done?

With any luck, “teaser rates,” no document “liar loans,” and similar vices from the last great boom will remain consigned to the ash heap of history. Nonetheless, riskier low down payment loans are going to be a part of any solution, but they must be coupled with strong buyer education programs. If the last crash taught us anything, it is that an educated consumer can make a riskier loan product viable.

MassHousing’s Mortgage Insurance Fund, the MassHousing Partnership’s “One Loan” Program, and FHA low down payment loans will be more in demand than ever. 

One of the more creative suggestions heard recently at an industry meeting was for the state’s quasi-governmental agencies, particularly MassHousing, to work with the management companies within its rental portfolio to identify (and groom) future homeowners from the leading ranks of tenants. Employer based programs to foster homeownership may also need to move beyond the beta stage.

Some additional original thinking along these lines is very much needed.

Bob Ruzzo is  senior counsel in the Boston office of Holland & Knight LLP.  He possesses a wealth of public, quasi-public and private sector experience in affordable housing, transportation, real estate, transit-oriented development, public private partnerships, land use planning and environmental impact analysis. Bob is also a former general counsel of both the Massachusetts Turnpike Authority and the Massachusetts Housing Finance Agency; he also served as chief real estate officer for the turnpike and as deputy director of MassHousing.”  Bob can be contacted by email at robert.ruzzo@hklaw.com.