Double-whammy for Gateway Cities
Municipalities are caught in vicious real estate cycle
CLARK UNIVERSITY IN WORCESTER this week unveiled a series of new data profiles suggesting Gateway Cities are being hit with a real estate double-whammy: housing prices that are relatively low and rents that are relatively high.
That combination is trouble because it means developers have little incentive to build new housing units in Gateway Cities and existing landlords can charge more for the units they rent out. The result: low-income renters end up paying a disproportionate amount of their income for housing. It’s a vicious cycle that shows no sign of abating on its own.
Gateway Cities are medium-sized communities outside of Boston that are struggling to regain their economic footing. Originally there were 11 Gateway Cities, including New Bedford, Fall River, Worcester, Springfield, and Lowell. As Gateway Cities garnered more attention from state officials, the group expanded to 27 cities. As defined by state law, a Gateway City must have a population between 35,000 and 250,000, an income level below the state median, and a share of residents with a bachelor’s degree or higher below the state average. Real estate problems have become a defining characteristic of Gateway Cities.
According to the Clark data, the median home value in the Gateway Cities is $252,085, well below the statewide median of $325,800. MassINC’s latest report, “Rebuilding Renewal,” offered more detail on the disturbing real estate trends in Gateway Cities. From 2000 until the Great Recession, the report said, assessed property values in the original 11 Gateway Cities grew at the same pace as in Boston. Between 2011 and 2015, however, Boston saw its total assessed value rise 28 percent, while the assessed value in the 11 Gateway Cities fell 2 percent.
With no new housing being constructed, existing landlords are free to raise rents. The average rent for one bedroom, two bedroom, and three bedroom units in Gateway Cities is higher, sometimes significantly higher, than the statewide average. The average rent for a two-bedroom unit in the Gateway Cities is $1,097 a month, compared to $926 statewide, according to the Clark data.
John C. Brown, a Clark economist who is currently on sabbatical as a visiting scholar at the Federal Reserve Bank, cautioned that the rental data, which rely on US Census information, are somewhat speculative. But he said the data are nevertheless indicative of what’s happening on the ground.Lawrence is a good example. Last summer, a report commissioned by six public and private groups, found that only 494 net new housing units were constructed in Lawrence between 1980 and 2012, a period when the population of the city grew by 22 percent. Despite what would appear to be a supply-demand imbalance, housing values have not gone up dramatically. The Clark report puts the median home value in Lawrence at $204,500.
By contrast, rents in Lawrence are high, particularly in relation to the low incomes of city residents. “It is not surprising that almost half of all households in Lawrence were spending more than 35 percent of their income on housing, a significantly larger proportion than 28 percent in Methuen and 40 percent in Chelsea,” said the report on Lawrence.