Study Finds Housing Key to Job Growth

Originally printed in The Boston Globe

December 30, 2008
Robert Gavin (Reporter, The Boston Globe)

Minneapolis, Indianapolis, and Columbus, Ohio, all added jobs while Boston's employment declined between 2000 and 2006. These cold-weather metropolitan areas did something else, too: They produced new housing units at more than twice the pace of Boston in the previous decade.
Housing production - more than home prices or tax levels - is among the most important factors in promoting long-term job growth, a new study concludes. The study, for the Massachusetts Housing Partnership, a quasi-public development agency, analyzed economic conditions in more than 200 US metropolitan areas and found that Greater Boston's failure to build enough housing contributed to its subpar job growth in recent years.
Boston expanded its housing stock about 6 percent in the 1990s, compared to an average of more than 16 percent among all metropolitan areas, according to the study.
In the first seven years of this decade, Boston lost jobs at an annual rate of 0.5 percent. Nationally, metropolitan areas gained jobs at an annual rate of 0.6 percent.
Basically, the lack of housing makes it harder to attract new people, particularly young, educated workers considered critical to the knowledge economy, the study said. Without a growing population and labor force, regional economies won't grow very much.
"We restrict the supply of housing, and it represents a whole set of attitudes that say we don't want people to come here," said Edward Moscovitch, the author of the study and president of Cape Ann Economics in Gloucester. "We have a policy of discouraging people to come here, and it's been successful."
The housing partnership's study adds to a long-running debate over housing and economic policy, and how they fit together. In recent years, many analysts and specialists have argued that soaring housing prices were damaging the state's economy in several ways: making homes unaffordable to many young families; discouraging them from staying or locating here; and adding to business costs by requiring firms to pay higher salaries to offset the cost of housing for employees.
But housing prices alone are not a key determinant of job growth, the study found. Cities such as Los Angeles and San Diego have prices as high as Boston's but much higher job growth. The difference: San Diego and Los Angeles built more housing.
Clark Ziegler, executive director the Massachusetts Housing Partnership, said housing options are as important as prices.
A region needs to provide a wide variety of housing to attract and hold on to the diverse workforce it needs to prosper.
Edward Glaeser, a Harvard professor who studies housing and regional economies, said his work has come up with similar conclusions.
"The way a place grows is to add housing units," he said. "If the Boston metropolitan area built more housing, it would grow more."
The problem is not that the Boston area does not have land to develop, but that it restricts housing through zoning regulations that limit development. As a result, about 30 percent of homes built in the region between 1995 and 2000 were on lots of one acre or more, about twice the metropolitan average, according to the housing partnership study. That adds up to fewer houses built overall on the same amount of land.
Gregory Bialecki, the state undersecretary for business development, said the Patrick administration expects to file legislation early next year that would provide incentives to communities to revamp zoning laws to develop more housing.
"We believe there's a connection, and the lack of housing production is holding us back in job growth," said Bialecki. "We need to be attracting the next generation."
But Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, said zoning, housing, and economic growth are complex issues.
Some communities, for example, might have large lot requirements because they don't have the sewer systems to support denser development.
"A lot of factors determine economic growth," Beckwith said. " 'If you build it, employers will come' needs a lot more evidence."