A new MassINC study examining state housing spending over the last decade and a half argues that state housing programs designed primarily to increase affordability in strong markets like Boston have not been able to meet the needs of cities outside of Rte 128. The report, entitled “Going for Growth: Promoting Residential Reinvestment in Gateway Cities,” shows how local housing markets vary considerably in different parts of the Commonwealth. In weaker markets outside of Greater Boston – where the challenge is lack of demand, not lack of supply – current housing tools are ineffective.

“We know that a one-size-fits-all housing strategy does not work when we have different real estate dynamics across the state,” said Benjamin Forman, Senior Research Associate at MassINC. “To have healthy neighborhoods and strong job centers, Gateway Cities like New Bedford, Springfield, and Worcester need tools designed to spur reinvestment in residential neighborhoods.”

“We know that a one-size-fits-all housing strategy does not work when we have different real estate dynamics across the state,” said Benjamin Forman, Senior Research Associate at MassINC. “To have healthy neighborhoods and strong job centers, Gateway Cities like New Bedford, Springfield, and Worcester need tools designed to spur reinvestment in residential neighborhoods.”

The economics of weak markets make it difficult to break the cycle of disinvestment, sparked by manufacturing job loss and compounded by decades of suburbanization. Data show that in many Gateway City neighborhoods, the value of housing has reached a point where it falls well below the cost to replace it, a dynamic that makes it challenging to finance construction to repair and rebuild housing in distressed neighborhoods.

 With no housing programs designed to support comprehensive neighborhood revitalization projects, Gateway Cities rely heavily on the state’s affordable housing resources. Since 1993, about a fifth of state affordable housing investment has gone to Gateway Cities. These communities often employ affordable housing funds reluctantly because they are the only capital available to address blight. While affordable housing redevelopment can resolve concerns on a given block, it may further destabilize Gateway City neighborhoods by drawing families away from the existing housing stock.

The report suggests that reliance on affordable housing funds for neighborhood revitalization may further concentrate low-income families in high poverty areas, thwarting efforts to restore healthy demand for housing. Researchers define highly concentrated poverty as areas where more than 40 percent of resident live in households with income below poverty.

Data from the 2000 Census indicate that the 11 Gateway cities – which account for 15 percent of the state’s population – are now home to more than 60 percent of residents living in neighborhoods with highly concentrated poverty. While more recent figures are not available to show trends, school enrollment data provide some indication that poverty is only becoming more concentrated. The percentage of students in Gateway City schools classified as low-income grew from less than half (45 percent) in 1992 to nearly two-thirds (65 percent) in 2008.

The report argues that the state can respond more effectively to the needs of Gateway City housing markets with a strategy that:

– Provides differentiated tools tailored to market conditions in varying neighborhoods; strategically targets limited resources to have an impact; coordinates housing spending with other public investments to restore healthy demand for neighborhood real estate; builds real capacity in local governments and nonprofit community organizations needed to support and sustain long-term revitalization efforts.

More specifically, MassINC recommends:

– The creation of transferable tax credits to strategically transform the most distressed neighborhoods into healthy-mixed income communities;

– The creation of technical assistance programs, forgivable low-interest rate loans, and home value protection products for owner-occupants rehabbing homes in more transitional neighborhoods;

– Legislative and administrative efforts to 1) target state and local spending; 2) coordinate investments in schools, parks, small business development or other neighborhood assets; and 3) create data infrastructure to monitor neighborhood housing markets, and rigorously evaluate the impact of public investment.

This housing brief is the second in MassINC’s Going for Growth series, which focuses on state level policy innovations to give Gateway Cities both the tools they need to redevelop, and a stronger state partnership to help them wield these tools effectively. These policy briefs follow the release of MassINC’s 2007 “Gateway Cities report” – a major research study that analyzed the social and economic challenges and opportunities in 11 cities that drive the state’s regional economies outside of Greater Boston. The Gateway Cities include Brockton, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Lowell, New Bedford, Pittsfield, Springfield, and Worcester.

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