Lagging construction of new homes contributes to rising prices

BOSTON — When it comes to the region’s overheated real estate market, much of the focus has been on the huge spike in prices.

A contributing factor to those higher prices is the slow pace of new construction over the past generation.

“There’s been fewer homes built in the 2010s than in any decade going back to the 1960s,” Daryl Fairweather, PH.D, Chief Economist at Redfin, said. “And that’s why we’re in a situation now where when there’s more demand for homes. There aren’t enough homes for people who want them, and then it just drives prices up.”

Rob Brennan, President of Cape Built, is currently building 60 units of workforce housing in Hyannis.

“Right now, we have a waiting list of about 98 people for our first six units that will be ready in September,” he said. “That tells you the demand we have here in Hyannis compared to the supply.”

The problem bringing new housing online is particularly acute in Massachusetts.

The state permits 36% fewer new housing units per capita than the national average. That ranks us 38th compared to all the other states, according to the Massachusetts Housing Partnership.

“I think in Massachusetts one of the challenges you start with is the shortage of available land,” Brennan, who is also on the board of directors for the Massachusetts Homebuilders and Remodelers Association, said. “You know, Massachusetts is a state that has been built up over a few hundred years. So when you don’t have a lot of vacant land that’s available for development, you’re talking about redeveloping land. And that can be expensive if there’s already something on it.”

That often impacts what gets built, and its affordability.

“That’s why you see so many teardowns and single families being turned into McMansions,” Gene Hashkes, a realtor/broker at William Raveis Realty in Newton, said.

Brennan focuses much of his efforts on workforce housing which is geared to being affordable for the middle class. He said dealing with the rising costs of raw materials like lumber and labor is putting a new strain on all developers.

“It’s like constantly trying to solve a Rubik’s Cube that every time you make a few moves it makes a couple to undo itself, and that’s a challenge,” Brennan said.

Brennan said homebuilders are encouraged by some moves on Beacon Hill, like the passage of Governor Charlie Baker’s Housing Choice Legislation.

“Which, across the state lowered the threshold for new zoning and for approval of projects through special permits from two-thirds down to a simple majority,” Brennan said. “You know, it insulates to some extent these initiatives and those projects from falling victim to (Not In My Back Yard)-ISM.”

Finding a better balance between supply and demand is important for the entire state, according to Keren Horn, PH.D., a professor of economics at UMass Boston.

“Hopefully demand doesn’t decrease. I think for our region we want these people to stay. We want the best and brightest to be able to live in Massachusetts, in the Boston metro area, so I think we need a commitment to building more housing,” Horn explained.

Along with other efforts in addition to the Housing Choice Initiative, Baker’s goal is to support the creation of 135,000 new housing units by 2025.