Sunday, February 6, 2011

MARKET TRENDS: If we build it, they will come

Why aren’t more people moving to Massachusetts?

The release of the 2010 Census results in December was accompanied by all the usual hand-wringing. Massachusetts has plenty to love, so why did the state’s population grow by only 3.1 percent over the last decade, less than a third of the national average? Given that our population growth has badly lagged the nation since the 1960s, Bay State boosters have grown adept at making excuses for the problem. We need more jobs, they say, or it’s just too cold here. But our slow growth actually reflects something else: our decision to highly regulate the building of new homes.

There’s no question that the growth of cities and regions depends on economic success. People have followed the money throughout US history. In the 19th century, farmers fled our rocky soil for fertile Ohio. Some of our skilled entrepreneurs also sought opportunities elsewhere, such as William Le Baron Jenney, who designed landmark skyscrapers in Chicago, and Hiram Walker, who became a whiskey magnate in Detroit.

The Midwest is no longer a land of easy economic opportunity, though, and that kind of migration doesn’t happen much anymore. In Michigan, for example, the unemployment rate is 11.3 percent, and the per capita personal income is only about $34,000. (It’s no surprise that the state’s population fell by 0.6 percent in the recent census.) But Massachusetts’s per capita personal income is almost $50,000, making us the third most prosperous state in the nation. In the meantime, our unemployment rate is 8.2 percent, well below the national average. The relatively strong state of our economy makes our slow population growth even more of a puzzle.

So could the problem be our cold climate? As America got richer, people increasingly made decisions about where to move based on quality of life (Midwestern farmers were retiring to sunny Los Angeles a century ago). I know of no variable that explains local population growth during the 20th century better than January temperatures. Warmer areas grow faster, and by February, even the hardiest New Englanders consider moving to North Carolina.

But poor quality of life would leave a telltale sign: low housing prices. When a place is unbearable, people aren’t willing to pay much to live there. That’s not the way it is in and around Boston. In the third quarter of 2010, the median sales price in Greater Boston was $366,500, higher than any metropolitan area in the continental United States outside California and Greater New York. Nationwide, housing prices have recently averaged about 3.6 times household earnings, but in Massachusetts, they averaged 5.5 times. If this were such a terrible place to live, our housing wouldn’t be so expensive.

To really understand the conundrum of a state like Massachusetts – with its high incomes and low population growth – we must factor in our lack of housing. An area’s growth is almost perfectly correlated with the increase in the number of homes. If you don’t build, you don’t grow, and our state just doesn’t build.

The issue isn’t lack of demand for new housing, but the vast number of local regulations that deter it. More than half the land in Greater Boston has a minimum lot size of greater than an acre. For years, communities have added more anti-growth rules, such as bans on large developments. In 2005 alone, three states each permitted more housing than Massachusetts did over the entire decade.

So when you wonder why more people aren’t moving to Massachusetts, don’t blame the weather. That explanation lets us off the hook too easily. Instead, think about how difficult it would be to add a couple hundred homes in your town and recognize that the Bay State stagnates by design. While our anti-change rules may keep our communities looking the way we like them, they also mean that we do a worse job of providing affordable housing than deep red states, such as Texas. This country is being shaped by local land-use rules, and around here, those regulations have now resulted in Massachusetts losing a seat in the House of Representatives.

Is this really how we want to live?

Edward Glaeser Boston Globe January 23, 2011

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