A demographic revolution is coming in housing
By Barry Bluestone | Boston.com | December 20, 2012
As we enter 2013, the latest news on the housing front is encouraging. This past year sales of single-family homes in Greater Boston rebounded for the first time in seven years. Condo sales are up as well, nearly 30 percent over 2011 levels. And with mortgage rates remaining at historic lows, this coming year could see more of the same.
But the big story in housing is the dawning of a seismic shift in the region’s population and with it, a dramatic change in what kinds of housing people will want and where they are going to want it. It’s all about the greying of the baby-boom generation and the coming of age of the “millenials.”
Between 2010 and 2020, the population of Massachusetts is projected to grow by roughly 200,000 or about 3.1 percent. But as the figure below demonstrates, the age structure of the population is going to change dramatically. The number of young “prime age” individuals, aged 25-34, is expected to grow by about 91,000. These are the millenials who were 15 to 24 years old in 2010.
The number of older prime age population – those aged 35-54 – will actually decline by a whopping 220,000. These folks represent the aging of the “baby bust” generation.
The fastest growth in the population will occur among us geezers – those of us in the huge baby boom generation born between 1946 and 1964. There will be over 250,000 more households headed by someone 65 or older.
This demographic shift will affect housing demand dramatically in Massachusetts and especially Greater Boston. Many of us older folks will wish to “age in place” where we have lived for decades but move from the suburban three and four bedroom homes where we raised our families to apartment and condo developments that are right-sized for us, allow us to use our cars less to go to Starbucks or the grocery store, and have plenty of amenities – especially elevators.
What we know about the millenials is that they are starting families later, want to live near work, hate to commute, and love to live in places where they can easily walk or bike to the same Starbucks we like to visit. We also know they have suffered from this Great Recession more than anyone else. Their incomes have fallen, their college debt has soared, they tend to be geographically mobile, and many will have trouble qualifying for mortgages. Rental housing will appeal to them while others will have the dough and the desire to purchase a condo. Few are going to opt for the suburban home on a large lot.
Those “disappearing” from the scene are older prime age families aged 35-54 who have historically chosen to raise their children in large-lot single-family homes in the suburbs and have been willing to sit in their cars for hours on Rte 3, Rte 2, the Pike, and I-93 commuting back and forth to work in order to do so. (As they sit in that traffic with a good deal of time to contemplate, many are coming to the unsettling realization that each year they are spending a larger proportion of the time they have left on earth in traffic jams – and wondering whether this is the best use of their remaining time!)
So what does this mean for housing in the Commonwealth and especially in Greater Boston between now and 2020?
The market supply of existing traditional suburban single family homes is going to expand as baby-boomers sell these units and move into smaller places. At the same time, market demand for larger homes is going to weaken as the number of older prime age households — those who have opted for this housing in the past — declines. That means traditional suburban home prices are going to continue to stagnate. At current rates, they may not return to their 2005 peak until sometime early in the 2030s.
Simultaneously, the demand for multifamily apartments and condos is going to soar as young millenials at one end of the age spectrum and aging baby boomers at the other both search for smaller housing units in village and town centers and some in the central city where there are close-by amenities and access to mass transit. Unless we build a lot more of this type of housing, condo prices and rents are going to skyrocket.
And here is the rub. Over the years, many of the suburban communities around Boston have enacted zoning that severely restricts the ability of developers to construct multifamily housing in village and town centers. Some of this stems from the fear that people “unlike” those living currently in their communities will move in to take advantage of more affordable housing in these developments.
But the demographic shift means that these communities are zoning not against “those” people, but against their own residents, many of whom have lived in their communities for decades — the community’s aging baby boomers and their millennial kids.
Unless these communities are ready to jettison their long-term residents, they need to get on with the task of rezoning sections of their communities for smart growth, transit-oriented, village and town centered, multifamily housing. If they are wise, they will use the state’s Chapter 40R program which will not only encourage developers to construct precisely this type of housing, but the communities themselves can get an extra dollop of local aid in the bargain which they can use to help keep their municipalities from going bankrupt.