Posted on December 30, 2008
BOSTON, Dec. 30, 2008 --- A new report released by MHP finds that the three most important factors in determining metro area employment growth are how much housing the region builds, its success in attracting new residents, and the extent to which it is dependent on manufacturing employment.
Click here for the report. Click here for a spreadsheet featuring all report data.
“This report is helpful in understanding why some cities grow more than others and it could serve as a useful guide for policy and business leaders as they figure out how to grow the Massachusetts economy,” said Clark Ziegler, the MHP’s executive director.
Entitled “Recipe for Growth”, the report analyzed job growth in over 200 metropolitan areas from 2000-2006 to determine why greater Boston and Massachusetts lagged behind the rest of the nation in job growth. The report found that Massachusetts could have added thousands of more jobs during the first part of this decade if its restrictive zoning practices had not sharply limited housing construction in the 1990s.
For the Boston Globe's story on this report, click here.
Written by Edward Moscovitch, an economist and former state budget director, the report found that the fastest growing cities were the ones that built more housing, regardless of price, and that job growth was much weaker in places with large-lot zoning. Finally, the report found that state and local tax burdens had little to do with growth - and that most regions that had higher employment growth than Metro Boston had higher tax burdens.
Myths about the Massachusetts economy
“It’s time to drop the ideological myths that high taxes and high home prices are the chief reasons why our economy is not growing and people are leaving the state,” said Moscovitch. “Greater Boston in fact does well in retaining the educated workers who already live here, but we lag far behind other regions – even some with high housing costs similar to our own – in attracting new workers. To keep up with other regions which, like Boston, rely heavily on highly educated workers, we need to build more housing of all types and make the region a more attractive place to live.”
Moscovitch analyzed a broad range of data in 242 metropolitan areas, ranging from New York City (population 21 million) to Muncie, Indiana (100,000). All told these metro areas account for 227 million people – over two-thirds of the U.S. population. For this study, Boston’s metro area includes Worcester, and communities south to Plymouth and north to the New Hampshire border. The report also included the Springfield-Chicopee-Holyoke area.
Data considered in the report included employment by industry and occupation; population by age and educational attainment; in- and out-migration; wage and tax rates; housing prices and construction during the 1990s; climate, higher education capacity and self-employment.
Using regression analysis to sort the relative importance of all these factors, Moscovitch found that the most predictive indicator of slow growth from 2000 to 2006 was a high reliance on manufacturing jobs. Based on its manufacturing sector alone, Metro Boston should have grown by 0.8 percent a year, but instead it lost jobs at an annual rate of 0.5 percent. Like Seattle, Portland, Austin and Raleigh, Boston falls in the mid-range in terms of its manufacturing (10 to 15 percent of total employment). But other cities with similar job profiles built more housing during the 1990s and enjoyed higher employment growth in the years since 2000. Had Boston built has many new homes in Seattle (adjusting for total metro area size), it would’ve added an additional 171,000 jobs from 2000 to 2006.
High prices not a factor in slowing growth
Moscovitch’s analysis also found that high housing prices were not a key factor in slowing growth. Many fast-growing cities with highly-educated work-forces, including Los Angeles, San Diego, and Seattle, had housing prices close to those in theB oston area. But because these metro areas built more housing, they were able to enjoy greater job growth. Housing prices in these cities are high because of the pressure on demand from a growing population. In Boston, where population growth is slow, home prices are high because of zoning and land-use policies that restrict supply.
The report found that Metro Boston had the greatest incidence of large-lot zoning of any of the large metropolitan areas, finding that almost 30 percent of the new homes from 1995 to 2000 were built on one acre or more. In comparison, Atlanta, which is the same size as Boston, built only 18 percent of its new homes on large lots and enjoyed positive job growth. Surprisingly, the study found that western and southern cities built housing at far greater densities than Metro Boston, despite having more land available to build on (only 7.7 percent of new homes in San Diego and 12.2 percent in Seattle were built on lots of an acre or more).
The report also discouraged the notion that high tax rates mean slow economic growth. Moscovitch found that cities that scored the biggest employment gains – Phoenix, Orlando and Las Vegas – all have higher tax burdens than metro Boston and built more housing. Another striking finding is that cities with low tax burdens similar to Boston – Houston, Atlanta and Dallas – built more housing and did not lose employment share, as Boston did.
So how much housing do we actually need to grow?
The Massachusetts Housing Partnership (MHP) commissioned the analysis as a first phase of a year-long effort to study and determine just how much housing Massachusetts needs to grow its economy and remain competitive with the rest of the U.S.
“We’ve done things like measure a student’s performance with MCAS tests but there’s nothing coherent to measure how we’re doing on housing and what we need to do remain competitive with the rest of the U.S.,” said Clark Ziegler, MHP’s executive director.
Funded by a grant from State Street Bank, MHP will commission research on three aspects of the housing question:
- How much do we need?
- Measure the public benefits?
- Develop a strategy based on national research of growth and land-use practices.
“What we want to do through research is build a statewide consensus on how much housing we need to grow, set growth benchmarks for communities and then provide the tools to help make it happen,” said Ziegler. “Ed Moscovitch’s study gives us a clearer picture of what the relationship is between housing and economic growth.
For a printed copy of this report, email your name and address to MHP.