BOSTON — Healey administration officials urged lawmakers to approve the governor’s affordable housing plan, arguing the $4.1 billion borrowing bill would spur the construction of thousands of homes and generate tens of billions of dollars in economic activity.
The Affordable Homes Act plan, filed by Gov. Maura Healey in October, includes a range of tax breaks, changes to state laws and borrowing to help spur construction of new housing.
Lt. Gov. Kim Driscoll said passage of the bill is an “economic imperative” for Massachusetts as it struggles to build more homes to fill a critical shortage of market-rate and affordable housing.
“The bottom line is we can’t wait,” Driscoll, Salem’s former mayor, told members of the Legislature’s Committee on Bonding, Capitol Expenditures and State Assets during a hearing Tuesday on the bond bill. “We have to act with urgency and scale. Our residents, our communities and our employers are depending on it.”
Housing Secretary Ed Augustus said the plan, if approved by the Legislature, would have a “catalytic impact” on the construction of housing in the Bay State while making it more competitive and attractive to new families and businesses.
“We need a Herculean response to our housing crisis,” he told the panel. “Housing builds a stronger economy, housing generates good jobs and housing strengthens competitiveness.”
A key plank of Healey’s affordable housing plan would create tax credits to spur the development of homes over the next five years for those with low and moderate incomes. It also calls for expanding the state’s community investment tax credit, which provides funding to community development corporations.
The plan would allow communities to add a transfer fee up to 2% to property tax bills. If a community votes to accept the tax, it would exempt the first $1 million on a home sale.
Healey’s plan also calls for giving single-family homeowners the right to build so-called “accessory dwelling units” of less than 900 square feet on their lots.
Economic impact
Affordable housing advocates called on lawmakers to approve Healey’s plan, arguing that the state needs to take aggressive steps to boost the amount of housing in the state.
“It’s really not an exaggeration to say that we’re facing the greatest housing crisis in the commonwealth’s history,” said Clark Ziegler, executive director of the Massachusetts Housing Partnership, a quasi-public agency that works with banks to finance affordable housing projects.
“We’re consistently ranked as the most expensive place in the U.S. to live, our chronic housing shortage goes back decades and when the final data is tallied, it looks like last year we’ll see a roughly 30% reduction in new housing starts over 2022,” Ziegler told the panel. “It’s a really serious problem.”
A report released by the Healey administration said passage of Healey’s plan, when combined with two recently reauthorized programs from the tax cut package, could create $24.8 billion in total economic impact over five years.
The study, conducted by the University of Massachusetts Donahue Institute, estimated the act could generate 29,700 jobs in the development, construction, finance and associated industries.
Economic activity from the Affordable Homes Act would also allow the state to recoup $750 million in tax revenue over five years, the report’s authors said.
But the transfer tax plan has prompted pushback from the real estate industry, which says the so-called transfer tax would compound the problem as housing prices and mortgage rates continue to rise, pricing people out of the market.
Healey and legislative leaders are trying to spur more home building amid the shrinking inventory that is edging first-time buyers out of the market. The prolonged housing crunch is affecting the state’s economic growth, making it much harder to attract new families and companies, they say.
A $1 billion tax relief package signed by Healey in October included reauthorization of a low-income tax credit program and housing development incentive program, also aimed at spurring housing production.
Healey has filed a bond bill for capital projects, which needs approval from the Legislature, that includes $1.6 billion to repair and modernize state-run public housing units.
The state faces a pressing shortage of affordable housing, with more than 184,000 people on the waiting list for state public housing units.
Housing prices
Amid the shortages, housing costs are continuing to increase to new records in the state as home sales remain largely flat.
The latest monthly report from The Warren Group found the median price for a home in the state increased by 10% to $548,250 in February over the same month last year, setting a new monthly record. Meanwhile, the number of closed sales on single-family homes remained largely unchanged from the same month last year, according the report.
During the hearing Tuesday, several lawmakers raised concerns that Healey’s plan does not go big enough on financial investments to ensure there is enough housing to meet demand.
“One of my fears is that we are creating generations that perhaps will never have an opportunity for home ownership,” state Sen. Pavel Payano, D-Lawrence, a member of the bonding committee, said in remarks. “I know we are doing some investments here, but I wonder if that is enough.”
Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group’s newspapers and websites. Email him at cwade@cnhinews.com