Indicator 21: Housing Affordability
How Does Massachusetts Perform?
The percentage of Massachusetts’ renters qualifying as “burdened” (spending more than 30% of their income on housing) by housing costs decreased by 1.3 percentage points from 2015 to 2016, falling to 46.8%. Massachusetts ranks 11th in the U.S. for burdened renters and 6th in the LTS after California, Florida, New York, New Jersey, and Connecticut. Massachusetts and the U.S. as a whole have seen little change in these figures over the last five years. In every LTS, over 40% of renters spend more than 30% of their income on housing. The percentage of burdened homeowners in Massachusetts decreased to 29.8% from 32.5% between 2015 and 2016, U.S. homeowners have also become less burdened in the past six years, with 28.1% of homeowners spending more than 30% of their income on housing, down from 37.8% in 2011.
Overall, homeowners are significantly less likely to be burdened by housing costs than renters. Homeowners face differing rates of housing cost burden with over 35% of homeowners in California and New Jersey spending more than 30% of their income on housing, and fewer than 25% doing so in Wisconsin, Ohio and Minnesota. On the surface, the situation seems to be improving in Massachusetts, yet home prices and rents are increasing. Demand for more housing is, however, having a positive effect on the Commonwealth’s economic growth and driving a boom in construction jobs. Around 7,500 construction jobs were created from 2015 to 2016 in Massachusetts, a 5.0% increase in construction employment.
Rising housing costs could potentially be a setback for the Massachusetts economy in the future as the lack of affordable housing and increasing commuting times may result in job losses to regions with more affordable housing stock. Over the last decade, housing prices have risen dramatically in Massachusetts, which currently ranks highest on the Federal Housing Finance Authority Housing Price Index (HPI) among the LTS. While HPI in the state has just recovered to mid-2000s levels, it has risen by 32.8% from Q4 2012 (when the market bottomed out) to Q2 2017. California has experienced an especially sharp rise in prices (58.9%) within the same time period. Florida (54.7%) and Texas (37.3%) also experienced relatively fast increases in the HPI, although both from much lower starting points.