Today’s New York Times featured an article that succinctly summarizes the daunting new challenges facing young people of modest means as they seek to enter the housing market. Here are some excerpts:
American home buyers are older, whiter and wealthier than at any time in recent memory, with first-time buyers accounting for the smallest share of the market in 41 years, the National Association of Realtors found in its annual profile of home buyers and sellers. White buyers accounted for 88 percent of home sales during the survey period, up from 82 percent during the same period a year earlier, reaching the highest level in 25 years, according to the association’s findings.
The new findings add weight to a hard truth that many young families have experienced as they struggle to save money to buy a home, competing in the most brutally competitive housing market in modern history: They have been elbowed out by buyers who have something they might never have — all cash.
The imbalance has made it nearly impossible for younger people with moderate and even middle incomes to own a home. The repercussions could be lasting, and deepen racial and generational disparities in homeownership. Without access to an investment that is usually a family’s biggest asset and a critical way to build generational wealth, a household may be shut out of one of the country’s best opportunities for upward mobility.
Homeownership offers another path to wealth, even if a home’s value remains flat: It provides the stability of a set, monthly mortgage payment that, as a person approaches retirement age, reduces to zero. While cash buyers have been insulated from the Federal Reserve’s moves to tamp down inflation by raising the federal funds rates, which indirectly impact home mortgages, first-time buyers are watching as what little buying power they had evaporates.
This is a feedback mechanism that can potentially supercharge wealth inequality in our economy,” said Austin Clemens, the director of economic measurement policy at the Washington Center for Equitable Growth, who studies housing inequities. “It’s hitting younger people, it’s hitting lower income people. And we also find that this is hitting Hispanic and Black households especially hard.”
Historically, first-time buyers made up about 40 percent of the market. But the share of first-time buyers fell to 26 percent during the 12-month survey period, from July 2021 through June 2022, plummeting to the lowest level since the trade association began tracking such data in 1981. The median age for first-time buyers was, at 36, the oldest it has ever been since 1981, as was the median age for repeat buyers, which rose to 59, during the survey period.
These hard realities are piling on top of a Newton market that has been trending upscale for decades. When I took an interest in housing a dozen years ago, I had a few clear goals in mind: to preserve or expand as much open space and parkland as possible; to protect the diminishing stock of affordable homes, usually modest Capes and ranch houses built after World War 2; and to limit the size of big developments while raising the percentage of affordable units in those developments. The teardown movement was gaining momentum, as was the influx of developers with big dreams and a host of requests for waivers of city ordinances in the name of “affordable housing.”
People like me, outgunned by realtors and developers, had no illusion we could halt the trends. We merely hoped to slow things down, to keep those developers honest, and to preserve what we could of the Garden City. We viewed socioeconomic, racial, ethnic, and generational diversity as a virtue . We lamented the ongoing gentrification of such mixed-income villages as Nonantum, Thompsonville, and Upper Falls. Even a dozen years ago, we knew we were fighting an uphill struggle.
Minor victories and major setbacks came and went.The effort to halt tear-downs until Newton better grasped their full consequence failed utterly in the old Board of Aldermen. But several ill-conceived developments, in the face of determined opposition, never came to pass, and others like Northland and Austin Street were modified in hopeful ways, including larger numbers of affordable units. Note that most of the proposed developments do not offer ownership options or condominiums; rental units are now the coin of the realm. As a consequence, in line with the Times article, even families moving into “affordable” units forfeit the possibility of accumulating wealth and growing their assets as market prices rise.
Sadly, almost all the vacant lots of Newton have been developed, usually becoming cookie-cutter homes either in the nouveau-barn style or Saint Tropez glass palace. Happily, in recent years Newton has expanded its green space, including the purchase of Webster Woods and the creation of the Upper Falls Greenway. Public-private partnerships have led to greater protection of natural environments like Cold Spring and Nahantan Park, Crystal Lake, and Bullough’s and Dolan’s Pond. Regrettably, no Landbank-style nonprofit has emerged to scoop up the remaining wooded lots and turn them into parks or protected forest habitat. Oh, well.
Those purchasing McMansions must be affluent couples, probably two working adults employed in finance, the professions, or the computer and biotech worlds. I wonder if their demographics match the Times paradigm. Nothing sinful here: we live in a capitalist system, and our new residents have played the game fairly and accumulated the assets to purchase a home or rent a luxury apartment in our community. In the process, however, my idealism has faded as most of my goals have failed to materialize. When it comes to Newton’s changing demographics, I have become a realist, accepting that the Garden City, while remaining a wonderful place to live, will become ever wealthier and elite, and less diverse than ever.
I’m afraid you’re right Bob.
Sadly, I agree. I moved here 27 years ago as a single mom. There were four places anywhere near what I could afford. There’s no way I could have managed had Newton’s housing situation been the way it is today. One of the things that attracted me to Newton was the diversity and it saddens me to see it disappearing.
I agree with your overall sentiment, though isn’t Newton getting increasingly more racially diverse if you look at the census etc?
@MMQC – there are multiple types of diversity. I very much welcome increased racial and ethnic diversity. I very much mourn the loss of socio-economic diversity.
@ Jerry, @ Bob. Wealthier and less diverse? This is simply false. Sorry…
% White: Newton, 76%, MA 79.8%
% Asian: Newton 15.2%, MA 7.5%
% Two or more races: Newton 4%, MA 2.7%
% Foreign born: Newton 21.3%, MA 16.9%
% speaking foreign language at home: Netwon 25.5%, MA 23.9%
https://www.census.gov/quickfacts/fact/table/MA,newtoncitymassachusetts/PST045221
Newton is more diverse than the state overall. This is an undeniable fact. Diversity means “the practice or quality of including or involving people from a range of different social and ethnic backgrounds and of different genders, sexual orientations, etc.” and we sure fit that bill. Why deny facts?
The census data is distributed in various pockets and there is no one place where you can run various reports, but if you look at the white population percentage by years, it reveals that Newton was:
94.6% White in 1980
88.1% White in 2000
79.6% White in 2010
73.9% White in 2015
73.5% White in 2020
It will be interesting to see how this changes with the building of the many housing options. I live in what I consider to be the most diverse village in Newton, which is Newtonville and surrounding villages. I cannot provide facts and stats to back this up, but in the 16 years I have lived here the neighborhood appears is far more diverse today than in the early 2000s.
“Note that most of the proposed developments do not offer ownership options or condominiums; rental units are now the coin of the realm. As a consequence, in line with the Times article, even families moving into “affordable” units forfeit the possibility of accumulating wealth and growing their assets as market prices rise.”
Especially true of renters whose rent is based on Social Security. At the bottom rung of the “affordable” ladder, those Newton residents will never reap the benefits of all the rent they’ve paid into the pot – which is just as significant to them as to the wealthy. They rarely have the possibility of accumulating wealth…in dollars, that is. So they perfect accumulating wealth in love and friendships instead.
Residents that move into rental units *do* have an opportunity to accumulate wealth. They can invest the money that would have gone into a 20% down payment and ongoing mortgage payments into whatever investment vehicle they choose.
That may or may not accumulate more money, but that’s just one quality of investment. For example, almost any other investment is more liquid than holding a mortgage. Buying and selling a home have their own significant costs. Upkeep of property is a burden and has potentially unbounded costs.
Our houses are good investments in part because policies such as home interest deductions distort financial incentives, not because homes are inherently good investments. They are certainly not diversified. We’ve done it this way in part because of a belief that home ownership brings social stability, but at the cost of forcing some people into a more illiquid form of investment that limits their financial flexibility and geographic mobility. And the risks are real: if your investment fails, you can lose your money and your home at the same time.
And I’ve repeated this several times lately, but it is easier for municipalities to create (or compel) affordable rental units in perpetuity than it is to create permanently affordable ownership. Without deed restrictions, sale prices become market rate after the first owner, while rents can be capped from one occupant to the next.
I’m not saying “rental good, buying bad”. I’m saying that we should look at the choice when clear eyes – for ourselves, for others, and for the city – and recognize it’s not a “one size fits all” choice.
Community land trusts (CLTs) represent a way to maintain affordable ownership of housing over time. A CLT sells homes (with the sort of deed restrictions that Mike Halle referred to) while retaining ownership of the underlying land, leasing the land to the homeowners via long-term leases (typically 99 years). Homeowners can make modest gains when they sell, and the land and homes stay out of the speculative market.
Yes Bruce, and also entities known as limited equity co-ops or cooperative housing.
There seems to be some in Newton, but executing one or two at large scale would actually start to change the game in affordable housing.
They are stable, sustainable, and scalable housing institutions that can actually defy the otherwise inevitable progression to unaffordability.
Just curious, why does the housing problem have to be solved in Newton? We live in a free market. If people with higher incomes choose to live in newton and bid up the prices of homes, thats a problem why?
There is no inherent right to live in any community. You cannot choose where you get to live and dictate the price you pay to live there. If you cannot afford Newton, live in Watertown or Dedham or one of hundreds of other communities, some of which border Newton.
The idea that we have some responsibility to build affordable housing is nonsense. The is a free market, capitalist economy. If you want communism, Havana is lovely this time of year. Im joking, but seriously, we dont have to solve all the worlds problems within newton. why cant people accept that demand to live here has driven up prices and it is what it is?!
Mike and Bruce:
Not to be negative, but CLTs are very difficult to make work in Newton’s current real estate environment. Raw land is close to non-existent, and older homes typically go for market price, which is based on the land value, not the home value in Newton. and with land and construction values being so high, there is little room for the affordable ownership absent a great deal of density. CLTs still have to make the numbers work. Absent someone else acquiring the land for the CLT, the model won’t work in Newton in my view.
30 years ago CLTs would have been an interesting model for Newton. They still work in neighborhoods rapidly gentrifying with low cost land available. And while it is possible the right mix of circumstances exist so that one or two could be created in Newton, I think as a solution it is impossible to scale.
Well, there’s a land new opportunity on Dudley Rd.
This is simple. To make more affordable housing, you need a lot. A lot of modest residences. A lot. To bring pricing down and make a dent. Again – A LOT!
But there will always be people complaining about one aspect or another. Needs to be done ‘right’ – needs to take into account. X, Y and Z — a developer is evil and shouldn’t be allowed to make much money or to be trusted – what about traffic considerations – how will schools be impacted – what about parking – need better ratio of green space …. And on and on and on.
I get a sad kick out of all the good intentions bogged down in ridiculous red tape. The result is that little happens and no progress to goal is made.
If folks really want to have way more affordable housing in Newton make it much easier to build more affordable housing!!! But … but … but … what about ______
To be blunt – much of what you fought for (especially limiting the size of large developments and ending teardowns) went directly against your stated cause of making housing more affordable and Newton a more accessible city.
How can tearing down modest Capes and ranch houses and replacing them with mega-houses and McMansions make housing more affordable? As for large developments, the goal was and is to make as many of the units affordable as possible. Otherwise, the situation will resemble Boston in that all the rentals coming online, other than those subsidized by government, are luxury units.
Newton city government is loathe to get involved in building and supervising affordable housing (the Armory, God willing, may yet be an exception). State and local governments also want out. If we must rely on private developers, let’s get as many affordable units out of them as possible.
Finally, if you argue that greater numbers of rental units and houses will someday lead to lower rents and housing prices (the Reibman Principle), well, from your lips to God’s ears. I will believe it when I see it. All the new houses and rebuilds/McMansions have price tags in the millions, and rents continue to rise.
Who pays for the “affordable” units to be affordable, given the high costs of construction? The remaining non-affordable units, which now have to become more expensive for the project to be feasible. So if you’re not lucky enough to get an affordable unit, the remaining housing has gotten more expensive and less accessible. And if you try to limit the size of development, then you can’t have as many non-affordable units to subsidize the affordable units, so either there’s fewer affordable units now, or the project is dead. 100% affordable of 0 is 0 affordable units, and now those people that could have lived there won’t live in Newton.
For single family homes – the value of the home in Newton comes primarily from the land (the whole area is a desirable location given its proximity to Boston), and teardown ordinances do nothing about land value. A teardown moratorium won’t stop the tiniest 251sq ft home from going for $450K ( https://village14.com/2021/09/30/newtons-smallest-house-for-sale/#axzz7kC6x6UrI ). A teardown moratorium won’t bring back affordable starter homes because it’s not the structure that’s expensive but the land underneath it. A teardown moratorium won’t stop luxury renovations that keeps the structure intact while moving the home significantly more upscale and destroying affordability. It’s a total red herring. A teardown moratorium will, however, stop single family homes from being turned into multifamily homes, an inherently more affordable form of housing that lets more families live on the same land for a lower price than in a single family home.
Why is that people lament about Newton’s lack of diversity… while the Asian population has been steadily on the rise? Do we not count? Have to admit, it’s more than a bit dissapointing, continues the US societal playbook of minimizing Asians.
I read Bob’s comments as lamenting the loss of economic diversity (i.e. not ethnic or racial diversity).
Bob Jampol: “Finally, if you argue that greater numbers of rental units and houses will someday lead to lower rents and housing prices (the Reibman Principle), well, from your lips to God’s ears. I will believe it when I see it.”
I call it the Trickle Down Theory of Affordability
The cheap money policy essential to unwinding the Barney Frank and Chris Dodd debacle (“The Financial Crisis of 2007-2008”, “Global Financial Crisis”, etc.) are far better explanations of Newton’s housing prices than anything done or not done locally … Zoom back and consider non-provincial drivers of what Bob laments .. see the “UBS Global Real Estate Bubble Index” downloadable on that page
Adam Smithian views of supply and demand have had little effect in a generation of asset price inflation caused by bad government policy
@Mary. It seems strange that you blame the housing bubble on Barney Frank & Chris Dodd. Maybe your memory is short but I clearly recall rising real estate prices since 1982 with occasional corrections along the way. The first one was caused by the Ronald Reagan S&L debacle and Republican led changes in tax laws in 1986. Unless interest rates remain in double digits for many years real estate values will climb again in a few years,
I think without Dodd Frank regulations there would have been more and more bad loans produced that would have created a much worse asset bubble.
JJ: Much is written on the topic by people there at the time, with the expertise to know, and with little motive for alt. narratives … for but one example …
and if you’ll allow .. Steve Bannon is familiar with someone who bet against the CDO market and earned billions in the collapse .. that person privately shared keying off of and relying on Barney and Chris leading wrongly.
The unrevised histories of money are not hidden.
Frank that is most classist and condescending thing I’ve ever heard. I’ve had multiple people in Newton tell me the same thing. Guess what? Housing like healthcare is a human rights issue. It’s great that some people can afford to buy a house of their desired size but having an unhoused population does nothing for anyone. Do you want people to contribute to your capitalistc society? Well if you don’t have a home address it’s really difficult to get a job.
And what about people who have disabilities? So people who can’t drive for instance and then need access to public transit. Sure you pay more living in a place like Newton but people have a right to be able to live in an area where they can actually get basic goods like groceries and be able to get to work. Not everyone has the ability to just move somewhere less dense.
People like you make Newton seem like this closed community where people don’t belong. And guess what? You let good people who actually want to invest in the community leave because they are perceived as less than because they are “poor.”
Thanks for airing your superiority complex. Good to know I’m added to your list of people who are less than even though I’ve been working multiple jobs in my adult life just to try and make rent.
J. raises some interesting points, especially the notion that those renting the luxury apartments in effect subsidize those in the affordable units. If those developments, however, were part of a public-private partnership, then more affordable units could be created. It’s part of the notion of the common good, in this case building housing for the rich and the poor. I know, some of you consider such thinking as socialism. I’d argue, in response, that pure capitalism has not created nor will it create the housing needed right now. As a taxpayer, I would not mind if my taxes contribute to more housing for moderate and low-income families.
As for creating two units out of a one-unit home, no objection from me! Grandparent additions and such are a great idea. Why not encourage extended families to live closer together? Humans at root are clannish, and many parents need family assistance for childcare. Believe me, I know.
Flooding the market with single-family homes will not happen; when it comes to meeting future housing needs, building developments seems the only way to solve the crisis. Though it saddens me to imagine the Garden City with lots of Northland-style high rises, what else can be done? The same goes for neighboring communities as the need for new housing is acute: another confession of a former idealist.