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"Understanding Affordability"

"Understanding Affordability"

MIT's Center for Real Estate helps tackle the high cost of homes
Technology Review, October 2005

If housing sales are an economic engine, then affordability is an issue of critical importance to American society. In 2005 that was certainly true in Massachusetts, where, according to Census Bureau figures, nearly 20,000 people – almost 3.5 percent of the city's population – had left the Boston area between April 2000 and July 2004. While there was no simple explanation for that migration, the cost of housing was surely a factor. According to the Massachusetts Association of Realtors, the median cost of a single-family home was nearly $400,000.

Jim’s story for the Massachusetts Institute of Technology's Technology Review magazine investigated research being done by the Housing Affordability Initiative (HAI), a program introduced by MIT’s Center for Real Estate (MIT/CRE) in 2004 to better understand issues contributing to the affordability problem.

The HAI’s first project was an eye-opener. The team investigated a NIMBY myth, often an impediment to building affordable housing – the fear that affordable and high-density housing projects would depress the value of nearby single-family dwellings. Studying the effects of seven suburban affordable-housing projects, an HAI team evaluated data from 36,000 property sales between 1982 and 2003. In 2005 the team revealed that, as MIT/CRE Prof. Henry Pollakowski put it, “In every case house price movements in the impact areas simply tracked those in nearby market areas.” In other words, the presence of affordable, multi-family housing had no effect whatsoever on the prices of nearby single-family homes.

Leading with the story of a Concord, Massachusetts, housing project that succeeded despite local resistance, Jim crafted an article that showcased cutting-edge research being done by the CRE. Posted on Technology Review’s website, the article generated a spirited dialogue between readers, who offered more than 20 comments.

Click on the link at left to read "Understanding Affordability" on the Technology Review website.

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