Below is a preview of the article that Sandy Carroll submitted and will appear in the Berkshire Business Journal. Thanks to MAR staff, especially Jonny for his assistance on laying out a clear path forward and also recognizing the inherent problems with transfer taxes being wielded as possible solutions.
The Berkshires are an incredible place to live. Our towns offer scenic beauty, a thriving cultural and artistic community, and historically at least, lower housing costs than eastern Massachusetts. However, more recently we’ve become a microcosm of a statewide challenge – we need more housing. With the assistance of Jonathan Schreiber of the Massachusites Association of REALTORS, we have access to very interesting local market data research.
Most of our towns have essentially stopped development for a decade or more. Great Barrington offers one example, 70% of the town’s housing units were built before 1970. According to its 2020 Housing Needs Assessment, zero units were built in the decade from 2010 to 2020. In Stockbridge, 80% of the homes were built before 1980, with only 40 units added from 2010-2021. Lenox lost homes, decreasing from 3,017 housing units in 2017 to 2,473 units in 2020. It’s no wonder given these statistics that housing prices have increased and vacancy rates are minimal, especially with the proliferation of remote work giving people more flexibility in where they live.
As a result, the region is facing a major challenge – the desperate need to increase its housing stock. More homes will help lower prices and stabilize rents. More homes will also improve energy efficiency and climate resiliency as new homes are built to significantly higher standards than they were 40-50 years ago when our region last saw any sizable housing growth.
But how can we get there? It’s tempting to immediately turn to funding, and we’re seeing more conversations about taxing homes to help fund a housing surge. But that recommendation is rife with problems. Transfer taxes, even those with a carve out for lower value homes, increase housing costs.
They apply downward pressure on homes priced below the threshold as every $1,000 increase in cost prices out 1,727 Massachusetts residents. The impacts go beyond hurting homeowners or homebuyers. Increased costs are passed along to renters who are often least able to afford them. Transfer taxes are also exclusionary. They make it harder for new residents to enter a community, slowing the gradual progress we’ve made towards diversity and inclusivity.
Rather than increasing taxes, we need to apply diligent effort to reform our regulatory structure to become a more welcoming housing market. Runaway regulatory costs have made Massachusetts one of the least affordable states by drastically inflating the cost of land, which currently stands at over $102,000 per acre, four times the average in the contiguous 48 states. One simple way our communities can identify these cost saving reforms is through the use of a housing production plan, a state-approved “proactive strategy for planning and developing affordable housing.” As of 2021, 174 communities had housing production plans, but only one was in the Berkshires (Lenox). These plans create a strategy to enable communities to meet their affordable housing needs. Most include zoning objectives that are rarely adopted. For example, the 2017-2021 Lenox plan calls for incentivizing affordable housing by establishing realistic density standards for multifamily dwellings and townhouses which are yet to be adopted.
We also need to maximize our use of existing resources to fund housing. The Community Preservation Act (CPA) is a powerful tool, generating $3 billion in municipal revenues all from homeowners who agree to pay an additional surcharge on their property taxes. The state provides matching funds derived from deeds excise fees also paid by homeowners. Yet, despite the acknowledged housing crisis facing the region and the source of funds from homeowners, only 34% of CPA funds in Great Barrington, Lenox, Pittsfield, Stockbridge and Williamstown (North Adams has not adopted the CPA and Lee adopted it in 2020 but has not spent any CPA funds yet) have been devoted to housing. Across the region 43% of funds have been used on historic preservation.
There are also several glaring holes. Lee, Williamstown, and Pittsfield all adopted surcharges significantly below the 3% maximum. Setting aside potential revenues that could have been had over decades due to recent adoption, Lee ($142,109), Pittsfield ($5,679,694), and Williamstown ($2,886,266) have foregone over $8.7 million in CPA funding by adopting surcharges below the 3% cap. Municipalities in the area have also historically struggled to comply with an annual 10% housing spending requirement, with several reporting multiple years without any CPA funds spent on housing.
While taxes may seem like a quick fix, the real answer is, it took us decades to dig our housing deficit hole, and it will take time to build ourselves out. Thankfully, we have incredible resources already available. We can study our local challenges through housing production plans and ease zoning restrictions to incentivize development. We can supplement development funding and individual’s housing budgets through more effective use of existing programs such as the CPA. It will take time and a diligent commitment to reform, but we have the power to do it. We just need to shift our mindset and embrace more homes, including more density and multifamily housing, which will help us achieve the diverse and inclusive communities we all want.