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Seeking Balance in Housing Affordability and Climate Change

A new report from the Home Builders & Remodelers Association of Massachusetts (HBRAMA), Public Policy for Net Zero Homes and Affordability, centered on the Commonwealth of Massachusetts has found that the Commonwealth must take bolder steps to solve the housing affordability crisis, while simultaneously counteracting climate change, including new policies to rapidly boost construction of more energy-efficient, planet-friendly homes without pricing out the next generation of homebuyers.

During the 18-month study, researchers Payam Bakhshi, John Cribbs, Afshin Pourmokhtarian, Justin Steil, Zhengzhen Tan, and Siqi Zheng from the MIT Center for Real Estate and Wentworth Institute of Technology analyzed the confluence of the housing and climate crises on building costs and, consequently, housing affordability, along with the potential effects of the recently passed “net zero” residential building code in Massachusetts. They concluded that, without additional incentives or financial support, the more stringent building requirements will likely push homeownership out of reach for many more families in Massachusetts.

Public Policy for Net Zero Homes and Affordability estimates that the specialized stretch energy code is likely to increase the cost of home construction by roughly 1.8% to 3.8%–adding approximately $10,000 to $23,000 to the median cost of a single-family home, and putting homeownership out of reach for between 15,000 and 33,000 households. The median price of a single-family home in Massachusetts soared to $553,500 as of April. The researchers also estimated a 2.4% rise in construction costs for large multifamily buildings.

“When it comes to housing policy, we must balance the scales in these two vital areas–affordability and climate change. Our policymakers must avoid tilting too far in one direction to the detriment of the other,” said Jeffrey Brem, HBRAMA’s President. “Legislative and regulatory efforts at the state and local levels should be geared toward accelerating the construction of housing that is more energy-efficient but also more equitable, more attainable and more affordable to a larger pool of Massachusetts residents.”

In a survey of Massachusetts homebuilders, the researchers identified multiple obstacles hampering the construction of more affordable, energy-efficient housing, including restrictive land use rules, permitting delays, lack of clarity on financial incentives, a shortage of workers skilled in green home building, supply chain issues, and a lack of public awareness of the economic benefits of energy-efficient homes.

The researchers found there is urgency to lower carbon emissions in new residential construction in order to advance climate goals for the Commonwealth. At the same time, there is urgency to increase the affordability of housing, particularly for people with low- or moderate-incomes, in order to maintain economic growth.

The research team of Bakhshi, Cribbs, Pourmokhtarian, Steil, Tan, and Zheng identified a series of policy tools that could facilitate the production of more energy-efficient and affordable housing, including:

  • Implementing land use changes that reduce carbon emissions and increase affordability: Ironically, many of the municipalities advocating for the more stringent energy code for homebuilding have extensive large-lot, single-family land use regulations. Among other proposals, the Legislature could require that adoption of the specialized stretch energy code be combined with land use allowances such as smaller minimum lot and unit sizes, smaller setbacks, taller height limits, greater density, and more multifamily zoning.
  • Streamlining permitting and reducing utility connection delays: One option suggested by the report authors would be to waive special permit requirements for multifamily projects that meet or exceed the local opt-in specialized stretch code that requires “net zero” residential building standards.
  • Restructuring financial incentives and tax credits: Builders and homeowners alike would benefit from a streamlined application process for climate-related incentives that currently come through multiple agencies and programs.
  • Increasing technical assistance for green building: The report states that smaller builders, an important part of the housing construction industry, are limited by a lack of training and technical assistance in meeting new “net zero” requirements. The Commonwealth could invest further in workforce training and education focused on energy-efficient building techniques such as “passive house” construction that dramatically reduces energy use.
  • Expanding financing sources: Several states have created “green banks” that leverage public funding to attract private investment in clean energy projects. Massachusetts could establish its own green bank to support housing developments that are energy-efficient and affordable, while reducing the risk and equity needed for them to get off the ground.
  • Supporting low-income renters: These renters may need additional support from the state’s home energy assistance program as large multifamily buildings shift from centralized fossil-fuel burning furnaces to all-electric heating sources in individual units.
  • Creating new tax classifications and exemptions: The Massachusetts Department of Revenue could establish a new property tax classification or a new exemption for highly energy-efficient housing. The authors of the report feel this could create a durable incentive that spurs production of more energy-efficient and affordable housing.

“The study gives policymakers a blueprint for enabling the construction of new housing that is both affordable and sustainable, and swift action is needed to meet the moment and make real progress toward addressing twin existential crises facing our state,” said William H. Grogan, President of the Planning Office for Urban Affairs at the Archdiocese of Boston. “New tools can bridge a gap that too often makes constructing greener, affordable buildings impossible to finance.”

The HBRAMA study was produced by a cross-disciplinary, collaborative research team. Wentworth researchers included Associate Professors of Construction Management Bakhshi, Pourmokhtarian and Cribbs, who is also an Associate Dean. MIT researchers included Steil, Associate Professor of Law and Urban Planning; Zheng, STL Champion of Urban and Real Estate Sustainability at the MIT Center for Real Estate; and Tan, who serves as Executive Director of the MIT Sustainable Urbanization Lab. Amy Dain, a Public Policy Consultant with Dain Research in Newton, Massachusetts also advised on the project.

The study was supported by a diverse array of organizations including the Air Conditioning, Heating and Refrigeration Institute, the Building Industry Association of Washington, Cape Cod Five, Housing Assistance Corporation, Massachusetts Association of Realtors, National Association of Homebuilders, Planning Office for Urban Affairs at the Archdiocese of Boston, Propane Education and Research Council, Pulte Homes, Mitsubishi Electric, Sunpower and Toll Brothers.

Click here to access a copy of the report, Public Policy for Net Zero Homes and Affordability.

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.

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