June 28, 2023
Massachusetts 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, according to a report released by the Home Builders & Remodelers Association of Massachusetts.
During this 18-month study, researchers 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 state’s recently passed “net zero” residential building code. They concluded that, without additional incentives or financial supports, the more stringent building requirements will likely push homeownership out of reach for many more families in Massachusetts.
The report 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, continued supply chain issues, and a lack of public awareness of the economic benefits of energy-efficient homes. For example, the Mass Save program provides incentives for certain types of energy-efficient, all-electric homes, but it is unclear how long the incentives will last and whether developers can count on them.
The researchers found there is urgency to lower carbon emissions in new residential construction in order to advance the state’s climate goals. 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 report notes there are opportunities for advances on both fronts.
The research team 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 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. 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 state 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. This could create a durable incentive that spurs production of more energy-efficient and affordable housing.
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.
A copy of the report, “Public Policy for Net Zero Homes and Affordability,” can be found here.