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Jon Gorey - Globe Correspondent
January 30, 2019 11:05 am
At the turn of the 20th century, many immigrants and working-class families claimed their share of the American dream in busy local labor centers like Lowell, Lynn, Brockton, and Fall River. A century later, already struggling in a postindustrial economy and downtrodden after decades of disinvestment, these cities were hit especially hard by the foreclosure crisis.
But now, housing markets in many of the Commonwealth’s “gateway cities’’ — so named for their onetime roles as portals to prosperity — appear to be roaring back to life, with home prices that are climbing far faster than in their surrounding counties and the state as a whole.
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For example, the median price of a single-family home increased 33 percent statewide from 2012 to 2018, according to the Massachusetts Association of Realtors, and 36 percent in Essex County. But prices in Lawrence almost doubled in that time period, rising 95 percent; Lynn saw an 85 percent increase. Likewise, Brockton house prices have risen 97 percent since 2012, compared with 38 percentin Plymouth County. And median condo prices soared more than 100 percent in seven gateway cities: Brockton, Chelsea, Fall River, Lawrence, Lynn, and New Bedford.
Those steep climbs emerged from deep troughs: Gateway cities suffered more than most in the last recession, and unemployment rates remained stubbornly high even after other communities bounced back. “They didn’t get the wind in their sails until late in the recovery,’’ said Benjamin Forman, research director at the nonprofit Massachusetts Institute for a New Commonwealth, known as MassINC.
That partly explains the rapid price growth, said Daniel McCue, senior research associate at Harvard’s Joint Center for Housing Studies, who’s seen the same phenomenon in other markets. “In high-cost, high-appreciation metros like Boston, we saw the bottom-tier prices rising faster and rebounding faster since they hit bottom around 2011 or 2012,’’ McCue said. “They got hit hardest, so they got pushed to the lowest levels, and now they’re sort of charging back.’’
We may also be seeing the fruit of seeds sown more than a decade ago, when a 2007 report by MassINC and the Brookings Institution studied the disparities between booming Boston and the state’s smaller outlying cities, and urged lawmakers not to leave the latter behind. State funding followed for an initial group of 11 gateway cities — later expanded to include 26 communities of between 35,000 and 250,000 residents with income and educational attainment levels below the state average. And after years of investments, many are increasingly attractive to home buyers.
Christian Doherty, broker and president of Doherty Properties in Lowell, said gateway cities like Lowell offer buyers a hard-to-replicate mix of walkable urban amenities, historic architecture, and affordability. “I think the reason they’re thriving is they offer the modern lifestyle buyers are seeking,’’ Doherty said. “People want access to all the shops and restaurants, the ability to go out to nightclubs, and Lowell is offering that. If people are looking for a really cool loft or an old mill mansion where one of the old mill owners lived, it offers that … at a third of the price in some cases.’’
Lowell, named one of the 10 hottest affordable neighborhoods in the country by real estate brokerage Redfin, is in some ways the poster city for the group — though Forman notes it had a healthy head start, thanks to the work and vision of civic leaders like the late senator Paul Tsongas. Doherty said state and local incentives to encourage the redevelopment of abandoned mills have really paid off for the city — and helped preserve a link to its past. “A lot of times [buyers] feel a connection to that history,’’ he said. “I have people come and say, ‘My grandmother or my great-grandmother worked in the mills.’ ’’
In Lynn, real estate broker Colleen Toner of Toner Real Estate isn’t all that surprised by the city’s rising prices and popularity. “I believe Lynn was undervalued to begin with, considering its proximity to the ocean, transportation, and Boston,’’ she said. The city’s abundant restaurants, downtown development, and active arts scene still come with an affordable price tag, Turner added, noting a two-bedroom condo in walking distance to Central Square that’s on the market for $200,000. “That’s less than renting.’’
Toner said Lynn has seen an influx of home buyers priced out of other areas north of Boston, including another gateway city: Everett, where the median-priced single-family has risen 86 percent since 2012, to $445,000, according to the Massachusetts Association of Realtors. The fact is, with housing prices around Boston spinning ever further out of reach, gateway cities are among the few places many buyers can still afford to buy a home. “The whole Boston metro area has seen a pretty steep rebound in house prices, and that’s made fewer and fewer areas affordable to the typical household or typical renter looking to buy,’’ McCue said.
Affordable as they are, these satellite cities hold even greater potential for equitable housing. “Gateway cities have a vital role to play as mixed-use urban centers,’’ Forman said. With downtowns that are zoned for dense housing and, in many cases, connected to Boston by existing rail lines, they’re primed for transit-oriented housing and workplaces if the state follows through on its plans to improve commuter rail service. “We could put tens of thousands of people either living or working in those places where we have great rail infrastructure,’’ he said. “Each of those rail lines is the equivalent of a 10-lane highway if you run regular service on it.’’
However, the picture isn’t entirely rosy. For one thing, gateway cities farther from Boston haven’t enjoyed the same housing buoyancy: Single-family prices in Pittsfield and Westfield are up only 16 percent and 19 percent, respectively, since 2012, the association found. And the number of gateway city residents living in census tracts with a poverty rate over 40 percent has roughly doubled since 2000, Forman said. “The only places in Massachusetts where we have poverty rates that high are a handful of gateway cities and Boston.’’
Rising home values overall betray a deepening inequality in our cities large and small: As prices climb throughout a community, low-income households have fewer options available to them, and end up clustered in the same few neighborhoods where it’s still cheap enough to live. “When everything’s getting more expensive and fewer and fewer places are affordable, we do see a growing concentration of poverty and low-income households,’’ McCue said.
“When you look at markets like Worcester that seem to be doing well on the surface, there are a lot of neighborhoods that appear to be under severe stress, and things have gotten worse, not better, there,’’ Forman said. Research has shown us the important role neighborhoods play in childhood development, Forman said, and cities need more resources to stabilize and safeguard these areas.
Another concern is whether those housing gains are going to residents or to outside investors. “In the past, those triple-deckers were owned by their occupants and they built a lot of wealth through them, and that’s part of the reason people had economic mobility from gateway cities,’’ Forman said. “But now they’re almost all investor owned.’’
In an all-too-common scenario, Forman said, an absentee landlord might squeeze as much rent as possible from a building without maintaining it, and then abandon the property once it’s in severe disrepair. Not only does that remove units from the city’s inventory, the blight threatens other nearby homes — whether from a fire that spreads to the house next door or by dragging down property values for neighboring owners.
Meanwhile, Forman said there are frustrating barriers to redeveloping such blighted properties, starting with strict building codes. In Massachusetts, owners must bring an entire property up to code if the improvements are worth 30 percent or more of the building’s original value, according to a report by MassINC. It’s not hard to hit that target when the median single-family sells for $205,000, as in Fitchburg.
“It costs huge amounts of money to modernize those old buildings,’’ Forman said. “And a lot of them have fragmented ownership — they’ve been [converted into condos], so in a single building you’d have to deal with dozens of owners to do anything with it.’’
Despite rising rents and home prices, the high cost of construction in Massachusetts means that a lot of development still isn’t particularly profitable in gateway cities. So Forman stressed that cities need a mechanism to recover blighted properties and the resources to fix them up.
“Even though home values are rising, they’re not at the point where you could replace a triple-decker with a triple-decker, so it’s important to maintain that naturally affordable inventory we have in places that are growing,’’ Forman said. “Because it costs us a lot more to produce a new unit of affordable housing than theoretically it should to acquire that property and make whatever repairs are needed.’’
The good news is that a new federally funded incentive, part of the 2017 tax overhaul, could soon spur a lot more private investment. The Opportunity Zone Program offers big tax breaks to developers who invest in certain low-income areas, and about half of the state’s 138 designated Opportunity Zones are in gateway cities. “We haven’t seen anything like that in a long time, and people think [the tax incentive] plus an interest in promoting commuter rail could really tip the scales and get developers moving around gateway cities and their downtowns,’’ Forman said.
From there, Forman hopes to see sustained support for stabilization efforts in surrounding neighborhoods, too. “We’re pushing low-income families out of Boston neighborhoods, and they’re landing in gateway city neighborhoods. And a good number are buying homes in these communities hoping not to have the same thing happen again where the neighborhood improves and they don’t get the benefit of it,’’ he said. “So if our most vulnerable are purchasing in these communities, we should do everything in our powers to make sure that’s going to be a good investment for them given our historic inequities by wealth and race and ethnicity.’’
