Real Estate: The Haves and Have-Nots

It is not lost on me that I’m lucky enough to be selling real estate in towns that are anomalies to not only the national real estate doldrums, but to the regional market as well. Demand is still high in these towns. Houses at or below median prices in towns like Lexington, Newton, and Belmont are currently a rare commodity. In fact, in Belmont there are only 20 single-family homes on the market at the time of this post. Only five of those are under $700,000. Two of the houses I’ve shown in the past week have had multiple offers on them — in January, generally the slowest time of year. But buyers seem optimistic.

It seems builders are feeling optimistic around here as well. Driving around Lexington this morning, I noticed many new houses going up, which in Lexington means a “tear-down” — one fewer modest house for average buyers to consider. A tear-down on a 1/4-acre lot in towns like Lexington typically sells for a $500,000 or more. So a builder/developer feels he/she must build as large as possible in order to maximize and justify a profit. I previewed yet another $1.35 million spec house today. I can walk through these blindfolded after 11 years of seeing such homes. The only things that really vary are the finishes. But they are comfortable, functional, and downright tempting. Politics of envy, indeed.

The housing market around here is just a mirror on the debate going on in this country about the 99 percent vs. the 1 percent. When you hear Occupy Wall Street arguments echoed in internecine Republican spats, you can be sure that such issues are on the mind of the voting public. Towns around Boston with great schools and easy commuting locations pull in folks with deep pockets, who buy large new houses that are built where more modest homes once stood. Property taxes rise for the new house and the tide that is raised along with them, feeding the school system and town services, and the cycle continues in an upward spiral. But what about the towns just across the borders? In adjacent towns like Waltham and Woburn, home values drop off sharply.

The disparity from town to town is nothing new. But is the gulf widening? A recent report unveiled in December at Harvard Law School suggests this is the case in the Northern suburbs. And the New York Times noted the national pattern of erstwhile middle-class neighborhoods shrinking, “as rising income inequality left a growing share of families in neighborhoods that are mostly low-income or mostly affluent.” Built up largely with modest homes in immediate post-war years, Lexington was generally not considered “affluent” until the 1980s. That has changed drastically since then, and many of those houses are disappearing.

These are complicated issues, and there are brighter minds than mine at work on them. I am eager to hear solutions. Do you feel that 40B zoning, a law that allows developers to build with greater density in exchange for selling 1/4 of the units at below-market prices, works? The Boston area’s stable towns are fortunate. I am a real estate agent and not eager to bite the hand that feeds, but are we walling ourselves off?

Jay Talerman, an attorney (full disclosure: and an old friend) who has represented dozens of towns on 40B, says:

“At first blush, and viewing it through an egalitarian prism, it appears that c. 40B could be the tool that compels towns to ensure a wide spectrum of housing opportunities. However, it seldom works out like that. 40B is a bit of a false idol. By and large, given the cost of land, the well-heeled towns have gotten away scot-free while the mid-burbs have borne the brunt of 40B’s draconian provisions. Even then, 40B has done a better job at lining pockets of developers then it has in addressing housing inequities, compounded by the fact that, by its very nature, c. 40B is the antithesis of ‘smart growth.'”

Paul McMorrow, who writes about these subjects for Commonwealth Magazine and the Globe, says:

“The biggest reason housing is so expensive is the unwillingness of many cities and towns to allow new construction. 40B is far from perfect, but it’s one of the only ways of breaking the large-lot single-family zoning that keeps the suburbs so expensive. It’s more troubling to me that there is a better way of doing things. The state smart growth law, 40R, lets towns pre-zone the sort of dense transit-oriented development we should be building. It pays cities and towns for writing zoning the right way. And the legislature is letting the program go broke. There are always going to be rich towns and poor towns, but zoning that prevents everything but luxury construction drives those two extremes further than they’d normally be.”

Talerman responds:

McMorrow “is right that the defunding of c. 40R was irresponsible.” But, he continues, “as a municipal practitioner that has represented small towns and big towns, rich towns and poor towns, I have seen a lot of zoning initiatives. And while I am not so naïve to believe that there are not unintended consequences in zoning decisions, I have yet to see a town that has purposely enacted a zoning bylaw with the purpose of excluding affordable housing. I reject that notion entirely.”

I am fairly certain that in a town like Lexington, which is exempt from 40B, having met and maintained the “10 percent affordable” threshold, the zoning is not what’s pushing out much of the middle class. The law of supply-and-demand in such towns means that those post-war Capes and ranches will soon make way for McMansions.