More Housing Information To Think About

The focus for the past several months has been how cities and towns need to do more to spur housing.  One particular area of the housing market that has brought much criticism of cities and towns has been the multi-family market.  It seems that those who have been leading this discussion feel that cities and towns are discouraging the construction of multi-family housing.

Recently I asked my colleagues around the state for information on stalled housing projects.  The results was that there were thousands of approved housing units, many in multi-family configurations, waiting for the applicants to request building permits.  Even one builder acknowledged that units were approved, but the mortgage market was stalling the ability to construct the approved housing.

The following article, from Boston.com illustrates that this problem is not just a planner's wild imagination:

New rules on condo loans hindering some buyers

As the article relates, there are homes.  There are buyers.  The access to mortgages are not there.

While the article has many things to consider, one particular passage really illustrates a point I have been hearing from the home building community:

"Peter Milewski, an official at MassHousing, the state's afford able housing bank, said condos are considered more problematic to lenders because a few foreclosures can affect property values for an entire complex. Also, he said, they carry monthly fees and special assessments that can create massive collective debts if individual unit owners fall behind on payments."

Simply put, lenders are not willing to lend to home buyers due to the threat of foreclosures in other units.  Thus constructed housing is going unoccupied.  This unoccupied housing increases strains on builders and on the condominium complex.  Carrying these empty units impacts the developers ability to make a profit off of the project, and limits their ability to undertake other permitted projects.  Essentially, stretching the builder beyond their means.  When the builder defaults, the banks expectations become a self-fulfilling prophecy.

Many who are pushing for local planning and zoning to include housing construction annual targets, seem to forget that it is a much larger picture.  What we really need is good land planning (as put forth in the Community Planning Act), good financial planning by the building community (which many I deal with seem to follow), and proper support for housing from the banking community (which means eliminating the risky mortgage practices of the past decade while not bailing out completely on the housing market).