Community leaders want solid, reliable, and clearly presented information to assist them in addressing the region's critical housing issues, which are often controversial and riddled with myths and inaccuracies.

ByJohn Eller

On May 25, the prototype of the Rental Housing Affordability Index (RHAI) was presented at an all-day conference at the Massachusetts Institute of Technology (MIT). Panels of experts and 200 attendees discussed the new index and its implications for affordable housing and future research. The consensus of participants was that the prototype was well on its way to becoming a useful tool for housing professionals.

From the left, Tod McGrath, John Eller, Tom Gleason, and Joe Flatley, executive director of the Massachusetts Housing Investment Corporation, at the MIT conference. Photos by Sandra Costantini.

In a summary of the index, MIT's Dr. Henry Pollakowski and Assistant Professor Lynn Fisher noted that the prototype "provides a single numeric score based on the availability of affordable housing and proximity to employment for communities along the Interstate 495 corridor. In the prototype system, the index value — a single number for each town — is the ratio of the town's available stock of affordable housing to its accessibility to jobs in the metropolitan region. The index does not rank a town by the percentage of its total affordable-housing stock but instead requires towns with better access to jobs to provide a larger stock of affordable housing to achieve the same score as less accessible towns."

The researchers noted that while two towns — one with good accessibility to jobs (Woburn) and the other more remote (Framingham) — have similar percentages of affordable rental units, Framingham is rated more favorably on the RHAI because Woburn, with better proximity to jobs, needs to have a higher percentage of affordable rental units to rank as high as Framingham.

"From a regional perspective, the Boston area would benefit more from additional units of affordable rental stock in Woburn than in Framingham," the researchers noted. "In other words, the housing responsibility is greater for municipalities with better access to area jobs. This aspect of the index is consistent with a fundamental principle in urban economics: accessibility matters."

The RHAI is expected to be broadened over the next 18 months to include affordability indexes for additional income ranges and for rental and ownership housing in most New England communities. Currently, the prototype only provides information on rental properties available to households earning between 50 and 80 percent of the area median income.

The development team believes this family of indexes will provide the factual data needed by local officials to help shape local zoning decisions and address the affordable-housing needs of their communities. The indexes are expected to be used by banks, state agencies, and the Bank in shaping their lending practices and funding priorities. The Bank's Housing and Community Investment Department believes the index will be especially useful in assessing specific local needs following the release of new Affordable Housing Program regulations by the Bank's regulator, the Federal Housing Finance Board.

Origins
For the Bank, the impetus for the RHAI initiative emerged a year ago during a forum on promoting affordable housing in New England. Sponsored by the Bank and Citizens' Housing and Planning Association, the forum included speakers from the Donahue Institute at the University of Massachusetts Boston. In proposing the development of a regional housing-affordability index, speakers from the institute argued that a research-driven, regularly published index would be an effective tool for local officials, media, and funders. Forum participants noted that current indexes were limited to small areas or were realtor-based snapshots.

At about the same time, researchers at MIT's Center for Real Estate (MIT/ CRE) met with Thomas Gleason, executive director of MassHousing and a member of the Bank's Advisory Council, to discuss the goals of MIT/CRE's new Housing Affordability Initiative, including the development of a town-by-town affordability index. Eventually, representatives from MIT/CRE, the Bank, and Mass Housing met to explore the possibility of developing the affordability index. Their goal was to develop a beta model followed by a family of indexes for New England communities.

Encouraged by Michael A. Jessee, the Bank's president and CEO, and Mr. Gleason, the Advisory Council recommended that the Bank support the development of the index. The Bank's board of directors approved the creation of a beta model as part of the Bank's 2005 Community Lending Plan and agreed to fund preliminary research in collaboration with MIT/CRE and MassHousing.

In building the index, the developers felt it was important for the research to be thorough, sustainable over time, and performed by an independent party. They felt that a highly regarded institution such as MIT had the research skills and necessary standing in the community to earn the respect of zoning boards, planning boards, and organizations responsible for allocating affordable-housing funding.

Community leaders want solid, reliable, and clearly presented information to assist them in addressing the region's critical housing issues, which are often controversial and riddled with myths and inaccuracies. "Having access to this family of affordability indexes could revolutionize local zoning plans and the allocation of affordable-funding resources by banks and state agencies," Mr. Gleason commented at the MIT conference.

The affordability index will be updated regularly and easily accessible through MIT's web site, where its methodologies will be fully disclosed. The MIT/CRE research team is headed by Dr. Pollakowski and includes Professor Fisher, academic staff member Tod McGrath, and a team of graduate students led by Andrew Jakabovics. The Bank's liaisons are John Eller and assistant vice president Mary Ellen Jutras. MassHousing's representative is Mr. Gleason.

Additional information about the prototype RHAI is available at web.mit.edu/cre/research/hai/conference.html.

John Eller is senior vice president / housing and community investment at the Federal Home Loan Bank of Boston.