Greater Worcester homebuilding lags behind state, national, historic rates

PHOTOS/GRANT WELKER A 15-home second phase of the Wachusett Valley Estates is now being built off Bullard Street in Holden, a town among those adding the most new housing in Worcester County.

Photo | Grant Welker Westminster Place is envisioned as a 55-plus community off Newell Road in Holden. The U-shaped road for the development was first laid out in 2004, but the development remains mostly unbuilt.

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By Grant Welker

In 2004, with a strong economy and housing market, communities in the Worcester metropolitan area approved 3,692 new homes for construction.

Last year, the area approved less than half that number.

New homes aren't being built at nearly the rate they used to in and around Worcester. In fact, the region hasn't kept up with statewide or national rates, according to U.S. Census housing data.

Even though home prices appear to be spiking – up 9 percent in 2018 – they still remain below pre-Great Recession levels. Coupled with the high cost of materials and often difficult zoning and building regulations, builders don't have the same financial incentive to create dwellings at the rate they once did.

“We're at a 50-year low in new home starts,” said Judy Patterson of Paramount Realty Group in Grafton, who is the president of the Realtors Association of Central Massachusetts. “We're at a 30-month low in inventory. It's crazy. And the demand is definitely there.”

Metropolitan Worcester – the nation's 58th largest urban area, defined by the Census as Worcester County and Windham County, Conn. – approved 1,768 new homes in 2017, a drop of 52-percent from this century's peak in 2004.

Restrictive regulations

For Guy Webb, the executive director of the Home Builders & Remodelers Association of Central Massachusetts, the shortage of new homes in and around Worcester is a matter of too many challenges facing builders.

Zoning in Massachusetts tends to be strict, severely limiting where homes can be built and how densely, Webb said. Zoning regulations vary by community, making it harder for builders to know what to expect in a given city or town. Permitting processes can be slow and onerous, he said.

“It's a worsening symptom of a statewide, decades-long disease of ever-restrictive zoning rules and an increase in regulations affecting all types of development and construction, especially residential, and especially with single-family homes,” Webb said.

Joseph Laydon, the town planner in Grafton, said the town has tried to resolve some of these issues by rezoning land around its commuter rail station to allow for denser development, and revising its affordable-housing plan in an effort to help bring lower-priced homes to the market.

“We're trying to accommodate and promote new housing opportunities and affordable housing opportunities,” Laydon said. “But it's one of those things with the market where there may be underlying forces with demand that isn't enough to spur significant increases in building activity.”

With 1,373 new homes since 2003, Grafton has built the third-most homes in Worcester County over the past 15 years, trailing only Worcester city (3,176) and Shrewsbury (1,437), according to the Census.

Aside from the permitting process, getting projects built can be a long undertaking, Laydon said. One project in Grafton started on paper a decade ago still hasn't begun construction, he said.

For builders, the process for buying land, hiring an engineer and going through permitting is lengthy enough that projects conceived after the Great Recession may just be hitting the market now, Laydon said.

“During the recession, developers didn't invest in seeking approvals, and now we're basically playing catch-up,” Laydon said.

Prices climbing

In April, the median price of a single-family home sold in Worcester County was $264,275, a 9-percent increase from a year ago, according to the Boston real estate data firm The Warren Group.

Despite these increases like these – prices for single-family Worcester County homes went up 5 percent from 2016 to 2017 – prices still remain below their pre-Great Recession levels.

According to the U.S. Census, which looks at all of metropolitan Worcester including Windham County, Conn., the price for all homes in the region this century peaked in 2005 at $290,700. Prices bottomed out after the recession in 2012 at $206,000.

Patterson, of the realty association, said high prices for materials and workers mean builders must get increasingly higher home prices in order to make new construction viable.

If builders could put new homes on the market for $350,000, “we could sell them like hotcakes all day long,” Patterson said. “You can have a home listed on a Friday and have it sold by Tuesday.”

Yet, inventory remains a problem for the real estate industry. April marked the 25th straight month of declining inventory driving up prices statewide, and the number of single-family homes sold in Worcester County is down by one from this point in 2017, according to the Warren Group.

Worcester vs. state, nation

As Worcester County has been building fewer homes in the past 15 years, it has fallen behind the Massachusetts rate. In 2003, Greater Worcester built at 18 percent of the homes in the state. In 2017, it built 10 percent.

The Worcester metropolitan area has slipped behind the national rate, as well. In 2003, this area built 19 of every 10,000 houses nationwide. By 2017, it was down to 14 of every 10,000 homes, according to Census data.

Inside the Worcester County, the city has the largest population, but its influence over new home construction has been waning. In 2003, Worcester city accounted for 19 percent of new housing in the county. By 2016, it was 5 percent.

The city of Worcester itself isn't keeping up with many smaller communities in Massachusetts in new homes, either.

In the five-year span ending in 2016, Worcester ranked 30th statewide in new-home construction approvals. The city ranked behind both close-in Boston suburbs like Chelsea and Everett and farther-out suburbs like Plymouth and Middleborough. Five Central Massachusetts communities landed ahead of Worcester: Natick, Hopkinton, Framingham, Boxborough and Holden.

However, this year will bring something of a rebound, thanks to one high-profile project. The 145 Front at City Square apartments had the first of its 365 units open in February. Assuming all those units come online this year, that project alone will make 2018 the highest year for new-home construction in the city of Worcester since 2005, when 501 homes were built.