Reviving run-down areas

THE HIGH COST of housing in Massachusetts was a frequent theme in the governor's race, and for good reason. Even if the overheated housing market has cooled slightly, recent price reductions give us no competitive advantage as a state. And they are small comfort to a family earning less than $50,000 per year.

But for all the talk about towns where the average home costs upward of $600,000, families in some parts of the state face a different kind of housing crisis. As Governor-elect Deval Patrick prepares to take office, he would be wise to look beyond metro Boston -- and consider the places where lower-income residents are beset by plunging property values and decaying homes.

Neighborhoods in cities such as Holyoke, Springfield, Worcester, Fitchburg, Lawrence, New Bedford, Pittsfield, and others grapple with vacant properties, abandoned buildings, aging infrastructure, high crime rates, and concentrated poverty.

The housing boom didn't bring any McMansions to these perennially weak housing markets. Consider a neighborhood like Springfield's Old Hill that, in a recent 12-month period, reported only 22 residential property sales at an average price of $86,000. This neighborhood of 4,700 people struggles with 134 vacant parcels or boarded-up buildings.

Weak-market neighborhoods like Old Hill challenge policy makers at every level of government. Abandoned parcels and reduced property values mean lost municipal taxes, losses to lenders, and the loss of equity for homeowners who remain in troubled neighborhoods. For city government, these losses are compounded by the direct costs of demolishing derelict buildings and clearing debris from vacant lots.

Unfortunately, the Commonwealth's current housing programs address affordability in booming markets without the emphasis on revitalization that many weak-market communities, such as Old Hill, really need. Indeed, state housing policies may even be contributing to the problem.

Programs such the Housing Stabilization Fund and the state's Affordable Housing Trust Fund resources to underwrite some of the cost of building or rehabilitating homes for lower-income first-time home buyers. But under the rules for such programs, homes that are built or rehabilitated with assistance by state funds must have their deeds restricted to ensure that the property remains "affordable." These restrictions limit future sales to first-time home buyers who fall below certain income levels. The allowable price for these transactions severely limits the seller's share of any appreciation. These deed restrictions remain in place for as long as 50 years.

In a recent study I conducted for the Pioneer Institute, "Housing Programs in Weak Market Neighborhoods," I argue that excessive deed restrictions on the resale of properties and restrictive home buyer eligibility can run counter to the goal of revitalization and perpetuate the concentration of very low-income people in weak market neighborhoods. While deed restrictions may help cool a super-heated housing market, they are often an obstacle in a weak-market neighborhood that needs warming up. Revitalizing our forgotten cities requires a new generation of homeowners. These urban pioneers cannot not be expected to take the risks of homeownership in an uncertain market while foregoing virtually all of the potential upside.

Older industrial cities present an opportunity for Massachusetts, and the failure of current state housing programs to include a strategy to revitalize them is regrettable. Considered from a smart-growth perspective, new development in older cities makes the most of existing infrastructure, transportation networks, and educational facilities. To capture this potential, the Patrick administration should seek to create incentives to bring new investment and new homeowners into communities that badly need revitalization.

As a matter of public policy, government should not promote gentrification that would force people out of their homes. But neither should it build enclaves -- intentionally or unintentionally -- of only the poorest of the poor. Government support for homeownership helped build the middle class, while other programs revitalized neighborhoods and created new opportunities for low-income buyers and renters.

Clearly, one housing policy cannot fit all. Government housing initiatives should be nimble enough to further a variety of legitimate public policy goals. The new administration ought to tailor the state's housing programs to reflect each neighborhood's market conditions. By encouraging new investment in weak market neighborhoods, we could benefit every Massachusetts community -- whether its housing market is hot or cold.

Peter Gagliardi is the executive director of HAP, Inc., a regional housing partnership based in Springfield.