Report ranks Massachusetts a ‘bottom state’ for affordable housing

The average construction cost per new housing unit in Massachusetts ($334,280) makes it the third priciest in the nation, according to the report.

Construction Coverage has named Massachusetts a “bottom state” for investment in affordable housing, behind only Hawaii and Wyoming.

Michael Stromberg, lead data analyst at the research firm, said the July 19 report ranked locations by the average construction value of all of the new housing units authorized in 2023. The website used data from the US Census Bureau and Zillow for the analysis, the methodology states.

“In the Boston-Cambridge-Newton, MA-NH metro area, the average value per new housing unit authorized was $311,451, nearly 30 percent higher than the national average of $241,792,” Stromberg said.

The average construction cost per new housing unit in Massachusetts ($334,280) makes it the third costliest in the nation, according to the report.

Earlier this month, Gov. Maura Healey signed what’s labeled as the “most ambitious legislation” to address housing costs in state history. The Affordable Homes Act authorizes $5.16 billion in spending to support the “production, preservation and rehabilitation” of about 65,000 homes across the state in five years, according to the state website.

Construction Coverage, which researches construction software and insurance, states that between February 2012 and May 2022, the annual rate of residential construction spending rose by $700 billion in the United State. Since then, however, it has fallen by nearly $150 billion.

“The factors influencing the ultimate cost of construction are multifaceted,” Stromberg said. These include the costs of materials, labor, regulatory compliance, and site preparation. Housing unit valuation is an estimate of the structure value and not a reflection of the land value, according to the report’s methodology.

Stromberg said the high cost of new housing in the Boston metro area and in Massachusetts as a whole suggests economic prosperity, but also highlights the challenges of increasing the affordable housing stock. “Strict building codes, zoning laws, and permitting processes often increase construction time and costs,” he said.

These were the top and bottom states when it comes to investment in affordable housing:

TOP STATESAVERAGE*BOTTOM STATESAVERAGE*

Delaware$143,579Hawaii$423,609

New Jersey$157,141Wyoming$342,230

West Virginia$189,464Massachusetts$334,280

Nebraska$191,523New Hampshire$303,025

Mississippi$192,134New Mexico$294,066

Kentucky$195,491Indiana$284,439

South Dakota$205,824Colorado$280,276

Virginia$205,945Alaska$279,491

New York$208,845Wisconsin$277,886

Texas$218,731Iowa$277,068

Arkansas$220,884Utah$275,507

Louisiana$227,295Michigan$274,404

North Carolina$230,054Illinois$268,098

Georgia$230,662South Carolina$265,617

Arizona$232,132North Dakota$263,343

Source: Construction Coverage

*Average value per new housing unit authorized

Here’s how the New England states were ranked:

STATE AVG. VALUE PER NEW HOUSING UNIT AUTHORIZED TOTAL NEW HOUSING UNITS AUTHORIZED RANK

Massachusetts $334,28013,21448

New Hampshire $303,0254,55547

Maine$260,4116,18332

Rhode Island $241,6431,16922

Connecticut$233,8896,27218

Vermont $233,3992,45617

Source: Construction Coverage

In 2023, both Massachusetts and New Hampshire ranked third and fourth, with an average value per new housing unit of $290,607 and $278,503, respectively, data from the report show. This reflects a 15 percent increase in average value in Massachusetts and an 8.8 percent jump in New Hampshire.

New Hampshire was also among the top five states with high construction costs.

“High construction costs lead to higher housing costs, making it harder for first-time buyers and renters to find affordable housing,” Stromberg said, noting that this aggravates housing shortages, particularly for the economically vulnerable.

These large metros added the most affordable housing units:

RANKMETROTOTAL NEW

HOUSING UNITS

AUTHORIZED

1.Houston-The Woodlands-Sugar Land, Texas68,755

2.Dallas-Fort Worth-Arlington, Texas68,029

3.New York-Newark-Jersey City, NY-NJ-Pa.63,030

4.Phoenix-Mesa-Chandler-Ariz.45,616

5.Austin-Round-Rock-Georgetown, Texas38,773

6.Atlanta-Sandy Springs-Alpharetta, Ga.38,639

7.Los Angeles-Long Beach-Anaheim, Calif.30,767

8.Charlotte-Concord-Gastonia-NC-SC29,419

9.Orlando-Kissimmee-Sanford, Fla.25,415

10.Tampa-St. Petersburg-Clearwater, Fla.25,386

Source: Construction Coverage

Here’s some other New England metros fared in the rankings:

METRORANKTOTAL NEW

HOUSING UNITS

AUTHORIZEDAVERAGE VALUE PER NEW HOUSING UNIT AUTHORIZED

Hartford-East Hartford-Middletown, Conn.5 (large metros)2,114$191,396

Providence-Warwick-RI-Mass.27 (large metros)1,930$241,368

New Haven-Milford, Conn.2 (mid-size metros)1,934$138,643

Manchester-Nashua, NH51 (mid-size metros)1,382$247,700

Springfield67 (mid-size metros)708$264,677

Portland, Maine73 (mid-size metros)3,072$273,278

Worcester, Mass-CT75 (mid-size metros)1,349$273,783

Bridgeport-Stamford-Norwalk, Conn.95 (mid-size metros)1,527$390,005

Source: Construction Coverage

Without policies to encourage the construction of more affordable housing, home shoppers and developers will turn more toward the Midwest and South, he said. “Continued high construction costs will slow the growth of affordable housing supply, pushing home prices and rents upward.”

More on the housing market