I was chatting with a coworker who grew up in Northampton about how the city has changed over the years. He was sort of shaking his head in shock and disappointment, saying, “It’s just gotten so expensive. I don’t even know who can afford to live here anymore.”
It’s true. My wife and I have been looking at buying a home in the Pioneer Valley, focusing on Northampton, Easthampton, and Holyoke. We found that for $300,000, you can get a mansion in Holyoke, a nice-ish 3 or 4 bedroom in Easthampton, and a 2-bedroom that needs updating in Northampton – if you’re lucky.
Same Price, Two Vastly Different Homes
Here are two examples I found:
Above is a listing from Northampton. A few things to note:
- The square footage on this property is under 1000 square feet.
- There are three bedrooms but only one bathroom. And at 1000 square feet, I can only imagine the size of the bedrooms.
- While it does have a very large lot, it is also pretty far away from city center of Northampton. Maybe it costs so much because of the potential to subdivide the lot?
Now compare that to what I found in Holyoke for a comparable price:
In comparison to the home in Northampton:
- This home, listed at $11,000 less than the Northampton listing, is literally a Victorian mansion.
- It has triple the square footage, 2.5 bathrooms, and five bedrooms.
- It is located much closer to amenities like cafes, a bike shop, municipal services, etc.
Admittedly, this is a much older home that probably needs some significant TLC. But if a 1,000 square foot ranch house in Northampton goes for $300,000, I can only imagine what a 3,000 square foot Victorian mansion would be listed at in the same location.
Housing Economics 101
Why does your money go so much further in Holyoke compared to Northampton?
Unfortunately, the typical narrative is that “those people” are coming in from the outside and bidding up housing prices. Those Millennial yuppies and hedge fund retirees, displacing local quirky shops and restaurants and replacing them with high-end boutiques or corporate franchises. Luxury condos start popping up around town. In larger urban areas, corporate shuttles transport high-skilled tech workers to/from work.
If the problem is outsiders, then the remedies sought for this disruption are predictable:
- Rezone the city to make it harder to replace anything with luxury condos, or really to build anything new at all.
- Set up historic districts to keep certain neighborhoods, or all neighborhoods, exactly as they are.
- Develop a labyrinthine commercial permitting process to keep out businesses you don’t like.
However, the consensus for why housing prices rise among urban economists and urban planners is simple: supply and demand.
One of the foundations of economics is the idea that in a perfect market, when the demand for something rises, the price of that item will rise. But when the price of that item rises, more producers will come in to sell more of that item. There is a constant ebb and flow of production and consumption, as consumers adjust their purchases based on cost and a number of other factors, and producers do the same.
A number of factors make the housing market imperfect. Zoning, permitting, parking requirements, taxation, affordable housing requirements – all of these contribute to a market where the true cost and natural equilibrium are disrupted. People can argue whether zoning, permitting, etc., are good or bad; what I think is settled is that, overall, it makes market-rate housing more expensive.
So, back to Northampton and Holyoke. Why is it that Holyoke is so cheap compared to Northampton? To answer this question, let’s consult the US Census.
You can see that there is a huge difference in the population growth of Holyoke compared to Northampton. While Holyoke’s population peaked in 1920 at nearly 60,000 residents, Northampton’s population has held steady at right around 30,000 since the 1960s.
Getting back to supply and demand, this chart demonstrates that the supply of housing in Holyoke, built to accommodate 50% more people than currently live here, is ample. Thus, housing prices are low.
Meanwhile, the housing supply in Northampton, built to accommodate around 30,000 people, can still only accommodate around 30,000 people. For anyone who wants to move to Northampton, there isn’t that much “spare” housing to choose from, and so when it becomes available you have to outbid anyone else looking to move in. Housing costs go up, population stays relatively flat.
How To Fix It
So if Northampton really wanted to lower the cost of housing, the solution is both simple and arduous – build more housing. This isn’t just my opinion, but also an opinion espoused by a ton of people much smarter than I am who have thought a lot about the subject (see Ed Glaeser’s book The Triumph of the City, or any of the Boston Foundation’s Housing Report Cards, or Jonathan Levine’s book Zoned Out, in addition to many, many others).
Of course, I am simplifying a complicated issue. But at its core, the solution to the high cost of housing is simple – build more housing. Since I don’t see the political will to really address high cost of housing in Massachusetts, I’ll look forward to more Millennial refugees from Boston or Northampton realizing what I did – Hampden County has a lot to offer, and it has plenty of space for you to live.