There’s been a surreal quality to all this past year’s news of economic disasters. The most difficult idea for us to accept on the Island, I think, is that perhaps the value of real estate here won’t continue growing at double-digit rates forever.
The bursting of the real estate bubble has had dramatic effects not only in the private market, but in the public arena where change and uncertainty have combined to spawn both adjustments in current strategies and spirited discussions about future approaches.
At the Martha’s Vineyard Land Bank, the sharp decline in revenues has put the focus on core priorities – and what’s been lost is the option of spontaneity.
James Lengyel, director of the Land Bank, recently recounted how he and the agency’s commissioners once toured what is now the Blackwater Pond Reservation, where they were negotiating for a trail easement across a property then on the market. The commissioners were so struck by the beauty of the place that they decided, what the heck – let’s buy the whole property.
“Just watching that process,” Mr. Lengyel said, “made me feel that Martha’s Vineyard was so privileged to have an institution that could start with a modest goal, get inspired to a much greater goal and then actually be able to do it. Many other communities would have just looked, and sighed, and said, if only we could have.”
This year, with revenues down by nearly half, the Land Bank won’t have to abandon its long-term goals, but the sort of wonderful impulse purchase that gave us Blackwater Pond is probably out of the question.
Meanwhile, the Island agencies at work on affordable housing have also had to adjust. In one respect, the bursting of the real estate bubble is a good thing, since it reduces the gap between the cost of housing and what working people can afford. But the chasm is far from closed, and the uncertainty of the market can make it hard to know how to proceed.
In Edgartown, arguably the Island town that has attacked the housing problem most vigorously and creatively, voters recently approved the creation of a new entity, the Edgartown Affordable Housing Trust Fund. The town’s affordable housing committee is now discussing how the new trust might spend the $700,000 it has received from developers of the Field Club subdivision at Katama.
The housing trust is a terrific development, full of promise for both Edgartown and the Island. If the trust’s early expenditures are carefully targeted and prove effective, it can be a model for other towns, and an attractive vessel for money from the Community Preservation Act. Remember that the CPA was implemented on the Island amid hopes that it would go mainly for housing, while in fact barely half its funds to date have been used for this purpose.
But is this the moment for Edgartown to jump into the real estate market, snapping up some of the low-hanging fruit and subsidizing properties for resale as affordable homes? Or should the trust sit tight and hope its funds might buy even more a few months from now?
One argument for caution is that Edgartown’s $700,000 is the first payment of a promised $1.8 million – but the next payment won’t be due until a third of the Field Club properties are sold. There’s no telling, in this market, when or even if that next payment will be forthcoming.
So the challenge is to find the balance between creativity and prudence. The housing committee in Edgartown is circulating a survey to assess the need and brainstorming its options, which is exactly the right way to proceed. The guess here is that some of the ways in which this housing trust money is spent will pleasantly surprise us.
Finally, the bursting of the real estate bubble casts an entirely new light on the debate over restrictions designed to keep our community’s housing stock affordable for future generations. The idea of perpetual affordability has been accepted almost universally within the agencies at work in this field, and that’s a good thing. But we still hear complaints that restricting homeowners’ equity growth to four percent per year somehow consigns people to second-class citizenship.
My family’s home in Edgartown – you can look it up in the Vision Appraisal database online – has appreciated at a rate of just over six percent per year since we purchased it in 1981. That’s before you subtract all the costs of home ownership over the years, from the new well and septic to the new windows, flooring, heating systems and roof. If we’d been restricted to a guaranteed growth of four percent per year during this whole historic boom, would that have made us second-class citizens? I don’t think so.
But what about the Island homeowners whose purchases were made five or even 10 years ago? Most would leap today at the guarantee of four percent in equity growth, per year, over that span.
Our whole conversation about affordable housing founders when we start thinking of homes as investments rather than places to live. If our public purpose were simply to make certain individuals wealthy, we could bypass the real estate market, pick out a lucky few and pour Edgartown’s $700,000 into their savings accounts. Make no mistake: Each time you award a $500,000 home for $250,000 and place no restrictions on future resale, that’s exactly what you’re doing.
Affordable housing is not about building personal wealth, but rather about preserving a public resource, namely us – the human ecosystem of our community. And regardless of whether the markets rise or drop, our work in this arena will only be real and enduring when we ensure that the public funds we invest in housing today are still at work, supporting year-round Vineyard residents, in generations hence.