The acuity of the state’s housing shortage bears repetition. We need 89,000 affordable homes immediately.
The inventory of active real estate listings has declined 79% –from 18,610 in June of 2018 to 10,228 in 2020, to 3,932 in 2023 while the state’s population has increased 1.4%.
The story of this oft-told paradox is usually presented in the context of interest rates, restrictive zoning, and even as part of a larger supply and demand cycle. These explanations each hold merit. However, when we take a closer look at the towns, especially by population size, we observe a distinction, indeed, a bifurcation, in the allocations of their grand lists over time.
This data alerts us to the likelihood of robust internal municipal machinations that work to preserve what many voters in smaller municipalities like to refer to as the “character” of their towns while, in effect, abrogating responsibility for housing resources to the larger towns.
A look at the historical allocation of municipal grand lists in Connecticut demonstrates three clear housing trends:
As shown in Figure 1:
- While the portion of vacant real property among the smallest towns in Connecticut has been declining, property tax revenues among the smaller towns have been increasingly derived from single family residential and commercial property.
- Smaller towns have persistently allocated but a small fraction of their real property to multifamily development. While that fraction has doubled in the last decade, similar to the larger towns, in small towns it remains vanishingly small.
And, as shown in Figure 2:
- Larger towns have assertively repurposed resources, through zoning or otherwise, to grow the numbers of single family residences, apartments, and commercial shares of their grand lists. Given the steady state of the vacancy allocations among the larger towns, these increases in grand list allocations, even controlled for revaluations, derive from reimagined uses of existing resources.
In short, the larger towns have assumed demonstrable responsibility for meeting the increasing housing needs of Connecticut residents and, in turn, the growing needs of employers for workers. In this sense, the large towns and cities have been increasingly pressed into the role of economic engines for the state.
Explanation of the recalcitrance of the smaller towns to allocate their available resources to development of multifamily housing involves several characteristics of the body politic.
One element stands out and bears individual examination: Connecticut towns’ reliance on their own-source revenue has the inevitable effect of obliging them to seek to deploy their resources in the most politically expedient manner.
Around 350 years ago, Louis XIV’S finance minister, Jean-Baptiste Colbert, famously declared that “the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.” That hissing, in towns where there is generally a two-year election cycle, frequently expresses itself at the ballot box. As we see from the data, in those smaller towns, where perceived continuity, in its various incarnations, inhabits a place of elevated value, development of single-family residences produces considerably less hissing than does development of apartments.
The rapid run up in single family home prices over the last couple years has escaped no one’s attention. I’ve measured the listing price of homes built in Connecticut during the period 2018 through June of 2023 to consider just how much more expensive, and, for that matter, more expansive, newly constructed single-family residences are compared to the existing inventory of homes. This figure, in turn, gives us a good handle on the property tax income development of those properties represents to the towns choosing them over other uses, such as apartments.
As shown in this chart, during the last five years, newly built single family homes in Connecticut have been listed for sale at a mean price of $2,015,007 with a median of $797,000. Compare this to a median listed price of $318,000 in the overall listed market.
Houses permitted for construction have also gotten larger, with new homes being built with a mean size of 3,657 square feet and a median size of 2,950 square feet, illustrated here. That’s 37% larger than the overall median home size of 2,158 square feet here.
Put another way, the smaller towns, which draw the overwhelmingly largest share of their property tax revenue from single family residences, are delivering their land resources to that revenue stream.
Not incidentally, the commitment of those municipal resources to single-family housing takes them irrevocably out of reach of alternative development. This outcome may assuage many voters who might otherwise be attracted to the tax revenues that might be produced on similar sized areas of land by multifamily development.
The economic juggernaut that has been built as larger, more expensive single-family homes in the last several years has rolled into Connecticut’s smaller towns, leaving the large towns and cities to find room for multifamily residences. The political bargain the small towns have made to attract this development has, undoubtedly, delayed the state’s ability to house residents and, for that matter, to attract employers who need access to the state’s famously skilled workforce. For how long, and at what cost remain to be seen.
Dan Smolnik is a tax attorney and a member of the Hamden Economic Development Commission. Any views expressed are exclusively those of the author.