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[Provost Bob Brown discusses some of the issues connected to affordable faculty housing and talks about what the Institute is doing and plans to do in the future.]
I think we are all painfully aware of the high cost of housing in Boston and its surrounding suburbs. Although always among one of the most desirable and expensive places to live, the cost of Boston housing has increased at an unprecedented rate over the last decade.
Although figures don't tell the story as well as going to some openhouses, a few numbers do help frame the issue. For example, the Office of Federal Housing Enterprise Oversight reports that housing prices in the greater Boston area increased by almost 74% between 1997 and 2002, with more than a 10% increase in 2002. Also, the median single-family house price in the area was reported by the National Association of Realtors to be $396,000 in 2002, an increase of 26% from 2000. For those of us already established in the housing market, these numbers are music to our ears, because they constitute growth of our investments. But for new members of our faculty or colleagues in transition from one type of housing to another, these increases are a tremendous hardship.
Clearly, the compensation increases that MIT has offered over the years have not kept pace with the housing market. As a result, our younger colleagues have to leverage their household incomes to an increasing extent to buy ever-smaller homes and potentially longer commutes into Cambridge. Potential new faculty members are faced with choices when considering positions at MIT: Should they come to MIT and settle for a great professional environment, but perhaps a lower quality of life, or go to another school where their personal and family life may be better. This is a difficult choice to make. Even when they decide in favor of coming to MIT, much too often the question leaves some second-guessing their decision. This impact is visible in the faculty responses to questions about housing and its competitive impact in the recent survey on faculty quality of life.
One might think that we are fortunate that many of our competing universities are in housing markets that are just as expensive as MIT (at least before the dot-com bubble popped). Although this is true, it has resulted in the increasing need for the type and quality of the housing program at the school to be an important ingredient in the financial decision for colleagues to accept positions. Like it or not, faculty housing programs are becoming a form of compensation, or a benefit. Schools are using combinations of cash, home equity-sharing, and low-interest and contingent interest mortgages arranged by the school to make it feasible for faculty to buy houses in markets under conditions where their base salary would not support the purchase.
Optimally, the programs are designed to get housing subsidies to the individual faculty in ways that are the most financially effective and tax efficient. Different programs may work for faculty at different stages of their careers. For example, low-cost rental housing on or near campus may be best for new faculty (and maybe others) and would help build the sense of community that we all want at MIT. Bob Redwine addresses this need in his article in this Newsletter.
MIT is lagging in expanding its housing program. Since the 1980s MIT has offered a Contingent Interest Mortgage Program (so-called CIM Program). It is a fixed-term bullet second mortgage with a capped interest rate that is designed to increase the buying capacity of a first-time homeowner by allowing for a portion of their mortgage to have no monthly payments for the term of the CIM at the price of a large bullet of interest and principle which is due at the end of the term. CIMs work reasonably well when the size of the CIM is small enough that the burden which occurs when the CIM comes due is manageable. This constraint is becoming increasingly difficult as housing prices move up. In the absence of a structured housing program that works for all, individual cases are being handled on a case-by-case basis. This situation is not satisfactory.
In collaboration with Executive Vice President John Curry and Treasurer Allan Bufferd, I have commissioned a small committee to re-examine the MIT CIM Program and to recommend how MIT might change/expand our program to better help our faculty with housing. As we wait for their recommendations, we should remind ourselves that many of the housing programs used by other schools are simply forms of additional faculty compensation that are directed to faculty members for a specific purpose – to buy a house – and thus are not available to others who do not want or ask for this support. It is easy to envision housing programs that amount to the deployment of 5% of the total faculty salary compensation pool to a housing program. There is an uncomfortable amount of inequity and social engineering inherent in implementing such a program; however, the housing market in Boston makes the need for a more aggressive housing program inevitable. I hope to have more to report before the fall.
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