Nearly everyone agrees that perhaps the biggest threat to Massachusetts’ economy is that people — and particularly young people — are moving away because housing is so expensive here.
But if so many people are moving away, why don‘t housing prices go down?
The state’s combination of slow population growth and sky-high prices would seem to contradict the basic laws of supply and demand.
222,000 new homes must be built over the next decade to fix housing shortage, state says
The simplest explanation is this: Even if people leave the state, Massachusetts is so short on homes that it would still need to build more to house those who stay.
There is no true estimate of exactly how many homes Massachusetts needs to meet demand right now, because different economists have different ways of measuring these things.
So researchers tend to defer to the most obvious indicator: the state of the housing market. Greater Boston has for years had among the lowest rental and homeowner vacancy rates in the country — a measure of the region‘s extreme demand, and a major factor in why prices and rents only ever seem to go up.
“There is no one perfect measure of the housing shortage,” said Daniel McCue, a senior research associate at Harvard’s Joint Center for Housing Studies. “The easiest thing to look at is the housing market and the way prices are growing here. That is indicative of extreme demand that the state isn‘t meeting.”
One recent example: In many parts of the country, home prices have modestly dipped over the last two years because of rising interest rates. Not here. Statewide, single-family home prices rose 11 percent in 2024, according to real estate analytics firm The Warren Group. In other words, the state has such a significant shortage that the housing market here defies national trends.
That alone, said McCue, is enough of an indicator that the state needs to build more, much more.
And then there’s the broader picture of the state’s population trends.
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Much of the narrative around people leaving Massachusetts focuses on what’s known as domestic migration — people moving from one state to another. And it is true that roughly 27,500 people left Massachusetts for elsewhere in the United States in 2024. But it’s also true that 90,000 people moved here from other countries — the other piece of the migration equation — for a net gain of about 63,000. That may have been something of an aberration due to a surge in international migration to the United States in 2023 and 2024 — the highest level the state has seen in the 21st century — that is expected to slow down under President Trump.
But immigration has driven population growth here for some time. Domestic migration was negative well before COVID — every year going back to 2014 — while international immigration has been positive. Then there are births in the state, which have outpaced deaths here for years, though that growth has slowed recently. So while people are leaving Massachusetts, the population is still growing.
And on top of the number of people who live in the state is the number of households they form. That number is also expected to grow over the next 10 years, said McCue.
These Massachusetts maps show where median home prices have risen (and fallen) the most
Someone forms a new household when they move into a new living arrangement. The simplest example of this is when a young person moves out of their parents’ home, and what was one household becomes two.
Household growth has surged in the United States in recent years — driven mostly by millennials — and the same has been true in Massachusetts. Between 2025 and 2035, the state figures some 500,000 millennial and Gen Z residents will form new households here, exceeding the pace at which Baby Boomer and other older households shrink or move away.
The easiest way to think of that dynamic and how it impacts the housing market in Massachusetts is like this: Picture a couple who raised two children in a Boston suburb. Eventually, those children will move out on their own, forming new households that require housing. Most won‘t find any place to live in the town they grew up in, unless that town has built new housing. At the same time, their parents will still be living in the family house, now with empty bedrooms, because there are so few smaller options.
What this dynamic means is that the number of people who need housing in Massachusetts will keep growing, even if the overall population does not.
Those are the new households the Healey administration accounted for when it called on the state to build 222,000 new homes between 2025 and 2035. The researchers who helped create that recommendation assumed zero population growth; if they’re wrong, of course, the state will need even more.
One somewhat common refrain is that population loss wouldn‘t be such a bad thing for Massachusetts, because it could lower housing costs. Why is it such a bad thing if the kids move away from the town they grew up in, or even out of the state, if it means demand for new homes will go down?
The answer, said McCue, is that those kids are future workers, who power the state’s companies and economy. If they leave, good jobs will follow. Housing costs would drop because of a downturn in the state’s economy marked by job loss, companies leaving the state, and a generally weaker Massachusetts.
“That is not a scenario that anyone should be rooting for,” said McCue. “States with healthy economies don‘t shrink.”
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