Executive Summary
3A zoning offers Marblehead the opportunity to pursue well-managed economic growth
By taking advantage of "new growth" taxation under Proposition 2 1/2, we can add to the town's tax receipts without increasing tax rates on existing residents
This strengthens our town budget, allowing us to invest more in town services and our schools
At an abstract level, the debate over 3A zoning is a debate about economic growth. Where should it take place? How fast should it occur? Should it even happen at all?
In keeping with America’s capitalist ethos, the Marblehead Housing Coalition is necessarily pro-growth as a downstream consequence of our support for housing. Economic growth is what made America the greatest country in the world and we think it is necessary to ensure Marblehead remains the best town in America.
But this statement demands interrogation: Why is economic growth necessary? Why can’t we just keep everything as it is? The answer is that one way or another, change always comes, and you can either meet it on your own terms or let it overwhelm you. Marblehead is already experiencing the effects of the latter option.
The combination of Proposition 2 ½ and Marblehead’s stifling regulation of private property owners’ rights in the form of single family zoning have effectively strangled economic growth in town. And the consequence of this is that our town faces a challenging fiscal outlook.
At the time of writing, Marblehead did not have a contract with its public school teachers, weeks out from the start of the 2025-2026 school year and with significant gaps in the negotiating position of both sides. The town’s free cash amounts, used in prior years to plug budget gaps, are shrinking. And we need major capital expenditures for everything from road repair to resiliency investments for our harbor and ocean-based infrastructure.
Proposition 2 ½ caps property tax revenues for towns in Massachusetts to 2.5 percent of assessed land value, and limits annual increases to 2.5 percent. This means that if the cost of delivering town and school services rises by more than 2.5 percent over time, the only way to plug the gap will be service cuts.
Marblehead, like the rest of the country, has experienced significant inflation since the beginning of the COVID-19 pandemic.(1) There isn’t much our town alone can do about nationwide inflation. Proposition 2 ½ does provide various remedies for towns that want to maintain their service levels, but face rising costs.
The first is an override. This increases the tax rate on all incumbent residents. In 2023, Marblehead rejected a property tax override.
A second remedy available under Proposition 2 ½ is new growth taxation. New growth taxation occurs when new housing is constructed and it does not increase the tax rate on incumbent residents. Instead, new growth taxation represents the addition to the tax base represented by the addition of new units of housing.
New growth taxation is an avenue by which Marblehead can stabilize its budget over time: Build more housing and capture the increased tax revenues. And the new housing has positive downstream effects as well. Businesses are more likely to form which themselves generate economic activity that can be taxed to invest in schools, town services, and improved public spaces.
But this is presently not possible due to heavy government regulation of zoning in Marblehead. With so much of our land reserved for single family housing, we cannot enjoy the benefits of new growth taxation.
So without an override and continued resistance to new growth, that leaves us one choice: Further cuts to our school budgets, which hurt our children, and continued cuts to our town service budgets which especially hurts our seniors who rely on the town for a wide range of programs and assistance.
And, eventually, those cuts will also have the effect of changing Marblehead. Many residents worry about the price of their homes, often their primary asset. This is especially important for our seniors for whom their home equity might be a crucial part of their retirement planning. Well the fact is that the next buyer of their home is probably going to be a family, not another senior. And families care about schools. And they care about public spaces. And they care about access to amenities.
But if Marblehead resists all efforts at generating economic growth to achieve these things, eventually it is going to catch up with home prices. The price of the median home in Marblehead is $1M. The kinds of people who can afford a home like that are people with a choice of where to live. At some point, our recurrent budget fights are going to make them think twice.
Indeed, that is already happening. As the Marblehead Housing Coalition has already detailed at length, we have experienced some of the slowest price increases for single family homes of North Shore communities between 2010 and 2022.
And this decreasing attractiveness of Marblehead to families has additional complications. In particular, it has had dramatic ramifications for the demographics of our town. Between 1970 and 2020, our share of children 19 and younger and our share of retirees 65 and older has converged.
But most problematically, our working age population, the group of residents with the greatest capacity to bear the burden of property taxation, has been declining steadily since 1990. As more and more town residents shift into retirement, the prospects of a property tax overrides become more and more remote. Many retirees live on fixed incomes which makes them both less able and less likely to agree to property tax increases to sustain school budgets and town services.
But, as we said earlier, this might catch up with retirees as well. If Marblehead’s housing prices grow more slowly than inflation, they may find that when it comes to sell their homes, they aren’t able to get the price they need to find retirement living.
This brings us all the way back to the question of economic growth. Because it is economic growth that can cut through the Gordian knot of how Marblehead will maintain and improve its schools and public services in a world of rising costs.
The Marblehead Housing Coalition believes in the power of American capitalism. It has brought our country enormous prosperity and we think it is fundamentally good. But it has to be managed, especially its pace. This is the hard thing about housing and growth: There is no obviously right answer to what constitutes too much or too fast.
Marblehead’s 3A zoning plan calls for up to 897 incremental units of housing over some indeterminate number of years. The Marblehead Housing Coalition believes that is a reasonable place to start. But most important is that we do start because it is the future of our town that is at stake.
(1) On the demand side, expansionary fiscal and monetary policy aimed at preserving American jobs were major contributors to inflation. On the supply side, the shut down of Chinese factories due to COVID and the war in Ukraine’s impact on commodity prices were major factors.
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