Getting Real in Affordable Housing
The following blog post was submitted by Anne Baker, Account Executive at Solomon McCown.
It’s all about perception versus reality.
That was the takeaway message from NAIOP’s Affordable Housing: Challenges and Initiatives panel on May 23. The panel included Howard Cohen, Chief Executive Officer at Beacon Communities; Lawrence Curtis, President at WinnDevelopment; Tony Fracasso, Senior Vice President at MassDevelopment; Bart Mitchell, President & CEO at The Community Builders, Inc.; Jeanne Pinado, Chief Executive Officer at Madison Park Development Corporation; and was moderated by Solomon McCown CEO Helene Solomon.
The meeting was kicked off by Aaron Gornstein, the newly appointed undersecretary for the Department of Housing and Community Development (DHCD). Gornstein outlined his plans for DHCD, emphasizing that the agency is planning ahead for growth in the state. Streamlining the permitting process, giving support to promising communities, marketing the opportunities available to developers and building needed infrastructure are all essential elements of Gornstein’s affordable housing plans.
But while some may only see affordable housing as a social issue, Gornstein was clear that the high cost of living in Massachusetts has serious long-term ramifications for whether businesses decide to locate here and that the construction of affordable housing creates needed jobs.
False perceptions were also a constant theme throughout the panel discussion. The public is not aware that family homelessness is a relatively recent problem and that it’s easily solved through the construction of affordable housing, Pinado said. Mitchell and Fracasso both emphasized the creative financing options that are available to affordable housing developers who are looking for them.
Curtis argued passionately that while the construction of affordable housing is important, it alone can solve the housing gap in Massachusetts; we must work together for the preservation of existing low-income and affordable housing. Cohen also noted that while many upscale communities fight affordable housing developments out of a fear for negative impacts on their school systems, there is little evidence to suggest that is reality. It’s all about overcoming how local communities often approach affordable housing and making the case that inclusion will benefit us all.
NAIOP Supports Jobs Bill
Today I testified at a legislative hearing in support of An Act Relative to Infrastructure Investment, Enhanced Competitiveness & Economic Growth in the Commonwealth (H. 4093), a comprehensive piece of legislation designed to stimulate job growth in Massachusetts. Speaker of the House Robert DeLeo and Representative Joseph Wagner, House Chairman of the Joint Committee on Economic Development and Emerging Technologies, released the bill earlier this week. NAIOP applauds the House and the Patrick Administration for crafting a bill that will encourage economic development in Massachusetts.
We are just starting to see the beginning of a recovery for the real estate industry, but it is still a very fragile time. This bill creates the necessary tools to ensure economic development projects can move forward. It builds on the comprehensive Economic Development Plan released by the Patrick Administration earlier this year. It expands and strengthens I-cubed, preserves important state and local permitting decisions, and encourages the cleanup and redevelopment of brownfield sites. We strongly support its passage before the close of the legislative session on July 31.
The bill includes many NAIOP-supported concepts including:
- Creates a new Local Infrastructure Development Program that gives municipalities a new tool for leveraging private funding to finance infrastructure improvements needed to support economic development projects. The program allows infrastructure projects to move forward without the use of public funding.
- Expands the successful I-cubed (Infrastructure Investment Incentive) program and increases the number of projects per community from two to four. It also increases the available funding for the program.
- Extends the Brownfield Tax Credit from 2013 to 2015, encouraging the redevelopment of brownfield sites by bringing more certainty and predictability to the process.
- Streamlines District Improvement Financing (DIF) by eliminating the required EACC review of DIF districts and development plans, making the program more accessible to cities and towns.
The full text of the bill and a section-by-section summary of the bill are now available.
Kids Are Not Toxic Waste
There have been many studies on the state of housing in the Commonwealth. What is very clear from these, and the numerous opinion pieces on the subject, is that we have very high barriers to the development of housing in general, and affordable and family housing, in particular. What is also apparent is that the economy cannot fully recover without the support of highly talented, college graduates that continue to leave the state.
Paul McMorrow wrote a column in The Boston Globe on April 24th that lays out the problem. Massachusetts has not been able to keep up with the current housing demand. This results in slower job creation and volatile housing prices. As Paul points out, without sufficient supply, the recovery is going to result, once again, in an explosion in housing prices. According to a report by the Donahue Institute at the University of Massachusetts, if the current pace of development is maintained, there will be a deficiency in our housing stock of 46,000 units. We are already seeing this problem with an inadequate rental stock, driving rents to record highs.
The problem is rooted in several areas that include “home rule,” large lot requirements, lengthy permitting, frequent appeals, and an anti-children attitude.
- The economic needs of the Commonwealth have been stymied by local regulations that continue to encourage large, expensive homes and discourage the production of more affordable “starter” housing.
- With minimum lot requirements in many towns of 1-2 acres, it is very difficult to economically justify building smaller scaled homes. (Few of these municipalities even offer cluster zoning.)
- Permitting requirements have become more onerous with local rules and special by-laws making the development process longer and more unpredictable.
- Even with local approvals, there are the frequent appeals that delay the start of a project by 1-2 years (sometimes effectively killing the project.)
- Lastly, many housing proposals that would attract families with school age kids are denied at the local level. The often heard justification is that adding any number of children to the system will break the back of the school budget. Oddly, this argument occurs in communities that project future reductions in the school age population. Frequently, it seems that communities would be more welcoming to an asphalt batching plant than to new children.
As Paul McMorrow so eloquently states, “The state’s technology sectors demand steady supplies of young talent. But over the last decade, while the Massachusetts population was growing at a meager 3-percent clip, it lost 9 percent of its 25- to 34-year-olds. These are the recent college graduates and young families that the state’s economic future is built on. They’re also the population that’s most sensitive to the state’s deeply ingrained affordability crisis. And they’re voting with their feet.”
Our future is our young families and our children. It’s time we stop viewing children as the equivalent of toxic waste and start building the housing we need. Otherwise, we will only have ourselves to blame for a failed economy.
NAIOP Bus Tour: 10 Facts Learned on the Trial Run
The following blog post was submitted by Duncan Gratton, Senior Managing Director, Principal at Cassidy Turley FHO.
This year marks the 10th Anniversary of NAIOP’s Bus Tour, and as the Vice President of the Bus Tour Committee, I had a hand in planning and designing it. The 2012 Bus Tour, What’s Big and Breaking in Greater Boston, is a fast-paced live market update on some of the most dynamic markets in the area, including Boston’s Seaport, Fenway, Longwood and Cambridge.
The actual date of the Bus Tour is May 2, but this week – along with Bus Tour Captains and NAIOP staff – I went on a dry run of the route. We saw a lot of projects breaking ground and learned several interesting facts from the knowledgeable Bus Tour Captains! Here are the ten I found most interesting:
- The largest private construction project in the US is located at Fan Pier. The Vertex buildings are 1,100,000 SF and $900,000,000!
- Three of the largest academic/medical clusters in the US are located in Boston. They are:MGH/Partners
Longwood Medical/Harvard
Boston Medical Center/Boston University
- Kendall Square in Cambridge was supposed to be the original site of NASA. After JFK was assassinated, Lyndon Johnson became President and being from Texas, he chose Houston as the new location.
- Boston University is one of the largest landlords in Back Bay/Fenway. They control over 1,000,000 SF of commercial and non-academic real estate.
- There are three new life science buildings under construction in Kendall Square (Pfizer, Novartis and Broad Institute) and two new office buildings (Biogen Idec). All are 100% leased.
- Rents in Kendall Square and the Seaport District have jumped over 10% in the last 12 months.
- New apartment construction is booming – at least six new projects are underway or about to start in Boston!
- New Balance has announced plans for four new buildings at Brighton Landing, including a new 250,000 SF world headquarters building. In addition, they are planning a 345,000 SF sports facility that will include a hockey rink and track.
- Harvard is constructing an ‘Innovation Lab’ in the former WGBH buildings on Western Avenue in Allston.
- Boston University has announced that construction will commence this summer on a new lacrosse stadium on Babcock Street, thanks in part to a $3,000,000 donation from New Balance.
I hope you will join us on May 2 to learn more about What’s Big and Breaking in Greater Boston. Get a sneak peek of what’s in store.
The transformation begins. Westwood Station at University Avenue on Route 128 will now be known as University Station. A new team, led by New England Development along with Eastern Real Estate, National Development/Charles River Realty Investors, and Clarion Partners recently purchased the 135- acre prime development site. The first phase of the new University Station is expected to open in 2014. The project had been on hold since the market crashed and the previous development team of CC&F/ Commonfund sold the property in 2010 after its lender, Anglo Irish Bank, went bankrupt and was acquired by the Irish government.
While this latest announcement is exciting for the region, credit is due to CC&F for amassing such a large tract of land with direct access to Route 128 and a major transit station and permitting a 4 million square foot, mixed-use, transit-oriented, energy efficient master plan. With an improving economy, the time is right for this landmark project to move forward.
So, what has changed beside the name?
- The project will remain a mixed-use project comprised of retail, housing, office and hotel uses. The market, however, has clearly changed and appears ready for multi-family rental housing and a retail center. It will remain to be seen how much of the development will be office and hotel and when that could happen.
- A supermarket is almost certain to occupy space here. Again, this is not a change in plans, especially with Wegmans expected to be the designee for this location. It will not be surprising if other local grocery store chains continue to oppose such a proposal.
- The state will continue to invest in the highway infrastructure improvements in and around the University Avenue/Route 128 intersection.
- The project will be a multi-modal transit oriented development, taking advantage of the Amtrak/MBTA Commuter Rail station and Interstate Route 95 and State Route 128. Before Westwood Station’s plans, the density of development at this location was one of the lowest of any intersection along Route 128, underutilizing the excellent transit opportunities.
- Although, probably too early to have financing in place, the debt market is sure to be open to investments such as this. Now is a very different economy from the late 2008 economic disaster that began with sub-prime home loans, led to debt swap defaults, and ended in the near collapse of the financial markets.
With the development team set, a strong financing market in place, a growing demand for retail and residential space, and a prime location for corporate build-to-suit office sites, University Station should be the first mega-project to break ground within the next 12 months. Congratulations and best of luck to all involved!
The Future of Multifamily
This blog post was submitted by Allyson Quinby, Account Executive at Solomon McCown & Company.
On Wednesday, April 4, industry experts gathered at Boston’s Seaport Hotel to discuss the future of Boston’s apartment market at NAIOP’s Future of Multifamily breakfast program. The panel featured experts in the industry including, Raymond Torto, Chief Global Economist at CBRE; Kent Larson, Principal Research Scientist at MIT Media Lab; Julie Smith, President of The Bozzuto Group; Simon Butler, Executive Vice President at CBRE New England; and James Gray, Principal at ADD Inc, as moderator. View panelist video.
Torto kicked off the panel and set the table for the discussion by explaining that from 2007 to 2012, there was an influx of graduating students in Boston. That, compounded with the fact that more individuals chose renting over homeownership skyrocketed Boston to the 7th largest multifamily market in the country—and counting.
Butler expanded on the supply side of the multifamily trend. According to Butler, Greater Boston’s supply of multifamily housing will continue to increase over the next three years. Currently, there are only a handful of residential construction projects underway in Boston and Cambridge metro areas. However, by 2014 these projects will be completed and almost double that number will be in the pipeline.
Smith addressed the demographic of individuals influencing the multifamily boom. Similar to Baltimore, New York and DC, Boston’s market is made up of single people, divorcees, and those in the 25-40 age group moving into the urban area and opting to rent over buying. Additionally, there is a demographic of individuals between the ages of 50 and 60—frequently empty-nesters—who are moving into luxury apartments. While varying in age, these demographics both expect hotel-like lobbies, energy-efficient appliances, common spaces and fitness centers all within a 30-minute commute to work.
Larson rounded out the panel by wowing the audience with his answer to the growing demand for personalized, high-quality and affordable units. Through the use of robotic walls, smaller apartments can now have multiple functions turning a full dining room into a bedroom with a touch of a button. MIT is providing the technology for these transformable environments that meet the popular need for spaces that can serve as the home and the workplace.
The factors that sustain the multifamily boom are just as interesting as the factors that led to this real estate trend. Rooted in job growth and urbanization, and perpetuated by the growing number of individuals opting to rent over homeownership, the emerging multifamily trend requires architects, developers and marketers to develop new strategies for building and filling these units.
Massachusetts Leads the Country in Regulatory Reform
Earlier this week, Governor Patrick announced a massive, top-to-bottom regulatory reevaluation for all state agencies. By the end of 2012, the Administration will have reviewed 1,000 of the regulations that were first put into place prior to 2000, with another 1,000 by the end of 2013. The goal is to determine which regulations should be rescinded, which should be modified, and which could be made more consistent with a national model or standard. 
This announcement may be surprising to some since Massachusetts, rightly or not, has not always had a business friendly reputation. With this new sweeping policy, the Governor has taken a hands-on, direct approach to ensure that there will be real results with immediate impacts.
In addition to the regulatory review, any newly proposed regulation must go through an extensive vetting process, lasting over nine months, that starts with a “small business impact statement” consisting of 25 questions delving into the potential financial and time costs. Small businesses are defined as those with up to 500 employees (85% of the companies in the state.) All draft regulations will go to the Executive Office of Administration and Finance, and to the new Regulatory Ombudsman for fiscal and business impact review . They will then go to the Governor’s office, where a case must be made that the agency’s recommendations outweigh the impacts and burdens on business and the public. Only then will these regulations go on to the Secretary of State’s office for posting and public comment.
April Anderson Lamoureux, Assistant Secretary for Economic Development, was just appointed as the first Regulatory Ombudsman between the Administration and the business community. She gave a detailed presentation on the regulatory reform initiative at the NAIOP Government Affairs program yesterday, along with Alicia McDevitt, Deputy Commissioner at MassDEP.
At the meeting, Assistant Secretary Lamoureux asked that businesses provide her with their suggestions on regulations that do not make sense, have extensive problems, do not add value, or where alternative solutions may better address the issue. NAIOP has been appointed to a Business Advisory Committee that will help identify problematic regulations and alternative processes.
MassDEP, under the leadership of Commissioner Ken Kimmell and Deputy Commissioner Alicia McDevitt, has led the way on regulatory reform by establishing a target list of 21 different reforms within the Department. McDevitt provided an update on the Final DEP Regulatory Reform Plan, which was released on Monday. Although, the reason for this effort originated with a reduced budget affecting staff permitting and oversight, the effort has moved in the direction of creating general permits, self-certification, and third party reviews. Collectively, these reforms will make a substantial improvement on the cost and time for the regulated community, without diminishing environmental protection.
Kudos to the Governor and his Administration for boldly going where few states have gone! Massachusetts has clearly earned the status of “first in the nation” setting a policy to reform one of the most frustrating aspects of government for most businesses and citizens. As always, others will follow.
