Making Air Rights Development Work
I applaud Matt Kiefer at Goulston &Storrs for his recent article in Commonwealth Magazine regarding the Columbus Center development fiasco and the potential role of government to prevent a similar outcome on future economic development projects.
What first struck me about the difficulty in getting this project through the permitting process in a reasonable amount of time was the lack of public support from the state, city, and neighborhoods.
One would expect loud cheering for a developer who presented a plan to knit back neighborhoods separated for decades and heal a visible, ugly, noisy, urban scar produced by an open sunken turnpike. However, after over 130 public meetings and several years, this project was sufficiently delayed until the development was no longer financially viable. Even with changing design requirements, increasing construction costs, and enormous engineering challenges, the developers still tried to make this project work, requesting state assistance with infrastructure and the affordable housing component. Finally, however, it was a national recession that sealed Columbus Center’s fate.
More recently, other proposed air rights projects have also fallen by the wayside. Four non-profit proposals to build over the Greenway land or exit ramps have failed to move forward. A prime culprit was underestimating the costs to construct over the expressway. And yet, the then-Mass Turnpike Authority continued to consider those and other similar sites as valuable assets worth millions of “up-front” dollars, rather than the liabilities they were to any developer considering construction.
It is challenging enough to commit to build a sizable development in Boston given the high construction costs associated with dense, urban projects. Add to that the obligation to fund city infrastructure, make linkage payments for affordable housing, and the uncertainty of where the market will be after a lengthy permitting process, and you have a serious set of impediments to growth.
I agree with Matt’s recommendations:
• MassDOT should look towards ground rents and/or sharing in the profits realized from a sale or refinancing, rather than pressing for larger acquisition costs. Massport has successfully helped produce many major development projects in the Seaport area using this approach.
• Building over air-rights is very complicated and costly. Government incentives and a predictable permitting process will be necessary to make the sites over the Turnpike and the Greenway ramps feasible. The result will be increased tax revenues and a better city.
• MassDOT should consider outsourcing the oversight for the development of air rights projects to MassDevelopment. It has a proven track record helping to guide development projects throughout the state.
Now is the time to start preparing for an upswing in development interest. If we do not fix these problems now, it could be many years before this highway blight is replaced with productive, well designed, urban mixed use projects.