NAIOP Supports Baker-Polito Housing Legislation

housingpressconference
On Monday, NAIOP was pleased to join Governor Baker, Lieutenant Governor Polito, and Undersecretary Chrystal Kornegay to support a new initiative to increase housing production in the Commonwealth. The Administration’s Housing Choice Initiative creates a new system of incentives and rewards for municipalities that deliver sustainable housing growth. It also creates a new technical assistance toolbox to empower cities and towns to plan for new housing production and proposes legislative changes, through An Act to Promote Housing Choices, to deliver smart, effective zoning at the local level. (A section by section summary of the bill is also available.)

NAIOP believes the production of workforce housing is critical for the continued growth of the Massachusetts economy and we are pleased to support this initiative. Unlike the extremely problematic zoning legislation that is supported by planners and environmental groups and opposed by the real estate industry and municipalities, this bill does not include language that would hinder the production of housing. Instead, it rewards communities that are producing new housing units and have adopted certain best practices with a new Housing Choice Designation.

Cities and towns that receive the Housing Choice Designation will be eligible for new financial resources, including exclusive access to new Housing Choice Capital Grants, and preferential treatment for many state grant and capital funding programs, including MassWorks, Complete Streets, MassDOT capital projects and PARC and LAND grants.

Under the legislation, the following local zoning changes would require only a majority vote of the local legislative body:

  • Reducing dimensional requirements, such as minimum lot sizes, to allow homes to be built closer together.
  • Reducing required parking ratios, which can lower the cost of building new housing and accommodate development on a smaller footprint.
  • Creating mixed-use zoning in town centers, and creating multi-family and starter home zoning in town centers, near transit, and in other smart locations.
  • Adopting “Natural Resource Protection Zoning” and “Open Space Residential Development.” These zoning techniques allow the clustering of new development while protecting open space or conservation land.
  • Adopting provisions for Transfer of Development Rights (TDR), which protects open space while creating more density in suitable locations.
  • Adopting 40R “Smart Growth” zoning, which provides incentives for dense, mixed-use development in town centers, near transit, and in other “smart” locations.
  • Allowing accessory dwelling units or “in-law” apartments – small apartments in the same building or on the same lot as an existing home.
  • Allowing for increased density through a Special Permit process promoting more flexible development.

While it does not mandate that any town adopt these zoning best practices, it does remove the barrier of having to convince a supermajority of the legislative body to adopt them.  

Unlike the zoning bills referenced above, this bill has the support of all of the key players – municipalities, business groups, housing advocates, environmental groups, and real estate. NAIOP looks forward to working with the Baker Administration and the legislature to advance this important legislation, which will be an important step in truly addressing the housing crisis facing Massachusetts.

A Housing Plan That Works

The business community is generally a bit skeptical when it comes to grand plans to cure critical deficiencies in the marketplace. One of the most pressing problems for Boston, and many other major cities around the country, is the lack of affordable housing and the inflationary pressures on existing housing stock. In 2014, Mayor Marty Walsh commissioned a new housing plan to confront the city’s problem of a population growth outpacing its production of housing.

The plan that resulted set a target of 53,000 new housing units to help rebalance the market and decrease the pressure on rents and housing prices in the city’s older (and more affordable) housing stock.

Through a cross department plan allowing for streamlined and expedited permitting, expanding the offerings of city-owned real estate, promoting innovation in housing production, and adding significant resources to housing production, the city has worked collaboratively with the development community to achieve real, measurable success.

Through December 2016, nearly 20,000 units were either completed or in construction. Over 21,000 units are currently in the permitting process. Housing unit completions have finally outpaced the city’s population growth.

Has the housing plan worked? For the first time in many years, rents in older units decreased or stabilized in the neighborhoods with the most new development in the past 5 years. The sharpest decreases were with studios and one bedrooms, with two bedroom units seeing modest decreases and three bedrooms rents stabilizing.

It is a serious challenge to develop a program to create new affordable, work-force housing without deep subsidies. However, we can now see that producing new market rate units can actually dampen the inflationary trends for the existing older housing stock. As long as the city can continue to work closely with the development community to keep the housing pipeline flowing, we may be able to keep Boston accessible to everyone.

With the Boston CPA Approved, How Should the Program be Administered?

Boston residents voted to adopt the Community Preservation Act by an overwhelming majority in November. The CPA is designed to create affordable housing, and preserve open space and historic sites through the creation of a local Community Preservation Fund. A one percent real estate tax surcharge on commercial and residential properties will go into this fund and will be administered by a nine-member Community Preservation Committee appointed by the city. Of the money generated by the CPA, at least 10 percent must be allocated to housing, 10 percent to open spaces, and 10 percent to historic preservation. The remaining 70 percent can be allocated to any one of those three uses at a different rate.

The City Council is responsible for creating the ordinance that will establish the Community Preservation Committee (CPC). The ordinance would establish the CPC’s composition, length of member terms, the method of selecting its members, and outline the responsibilities of the CPC.

NAIOP suggests that the CPC could be tasked with establishing the annual percentage allocations among the three categories of investments. Those budgets could then be provided to the City agencies best positioned, staffed, and experienced to review the proposals submitted through a “Request For Proposals” (RFP) process. The agencies’ recommendations for grants could then be reviewed by the CPC prior to submission to the Mayor and the City Council for final approval. This system would utilize the established expertise within the City agencies, rather than creating a parallel “review process” that might be limited by staffing and funding.

With respect to housing, it would be unusual for a CPC grant to be sufficient to fund new housing, rather than being a gap participant in the more complex financing structure. In that case, the Department of Neighborhood Development would be better suited to determine where these funds could best leverage the most housing (a similar arrangement exists under Somerville’s CPA). Again, their recommendations would still need to be approved by the City Council and the Mayor.

As with any new program, the devil is in the details.  For this to succeed, it is essential for the City to develop a rational, transparent, and cost effective process. Only then will the CPA be of the greatest good to Boston.

As Boston Proposes CPA, Issues to Consider

The Boston City Council’s Committee on Government Operations scheduled a public hearing for Tuesday, March 29 to discuss the city’s adoption of the Massachusetts Community Preservation Act (CPA). If approved by the City Council to move forward, the question would be put to the voters of Boston on this November’s ballot. This would result in a 1% property tax surcharge on commercial and residential properties starting in fiscal year 2018 (with the first $100,000 in value exempt as well as a 100% exemption for those who qualify for low-income housing or low or moderate income senior housing). Communities that adopt the CPA can decide on the distribution of funds across the three areas covered under the CPA, as long as each area – open space, historic preservation and affordable housing – receives at least 10 percent of the total available.

The Mayor has released a comprehensive housing plan for Boston, including objectives to produce 53,000 new units of housing. The report, Housing a Changing City – Boston 2030, estimates the CPA would generate $20 million annually, including state matching funds, of which 50% or $10 million would be dedicated to new housing funds. There is no question that Mayor Walsh and his team are very committed to providing affordable and middle income housing, as confirmed by the various initiatives the Administration has advanced in recent months.

The business community is also concerned about the lack of workforce housing.  Without housing that can be affordable to working individuals, couples and families, the region will not be able to maintain the exceptional economic growth it is currently experiencing. However, as City Council considers putting this on the ballot, a few questions should be asked and answered:

  • How much of these funds will end up supporting middle income housing? With a statutory requirement that housing produced under the CPA be for persons and families whose income is less than 100% of the AMI, it is unclear how middle income housing would be created. Furthermore, the independent CPA committee that will oversee the use of CPA funds is free to spend these funds in any of the three prescribed uses (beyond the 10% statutory requirement).
  • There is no requirement for the City to detail exactly how the CPA funds will be used to attain its goals. One would think that the days of throwing money at a problem and hoping for a good outcome are in the past. The MBTA operated like that for years, and we are seeing the results very clearly. What exactly is the plan to produce more affordable and workforce housing with this additional revenue?
  • How much of an impact will the CPA make? Preliminary estimates show that if half of the CPA funds ($10 million) were used for traditional affordable housing, there would only be 40-50 units built in a year. That is helpful, but is it worth it to impose new taxes on residential and commercial properties? The last time the CPA was proposed in Boston, it was estimated that the business community would be paying 81% of the total, as a consequence of real estate tax classification and the residential exemption. In addition, the City has also increased the requirements for new developments under the Inclusionary Development Policy and higher linkage payments for new commercial development are coming.

As a result of the recent building boom, the city’s revenue from real estate taxes is the largest in history. While having more money from the CPA for the City sounds great, the costs and benefits must be weighed before making this decision.

Speaking of Real Estate

NAIOP Massachusetts is kicking off a video series we will be calling “Speaking of Real Estate”.

The idea behind this effort is to interview leaders in the commercial real estate industry, including developers, owners, investors, as well as some of the heads of the major professional service firms that support our business.

We are starting with a very candid discussion between Tom Alperin, President, National Development and Marc Margulies, Founder and Principal, Margulies Perruzzi Architects. They cover a range of topics that include affordable housing, new design considerations, shared economy, and looking to the future for the industry.

We plan on bringing you the opportunity to hear from individuals that are in the forefront of creating our new urban and suburban “live, work and play” environments. Who are some CRE leaders you would like to hear from in this series? Let us know in the comments section below.

Housing Costs May Cost Us Our Young Talent

This post originally appeared in the Boston Business Journal on November 20, 2015.

ApartmentsIn the coming years, the Massachusetts economy may be at serious risk. The Commonwealth’s most valuable resource is its educated, skilled talent. Maintaining that resource is essential for continued economic growth. However, there is a threat which is making that goal harder and harder to achieve. Massachusetts has one of the highest housing costs in the nation – a significant barrier for talent recruitment and retention. Without an adequate supply of workforce housing, Massachusetts may soon lose that talent to other, more affordable, markets.

The UMass Donahue Institute’s Population Estimates Program concluded that the state’s population will increase by nearly 300,000 over a 20-year period. Good news, but the population of Massachusetts grew only by 3.1 percent between 2000 and 2010, while the U.S. population increased by 9.7 percent. Of concern, the study also projects an increasingly older population for the state.

Though a good portion of Massachusetts’ growth is driven by a net natural increase (number of births greater than deaths), a larger share of the growth is attributed to net immigration. Looking more closely, there is a net domestic outflow of residents (more people moved out of Massachusetts than into it from other parts of the U.S.), offset by a large number of international immigrants.

This is occurring during a boom time for the Greater Boston region, while the rest of the country, with a few exceptions, is still working its way out of the recession. Another way of looking at it is that, for the past few years, there have not been many job opportunities attracting our younger workers away from the state.

It was not that long ago that most of the country was experiencing stronger job growth than Massachusetts. As documented in a 2003 University of Massachusetts/MassINC report, Mass. Migration, over 200,000 more domestic residents moved out of Massachusetts than moved into the state between 1990 and 2002. And then, between 2002 and 2004, that imbalance became worse.

Fortunately, at that time, foreign immigrants helped to offset these population losses, but they frequently arrived with lower levels of education and skills than those who were leaving. Those departing tended to be younger, better educated, and more likely to be employed in a knowledge-intensive industry.

These trends will have substantial workforce and business implications and should be a call to action. The costs of both rental and for sale housing have been accelerating, reaching record highs. More and more young individuals and families are being priced out of the market. In some cases, the problem is restrictive zoning, other municipalities are shunning any housing that increases the school population, and in some markets, the cost of construction makes workforce housing uneconomical.

The solutions may be difficult, political, and costly, but without action at the state and local levels, the future of the Massachusetts economy is at risk.

Good to Great: Creating Workforce Housing

BakerPolitoCoverThe following is our weekly excerpt from NAIOP’s report, Good to Great: Recommendations for the Baker Polito Administration. The report is the result of significant input from NAIOP members and focuses on a wide range of ideas – big and small – affecting the Executive Office of Housing & Economic Development (EOHED), the Executive Office of Energy & Environmental Affairs (EOEEA) and transportation (MassDOT). Each week will cover a different recommendation. Comments are encouraged!

EOHED: Creating Workforce Housing

The Commonwealth’s economy depends on its ability to attract and retain a talented workforce. Massachusetts has one of the highest housing costs in the nation – a significant barrier for talent recruitment and retention. This is a supply problem due, in part, to a shortage of single family and multi-family housing. Lengthy and unpredictable local permitting, combined with high land and construction labor costs, put new housing out of reach of many of the state’s working families.

Massachusetts communities have some of the strictest zoning in the region, with large minimum lot sizes, restrictions limiting multi-family housing, and unworkable cluster zoning ordinances. Communities have tightened permitting, making it harder to build and meet the demand for housing, in general, and moderately priced and affordable units, in particular. Zoning requirements have become more onerous with local rules and special by-laws, making the development process longer and more unpredictable. Currently, there is a serious lack of permits issued for housing for families.

Therefore, NAIOP suggests that the Baker Polito Administration and EOHED work to increase the production of a wide range of housing types through the implementation of a plan that allows for the construction of family-friendly apartment housing as well as smaller, denser, affordable, single family starter homes. The plan should eliminate barriers to housing production and provide new ways of meeting the existing need for workforce housing by addressing the following (among other things):

  • Expand Chapter 40S to Address School Budget Challenges: The most frequent argument used to oppose apartment construction is the burden it will put on local school budgets. That is not always the case. Although Chapter 40S has been adopted to help offset the cost of student education for projects developed under Chapter 40R, it should be expanded to incentivize and assist those communities that would substantially increase their school-age population through new housing development of any kind. An important place to start would be to include Ch. 40B projects under this school “reimbursement” program, removing one of the objections to affordable housing projects.
  • Encourage Production of Starter Homes: There is a serious lack of moderately priced single family homes (starter homes) for many working households. A goal should be set to encourage cities and towns to establish zoning districts that permit the construction of a modest number of small, single family homes that are affordable for middle-income families. “Starter Home” zoning districts could be established in the most appropriate locations for these new neighborhoods. Incentives could include qualifying for Chapter 40S funds, assistance grants, and an increase in local aid. To keep the land cost per unit down, density bonuses would be needed for this type of housing, with the requirement that the scale of the homes be smaller (e.g. 1,500 square feet.)