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.)

Where is Housing for the Middle Income Family?

Thomas Grillo did an excellent job on BBJ’s recent article, “The story behind Greater Boston’s housing bottleneck”.

As rightly pointed out, 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. Interestingly, the municipalities and planners are crying out that they do not have enough control and want new land use reforms. However, there is currently a serious lack of permits issued for housing for families and these changes would actually hinder the production of reasonably priced housing.

Many 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. Opportunities for young families to rent a moderately price apartment or find a reasonably priced starter home is virtually impossible. The Massachusetts economy cannot fully expand without the support of its highly talented college graduates. Unfortunately, as the recovery continues nationally, local business leaders are finding it more difficult to attract the best talent when competing with other states. Economic development professionals across the country are already starting to attract young families out of our region and into areas that are more affordable, leaving us, yet again, with the risk of a declining skilled workforce.

The strangest trend to occur in housing production is that children have become society’s “toxic waste”! Many housing proposals that would attract families with school age kids are denied at the local level. More and more municipalities are fighting the permitting of three or four bedroom apartment units, or even requiring 55 and older residency age restrictions. If it appears that developments will bring children into the community, they are fought aggressively by the local boards. Even towns where the school populations are predicted to decline are reluctant to allow apartments that accommodate two or more children.

We are losing our 25 to 34 year olds at a faster clip than we are growing our total population. Our future is our young families and their children. Once and for all, we need to develop a serious policy that allows for the construction of family-friendly apartment housing and of smaller, denser, affordable, single family starter homes.

The future of our economy and our workforce depends on it.

Zoning Legislation Will Hinder Housing Production In Massachusetts

In response to the June 2, 2014 Boston Globe editorial, “Sprawl takes a fall?,” NAIOP Massachusetts submitted the following Letter to the Editor: 

A recent Boston Globe editorial titled “Sprawl takes a fall?” urges the Legislature to pass zoning legislation with the incorrect assumption that the bill will result in the production of more reasonably priced housing. Unfortunately, the legislation would actually hinder, not encourage, the production of this much needed housing.

The bill makes a number of changes to the zoning law, Chapter 40A, which would apply statewide. However, many of the other changes would apply only in “opt-in” communities.  Key parts of the bill would limit predictability and add financial risks for expanding businesses in the Commonwealth. For these reasons, all of the industry trade groups in the state representing builders and developers strongly oppose this legislation.

The lack of workforce housing is a barrier to economic growth, limiting the ability of business leaders to attract the best talent when competing with other states with lower costs of living. Instead of passing this very problematic bill, we urge the Legislature to work with the Administration, municipalities and the business community to create a new program that truly encourages the production of denser and more affordable housing.

David I. Begelfer
NAIOP Massachusetts, The Commercial Real Estate Development Association


The Changing Face of Downtown Boston

The following blog post was submitted by Ally Quinby, Account Executive at Solomon McCown.

Real estate professionals gathered last week to discuss the significant transformation happening in our city’s core. The office, retail and residential sectors are all growing and working together to create a true 24/7, live, work, play environment in downtown Boston.

Even with the boom in the Seaport, Downtown is seeing an influx of new office tenants who want to be in the heart of the city. David Greaney of Synergy Investments told us that of the 70 leases his firm has completed this year, 59 of them were located downtown. And these tenants are looking at more than just the office space. Mark Smith said that Equity includes the amenities of the surrounding area on tours with potential tenants. He also told the room that tenants want comfortable, communicative environments.

All these companies have employees who want to be within walking distance of work. Despite the thousands of apartment units that are planned and currently being constructed, Bill McLaughlin of AvalonBay Communities said that the demand is there because young people aspire to live in the city; we are well-positioned to absorb the deliveries we will see in the next five to six years.

Retail is growing too. Andrea Matteson of CBRE/Grossman Retail Advisors highlighted Walgreens, Equinox, Scholars and the coming Legal Seafoods as game changers who have helped Downtown Crossing look better than ever. She said that first floor tenants are key in providing character for downtown buildings.

Foreign investment and continued development make Boston one of the U.S.’s most dynamic cities, and our panelists agreed that downtown is going to be an integral part of Boston’s growth in the coming years.