MassDevelopment, the state’s economic development authority, has increasingly focused on housing creation during the last two years. The agency will soon close on a $9.5 million tax-exempt bond for the development of Cordis Mills, a 112-unit residential development in a former mill building in Millbury.
It was a concern that leaders at MassDevelopment heard repeatedly from businesses they were trying to recruit to relocate or expand in this state: Housing in the region was too expensive and hard to find.
The state’s economic development authority took that message seriously, and decided to take action.
The result?
In the last two years, MassDevelopment has financed 135 different developments that include housing throughout the state, representing over $730 million of its spending.
“We’ve always done housing as part of our business,” explained Michael P. Hogan, president and chief executive officer of MassDevelopment. Over the years, 10 percent of MassDevelopment’s business had been devoted to housing-related projects.
Traditionally, the quasi-public agency has focused on helping businesses expand and aiding in the state’s economic growth. For example, MassDevelopment has helped with the creation of industrial parks, revitalization of urban centers and redevelopment of abandoned buildings.
But it became increasingly obvious that without an adequate supply of housing that working people could afford, the state’s economic growth was heading for trouble.
“We were seeing consistently that businesses we were working with to recruit and expand here were raising concerns about housing costs and availability,” said Hogan. “It was becoming a drag for expansion.”
In the fall of 1999, when the agency set out to work on its two-year strategic plan, MassDevelopment leaders decided it was time to focus more of its resources on housing creation. Today, about a third of its business is dedicated to housing creation.
MassDevelopment has mostly centered its work on creating rental housing in urban centers or smaller industrial communities. The agency has its own real estate development portfolio that features 1,000 units – about two-thirds of which are ownership units.
According to Hogan, the agency “took to heart” a study released in the fall of 2000 by Northeastern University’s Center for Urban and Regional Policy that called for the most significant investment in housing creation in the state in more than a decade. The study recommended that the public, private and nonprofit sectors work together to create 36,000 new housing units – including the addition student dorms – in the Greater Boston area over the next five years.
At MassDevelopment, the study’s message has stuck. As the agency starts to work on its next two-year business plan, Hogan assures that housing will again be a critical component.
“We’ll be making a significant commitment for the next three years in supporting housing creation,” said Hogan.
Last month, MassDevelopment’s Board of Directors approved spending more than $130 million on 10 housing projects in Boston, Western Massachusetts, the South Shore and North Shore. Among the financing that was approved was a $15 million bond to convert three historic mills in South Boston into 90 artist lofts and a $2 million bond to acquire and renovate a 21-unit multifamily rental housing development in Manchester-by-the-Sea.
Different Model
MassDevelopment offers a variety of financial tools and services to developers and nonprofit groups to make these projects happen – including tax-exempt bond financing, economic development lending and community development and technical assistance for projects like brownfields assessment. During the last two decades, MassDevelopment has provided over $10 billion in financing to businesses and nonprofit organizations and created nearly 100,000 jobs, while retaining thousands more.
Much of the MassDevelopment-financed rental housing that is under development has received strong local support, according to Hogan. Hogan attributes that to MassDevelopment’s community-based focus. Unlike other lenders and developers, the agency has established offices in various communities, having its leaders working closely with local officials in planning and zoning. That has helped get projects moving more quickly, he said.
“Our model in approaching housing is a lot different than that of a lot other lenders,” said Hogan.
In recent years, the agency has also been the largest financier to colleges and universities seeking to build more student housing.
MassDevelopment provided financing to Boston University for an apartment-style residence hall at 10 Buick St. that opened up two years ago. The residence hall can accommodate more than 800 students. It has also provided financing to Emerson College, Suffolk University and Wentworth Institute of Technology to build additional dormitories, not to mention colleges in the Worcester area like Clark University.
The agency is also behind the redevelopment of sites that involve mixing commercial and residential components. One example of a so-called mixed-use project that MassDevelopment is working on is the rehabilitation of the Saltonstall Building at 100 Cambridge St. in Boston. The former state office building will be converted into 75 housing units – with 25 percent set aside for low- and moderate-income residents – and 35,000 square feet of retail space. MassDevelopment, which contributed $20 million in equity for the project, was selected to manage the $184 million redevelopment.
Recently, MassDevelopment provided $16.7 million in bond financing for the construction of 144 new rental units in Chelmsford, 25 percent of which will be affordable. In Central Massachusetts, MassDevelopment provided a $9.5 million tax-exempt bond and $500,000 for an environmental analysis and cleanup associated with the residential redevelopment of an old mill in Millbury. The project, called Cordis Mills, will feature 112 units.
In addition, MassDevelopment has worked with a number of community development corporations and provided tax-exempt bonds and loan guarantees for housing developments throughout Boston.
Joseph A. Kriesberg, president of the Massachusetts Association of Community Development Corporations, is glad to see that MassDevelopment is becoming more active in housing creation. The MACDC represents 70 CDCs throughout the state.
“We are very pleased to see them take this approach,” said Kriesberg. “They have been particularly helpful with projects that require environmental remediation because they have used the Brownfields Redevelopment Fund to help pay for these costs.”
