THOMAS MENINO
Proposed the increase

Large-scale development in Boston is about to get more expensive.

In a recent speech, Mayor Thomas M. Menino announced that he wants to increase the linkage fees that developers of commercial space and other big projects must pay for housing and jobs programs by almost 10 percent.

The news was welcomed by affordable housing advocates who have been pushing city leaders to raise the fees, which were last increased four years ago. But the hike would come at a time when developers already have been hit by a considerable spike in construction costs and while they’re shelling out more in property taxes.

“We think this is a very good and timely increase,” said Thomas Callahan, executive director of the Massachusetts Affordable Housing Alliance, noting that there is a significant amount of institutional development and expansion taking place. “We would have liked to see it [the increase] sooner, but we are pleased that the mayor has taken this action now,” he said.

While housing activists like Callahan expressed their support, others questioned the timing of the proposal considering that developers are already forced to pay a higher tax share because of a measure passed two years ago.

After heavy lobbying from the mayor, who argued that commercial property taxes were disproportionately low while residential taxes had skyrocketed, the state approved a measure in 2004 allowing the city to temporarily shift more of the tax burden onto commercial property owners. The city taxed businesses up to 200 percent of their assessed value the first year, with the limit declining to 197 percent in 2005, and 190 percent this year. Prior to that, businesses were taxed at 175 percent of their assessed value.

“There’s no question it’s [linkage] a worthwhile program in terms of how the dollars are utilized,” said Samuel Tyler, executive director of the Boston Municipal Research Bureau. But larger property owners might feel like they’re getting hit with a “double-whammy,” said Tyler, given that the proposed increase comes when they “are already paying more than they would otherwise legally be required to pay” for property taxes.

Under the city’s linkage policy, which was officially adopted in 1987, developers of projects exceeding 100,000 square feet are required to pay $7.18 for every square foot to pay for low-cost housing, and $1.44 per square foot for jobs programs. The mayor wants to increase the fees to $7.87 and $1.57, respectively.

The city has collected more than $81.4 million in linkage fees for housing in nearly two decades, which has led to the creation of 6,159 homes in 115 projects across the city, according to Tim McGourthy, director of policy for the Boston Redevelopment Authority.

The fees are placed into an affordable housing trust fund that is administered by the Department of Neighborhood Development.

“The linkage program has been a huge success,” said Callahan.

Calling the linkage fees a “tremendous resource” and funding “gap filler,” Callahan said many community development corporations and nonprofit developers have utilized linkage money to build affordable housing.

“I don’t think the city’s efforts to build affordable housing would be as successful without linkage,” said Callahan.

‘An Excellent Job’
Joseph Kriesberg of the Massachusetts Association of Community Development Corporations said linkage fees have been a “critical source of flexible city funds” since state resources for housing production have been shrinking.

“The Department of Neighborhood Development has done an excellent job of administering the program,” he said. “One of the reasons we’ve advocated for linkage and wanted to see the increase is because it’s been well administered.”

Kathy Brown of the Boston Tenant Coalition, which appeared during a City Council Housing Committee hearing last October seeking an increase in linkage fees, also praised the linkage program because it has helped create housing for those with low and moderate incomes.

“This is a great source of funding because it funds a variety of projects at a variety of incomes,” Brown said.

In 2001 – the last time city leaders sought to increase the linkage fees – the city had to receive state approval in the form of a home rule petition. At the time, larger developers were paying only $5.49 per square foot for affordable housing, and the fee hadn’t been increased in more than 10 years.

The city wanted to raise the fee to $7.18, but even though the legislation allows the city to increase linkage fees every three years based on inflation, city leaders had to get state approval because the increase was so great.

This time around, only the Boston Redevelopment Authority and the Zoning Commission must sign off on the increase. The BRA is scheduled to vote on the matter at its March 9 meeting, according to McGourthy. If it’s approved, it then moves to the Zoning Commission, which will take a vote on April 5.

When the city hiked linkage fees four years ago, real estate industry groups including the Greater Boston Real Estate Board voiced concern because the increase came as vacancy rates were climbing and the Community Preservation Act – a measure that would have allowed the city to place surcharge on property taxes – was on the ballot.

Last week, a GBREB leader said the group hadn’t seen a formal proposal and couldn’t comment specifically on it.

“We as an association are supportive of efforts to increase housing,” said Patricia Baumer, legislative counsel for the Greater Boston Real Estate Board. “However, as a general policy, we oppose any tax that singles out real estate development.”