Aided by a city tax incentive agreement, Boston-based Related Beal plans to build 239 units of workforce and affordable housing on a vacant parcel near North Station.
A multifamily development boom has done little to control wallet-draining housing costs in Boston. As 2015 draws to a close, Mayor Martin J. Walsh’s administration has taken some steps to rewrite the script favoring luxury properties as the predominant form of new construction.
City officials approved a 23-year tax break for Boston-based developer Related Beal’s 484,000-square-foot workforce housing and hotel development in the Bulfinch Triangle. The project is a touted as a potential model for building apartments for the middle class in the urban core of one of the nation’s priciest housing markets.
And a series of major changes in the city’s inclusionary development policy (IDP) will take effect Jan. 1, providing new incentives for developers to include affordable units on-site and to build in outlying neighborhoods that have been largely overlooked in the current building boom.
The changes were prompted partly by the unequal patterns of the city’s housing development, with most of the new multifamily projects sprouting in high-cost neighborhoods where $3,000-and-up rents are the norm.
“It’s an opportunity for us to capture the benefit in every community, rather than treat somebody in Jamaica Plain the same as you treat a downtown high-end luxury tower,” Walsh said.
Potential Model For Workforce Housing Production
Related Beal is trying to jump-start a long-delayed mixed-use project on a state-owned vacant lot left behind by the Big Dig at Causeway and Beverly streets.
“When they approached us on trying to get this project done, they were having a difficult time making the numbers work,” said Ron Rakow, Boston’s assessing commissioner. “This is a unique project. It’s the first time we’ve have a plan to produce workforce housing (downtown).”
The 121A tax agreement would help Related Beal bridge the gap between high development costs and a below-market rent structure. All 239 apartments would be restricted to households falling within the city’s low- and moderate-income housing guidelines.
In place of property taxes on the two residential buildings, Related Beal agreed to pay a percentage of revenues starting with 1.5 percent in 2019 and topping off at 7.5 percent from 2027 through 2038.
Rakow said the agreement was structured to make it easier for Related Beal to obtain financing in the early years of the project, before it reaches rent stabilization. The top payment level is designed to mirror the typical property tax paid by multifamily developments, he said. Incentives also would apply for the 69-space parking garage, which would pay 3.75 percent of gross receipts starting in 2019 before maxing out at 15 percent from 2022 to 2030.
“We find that (structure) really helps the developer on their returns in the early years and that seems to be a big difference-maker in terms of making projects a reality,” Rakow said.
A 220-room hotel and 10,000 square feet of retail space would be exempt from property taxes until 2019, when the full tax rate would kick in. The city did not calculate the difference between revenues in the agreement and what the typical tax payment on the property would be, Rakow said.
Related Beal has indicated it hopes to rent the units for an average of $2.50 per square foot, a significant discount with most new complexes in the downtown area averaging approximately $4 per foot.
The 132 workforce apartments would be restricted to households that make between 120 and 165 percent of the median income. At the 120 percent level, that ranges from $82,750 for a single household to $118,200 for a family of four, according to the Boston Redevelopment Authority’s 2015 guidelines. Maximum rents in that category are $2,137 for a one-bedroom apartment and $2,748 for a three-bedroom unit.
The development will contain 48 affordable units reserved for households earning from 30 to 50 percent of the area median income, Related Beal announced Friday after Banker & Tradesman went to press. The remainder would go to those making from 110 percent to 165 percent of the area median, with the largest block, or 72 units, set aside for households making 140 percent of the median income.
Named after the chapter of state law, 121A tax breaks have been granted in Boston since the 1960s for a wide range of projects, from office towers downtown to affordable housing projects in Mattapan. As of Dec. 1, there were 112 agreements in place, according to the assessors’ office.
Beal would lease the site from the Massachusetts Department of Transportation for $12.3 million over 99 years, The Boston Globe reported in April. A MassDOT spokesman did not respond to an inquiry about the status of the lease.
New Set Of Rules For Developers
In a major policy initiative announced in early December, the city updated the guidelines for affordable housing in new development projects containing more than 10 housing units. Since the IDP was enacted in 2000, approximately 3,600 income-restricted condos and apartments have been built.
But affordable housing advocates say the existing policy made it too easy for developers who preferred to pay into a fund to generate off-site affordable units, and that fees didn’t reflect current development costs.
The new policy takes effect for development proposals filed after Jan. 1. It splits up the city into three zones based upon median sales prices from 2013 and 2015, as provided by The Warren Group, publisher of Banker & Tradesman.
While the minimum percentage of on-site affordable units in new developments will remain at 13 percent across the city, it would rise from 15 to 18 percent in two-thirds of neighborhoods if developers opt to pay into a fund to create affordable housing rather than including units on-site. And off-site fees would rise from $200,000 to $380,000 per unit for projects built in the highest-cost Zone A, which stretches from the Fenway to the Seaport, along with waterfront properties in East Boston and Charlestown. The fee will remain unchanged in lower-cost neighborhoods like Roxbury and Dorchester, but rise to $300,000 in middle-market areas such as Jamaica Plain and South Boston.
“There’s never been anything hidden about the fact that this administration wants the affordable units if at all possible to be on-site. It’s been shown to work, and if a developer feels that’s not consistent with their pro-forma, they can pay out accordingly,” said Carla Moynihan, a partner in the real estate department at Boston-based law firm Sherin and Lodgin LLP.
The new policy also spells out many of the maximum income and rent formulas that weren’t made clear until the developer was going through BRA review, Moynihan said.
“There’s no guessing game anymore. I find it to be very comprehensive and clear,” Moynihan said.
