It was a bold idea born of the housing boom – roll out downtown and suburban style residential projects in some of Boston’s poorest neighborhoods.
But the worthy goal of creating some upscale developments in neighborhoods loaded with subsidized apartments now appears in danger of going bust amid the housing downturn.
In Dorchester, there’s the Carruth, a stylish, amenities-packed condo residence near the Ashmont MBTA station, as well as the Schoolhouse on River Street and the trendy DNA Lofts on Dorchester Avenue. Over in Mattapan, the first phase of Olmsted Green, part of a sweeping plan to remake the old Boston State Hospital site, is now on the market.
All are now slashing prices in a bid to lure scarce buyers, and in some cases renting out condos in a bid to fill empty units.
Heralded by city leaders and neighborhood activists not that long ago as the vanguard of a brighter future, those pioneering projects now face an uphill battle.
Despite some laudable efforts by City Hall to stem the tide, the foreclosure crisis has hit Dorchester, Mattapan, Roxbury and East Boston particularly hard, flooding the market with bank-owned condos and homes.
That has caused prices to implode, just as new projects like the Carruth try to gain traction.
“There is no question that developers are feeling downward pressure on their properties in the Dorchester area as a result of the surge in foreclosures,” notes John Ford, a top downtown broker and a blogger on the city’s real estate scene. “I just think the developers bit off more than they could chew and the recession is catching up with them and they are feeling the pain.”
In the face of some daunting challenges, the developers behind these projects are fighting back with a mix of creative marketing and price cuts.
Trinity Financial, developers of the Carruth, is ready to loan buyers up to three-quarters of the 20 percent down now needed to close a condo deal. And with much of the complex being rented out, Trinity is also offering to put three months’ rent into a special escrow account for a future purchase.
The developers have cut prices to the $239,000-to-$399,000 range, down from $299,000-to-$499,000 previously.
So far, six of the project’s 42 units have been sold, with the rest rented out.
Tim Deihl, a broker with At Home Real Estate who is helping sell units at the Carruth, acknowledged the foreclosure issue has had an impact.
But it has mainly been one of image, with the market for cheap, foreclosed units pretty much dominated by investors able to put down $50,000 in cash for a unit.
That has put these units out of reach of the average buyer, he notes.
“It is definitely having an impact,” Deihl said. “It builds a perception.”
Still, a bigger problem for the Carruth has been working around tough new lending standards banks are using when it comes to new condo developments.
Not Seeing Green
Olmsted Green, a joint venture featuring the Rappaport family’s New Boston Fund and Lena Park Community Development, is also cutting prices in a bid to lure buyers.
The sweeping development, aimed at building a new neighborhood on the bucolic grounds of the old state hospital, has cut its entry level price down to $269,000.
Four of the 19 townhomes in the project’s first phase have been sold, officials say.
Miles away, where Dorchester meets South Boston, the developers of the DNA Lofts slashed prices this spring.
But encouraged by a recent upsurge in traffic, RaiCoh Partners has started to push prices back up a bit, by roughly 7 percent. That has pushed prices back up to the $299,000 to $425,000 range, said David Alexander, a principal at the firm.
The developers of the Schoolhouse condos on River Street are now leasing the units.
Project developers and those working with them are not eager to talk about the foreclosure epidemic that has ripped through Dorchester.
Chris Lyons, a spokeswoman for the Carruth, contends the new incentives have already generated increased traffic. The imminent completion of the long-awaited new Ashmont T station, which has turned the area around the new project into a construction zone, will also provide a boost.
“It’s going to glow at night,” Lyons said of the new station. “It is going to make us look better.”
Olmsted Green development executive Kirk Sykes, in a written statement, also tried to distance the project from the foreclosure crisis gripping the neighborhoods around the sprawling green grounds of the old state hospital.
“The foreclosure buyer is not the Olmsted Green buyer,” Sykes writes. Foreclosures are in the middle of difficult situations – in terms of circumstances with banks and lien holders, and sometimes in terms of physical conditions. “The Olmsted Green buyer is seeking quality, comfort and a compelling value proposition with a sustainability component.”
DNA Lofts’ Alexander contends the area of Dorchester the project is located in, where the neighborhood meets South Boston, has escaped the foreclosure madness that has engulfed other parts of the neighborhood.
He’s seeing an uptick in interest on his units, though he is sitting on a completed but unsold and empty third phase until the market picks up sufficiently.
Roughly 10 of the 38 units in the project’s first phase are sold, with another five under agreement.
“We have done fairly well closing on that many units in this environment,” he said.
Burgeoning Blight
Yet the elephant in the middle of the room is the flood of foreclosures that have left parts of Dorchester studded with abandoned and boarded up homes.
And as they have everywhere in the country, this concentration of foreclosures has brought condo prices in the neighborhood crashing down hard.
Long gone are the days, back during the boom, when condos in renovated triple-deckers were “selling” for $300,000 or more. I put selling in quotes, because it turns out more than a few of these deals were simply frauds featuring speculators using straw buyers, with a big assist from shady, subprime lenders.
Today, the median price for a condo in the neighborhood is just $110,000, while in Mattapan it is a rock bottom $55,900.
There are now more than 900 bank-owned properties, many of them clustered in Dorchester, Roxbury, Mattapan and East Boston.
It may be worse in other cities. But it’s hard enough for the pioneering market-rate developers trying to make a go of it now in neighborhoods like Dorchester.
