PGIM Real Estate and Wheelock Street Capital are partnering with Boston Global Investors on a 17-story, 530,000-square-foot office-lab tower under construction at 401 Congress St. Image courtesy of Sasaki
Nonprofit housing developers said higher fees on development in Boston would help ease the city’s affordability crisis, while commercial developers warned an increase would have the opposite effect by making projects harder to finance.
The Boston Planning & Development Agency hosted a public hearing Wednesday on Mayor Michelle Wu’s proposal to hike linkage fees charged developers of new commercial and multifamily buildings, including doubling fees on life science projects. The proposal would funnel more money to affordable housing and workforce development programs.
The current $15.39 per square foot fee would double to $30.78 for lab buildings and increase to $23.09 for other commercial projects. Affordable housing would receive 84 percent of the proceeds under the mayor’s proposal. The proposal also lowers the minimum size of buildings subject to the fee from 100,000 to 50,000 square feet.
The linkage fee was previously raised by former Mayor Marty Walsh by 42 percent in 2021.
Wu is seeking city council and BPDA board approval for additional increases, citing the need to boost housing production and rein in still-rising rental and home ownership costs.
Affordable housing developers receive linkage funds to subsidize the cost of new projects and help them complete their financing packages.
“The linkage fees we currently are asking these [lab] developers to pay in no way will get to anywhere near the number of units needed to house the people they’re proposing to bring in,” said Richard Giordano, director of policy and community planning for Fenway Community Development Corp. “There’s a tremendous economic benefit but they will drive up demand for housing in general.”
Commercial real estate groups say the latest increase would have have the opposite effect of its goal, adding development costs at a time when demand for office and lab space is shrinking.
Developers group NAIOP-MA “strongly opposes” the additional fees, NAIOP MA CEO Tamara Small said.
“The only impact this will have will be to drive lab development out of Boston,” CEO Tamara Small said, noting recent market reports about rising office and lab vacancies.
Greater Boston lab tenants are offering 1.5 million square feet of sublease space, triple the amount at the end of 2021, according to a CBRE report released this week. The lab availability rate in the city of Boston – which includes direct vacancies and sublease listings – is nearly 25 percent.
The lab vacancy rate in Boston was 1.9 percent at the end of 2022, according to CBRE.
“The lab market has cooled,” said Patricia Baumer, director of government affairs for the Greater Boston Real Estate Board. “Boston is approaching an oversupply of lab space which isn’t reflected in the vacancy rate, but in availability of financing for lab projects.”
Affordable housing and tenant advocacy groups said the recent life science boom has contributed to displacement, bringing in thousands of high-wage employees that compete with working-class families for housing.
“Linkage can be a tool to address this problem, and address the profound racial wealth gap in Boston,” said Kathy Brown, executive director of the Boston Tenant Coalition.
BPDA officials announced a public comment period on the changes has been extended until Feb. 1.
Wu also has proposed increasing the minimum affordable unit percentage in new multifamily developments from 13 to 20 percent.
